Favorable government policies, coupled with technological advancements and the flourishing machinery, packaging, and service sectors, collectively indicate a strong and promising growth trajectory for the industrial sector. So, investors could consider buying quality industrial stocks Hitachi, Ltd. (HTHIY), Berry Global Group, Inc. (BERY), and Limbach Holdings, Inc. (LMB) for a robust portfolio.
Before we dive into the stock analysis, let us take a look at the current dynamics in the industrial sector.
In November 2023, total industrial production in the United States experienced a year-over-year growth of 0.2%, reaching an index of 102.7, as per the latest data available.
Globalization and rapid industrialization in emerging nations are fueling demand for advanced industrial machinery, boosting the overall industrial sector.
Besides, the industrial sector is expected to receive a boost from favorable government policies such as the Inflation Reduction Act, Bipartisan Infrastructure Law, and CHIPS and Science Act. These measures are anticipated to stimulate domestic manufacturing, leading to increased demand for essential industrial products like metals and machinery.
In addition, the industrial machinery market is poised for growth, driven by technological advancements such as 3D printing, artificial intelligence, and big data analytics, enhancing productivity and reducing operating costs. Integration of IoT applications, mobile technologies, and advanced sensors further bolsters the sector.
The industrial machinery market is expected to grow to $708.30 billion in 2027 at a CAGR of 6.7%.
On top of it, with a surging focus on sustainability, flexible packaging, and the demand for e-commerce, the packaging industry is projected to achieve a 2.8% CAGR, reaching $1.05 trillion by 2024.
Similarly, the global demand for specialized industrial services is rising due to the interconnected global economy, international regulatory complexities, and continuous growth in manufacturing. The industrial services market is projected to reach $51.98 billion by 2032, expanding a CAGR of 5.7%.
Furthermore, investors' interest in industrial stocks is underscored by the Industrial Select Sector SPDR Fund (XLI), which has demonstrated a notable increase of 13.1% in the last three months, outperforming the S&P 500's 11.3% gain.
Given the favorable trends, it's worthwhile to examine the foundational aspects of the three industrial stocks.
Hitachi, Ltd. (HTHIY)
Headquartered in Tokyo, Japan, HTHIY offers information technology, mobility, industry, and smart life solutions. The company provides information and telecom services, including IoT, servers, software, ATMs, and scanners for communication, finance, manufacturing, and energy industries.
On December 19, GlobalLogic, a Hitachi Group Company, officially entered into a definitive agreement to acquire Mobiveil, a specialized embedded engineering services firm based in the United States. This strategic move aims to enhance GlobalLogic's capabilities in Embedded Software, which is crucial for digital products and services in industries such as Semiconductor, Automotive, Media, MedTech, and High Tech.
The company distributes an annual dividend of $2.15, which yields 1.52% on the prevailing price level, compared to a four-year average dividend yield of 2.17%. Moreover, the company has raised its dividend payouts at a CAGR of 4.6% over the past three years.
HTHIY’s revenues amounted to ¥4.96 trillion ($34.84 billion) for the six months that ended September 30, 2023. The company’s adjusted operating income grew marginally from the previous- year period to ¥325.40 billion ($2.29 billion). Its total adjusted EBITA came in at ¥400.90 billion ($2.82 billion), up 2% year-over-year.
Also, the company’s net income increased 15.7% year-over-year to ¥232.30 billion ($1.63 billion), and the earnings per share attributable to HTHIY stockholders came in at ¥233.88, up 30.6% from the prior-year period.
Street expects HTHIY’s revenue to rise 433.3% year-over-year to %$64.97 billion in the fiscal year ending March 2024. Its EPS is expected to be $7.90 in the current year. It surpassed revenue estimates in each of the trailing four quarters, which is impressive.
Shares of HTHIY soared 40.2% year-to-date to close the last trading session at $141.70.
HTHIY’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
HTHIY has an A grade for Value and a B for Sentiment. Within the B-rated Industrial – Equipment industry, it is ranked #12 of 90 stocks.
In addition to the POWR Ratings highlighted above, one can access HTHIY’s ratings for Growth, Momentum, Stability, and Quality here.
Berry Global Group, Inc. (BERY)
BERY manufactures and supplies non-woven, flexible products in consumer and industrial end markets. The company operates through Consumer Packaging International; Consumer Packaging North America; Engineered Materials; and Health, Hygiene & Specialties segments.
On December 15, the company paid its shareholders a quarterly dividend of $0.275 per share. BERY’s four-year average yield is 0.29%, while its annual dividend of $1.10 translates to a 1.62% yield on the current market price.
In the fiscal fourth quarter (ended September 30, 2023), BERY’s net sales amounted to $3.09 billion. The company’s net income stood at $186 million, while its adjusted net income per share increased 1.3% year-over-year to $2.28. Moreover, its operating EBITDA rose 1.5% from the year-ago quarter to $547 million, and free cash flow improved 5.7% year-over-year to $926 million.
For the fiscal year 2024, the company’s financial outlook includes an adjusted EPS range of $7.35 to $7.85 per share, cash flow from operations ranging from $1.35 to $1.45 billion, and free cash flow ranging from $800 - $900 million. The company also announced a 10% increase in the quarterly dividend to $0.275 per share and is dedicated to debt reduction while returning capital to shareholders through share repurchases and dividends.
BERY’s EPS and revenue are expected to grow 2.7% and marginally year-over-year to $7.62 and $12.68 billion in the fiscal year ending September 2024. Moreover, it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 20.3% over the past nine months and 10.6% over the past three months to close the last trading session at $68.
BERY’s POWR Ratings reflect this favorable outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
It has a B grade for Value. In the B-rated Industrial – Packaging industry, it is ranked #5 among 20 stocks.
To see additional POWR Ratings for Growth, Momentum, Stability, Sentiment, and Quality for BERY, click here.
Limbach Holdings, Inc. (LMB)
LMB is a provider of integrated building systems solutions. The company operates in two broad segments: general contractor relationships and owner-direct relationships. It designs, installs, and maintains mechanical, electrical, plumbing, and control systems; and heating, ventilation, and air-conditioning (HVAC) systems.
In November, LMB completed the acquisition of Industrial Air, LLC (IA), a specialty mechanical contractor headquartered in Greensboro, North Carolina. The transaction, conducted entirely in cash, valued IA at an initial enterprise value of $13.50 million.
This strategic move enhances LMB's footprint in the industrial sector, aligning with its commitment to seizing opportunities and delivering essential solutions. The agreement also involves contingent earn-outs, potentially reaching up to $6.50 million over the next two years. Industrial Air is anticipated to contribute an average annual revenue of $30 million and $4 million in EBITDA to LMB.
LMB’s revenue and gross profit increased 4.4% and 25.7% year-over-year to $127.77 million and $31.24 million, respectively, in the fiscal third quarter that ended September 30, 2023. Its net income and EPS stood at $7.19 million and $0.61, up 97.5% and 79.4% from the year-ago quarter, respectively. Moreover, adjusted EBITDA increased 33.6% from the prior-year quarter to $13.63 million.
LMB revised its fiscal year 2023 guidance, and it anticipates revenue in the range of $490 million to $520 million, with adjusted EBITDA projected to fall between $42 million and $45 million.
Analysts expect LMB’s revenue and EPS for the fiscal first quarter ending March 2024 to increase 9.1% and 53.7% year-over-year to $131.98 million and $0.42, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 331% year-to-date to close the last trading session at $44.87. Over the past nine months, it has returned 171.6%.
LMB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
LMB has an A grade for Quality and a B for Growth, Momentum, and Sentiment. Within the A-rated Industrial – Services industry, it is ranked #4 out of 79 stocks.
Beyond what we’ve stated above, we have also rated the stock for Value and Stability. Get all ratings of LMB here.
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HTHIY shares were trading at $142.72 per share on Wednesday morning, up $1.02 (+0.72%). Year-to-date, HTHIY has gained 43.29%, versus a 26.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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