With the transition from traditional manufacturing to sustainable practices, rapidly growing demand for industrial machinery and services, and increasing technological advancements, the growth prospects of the industrial sector seem bright.
Given this backdrop, investors could consider investing in fundamentally robust industrial stocks Komatsu Ltd. (KMTUY), FUJIFILM Holdings Corporation (FUJIY), and Smurfit Kappa Group Plc (SMFKY) for substantial returns.
The industrial sector is expected to witness significant profitability and expansion in the upcoming years, driven by sustained demand for goods and services, growing industrialization, and rapid technological innovations.
In recent years, there has been an increased need for efficient industrial machinery and services across multiple industries, such as consumer electronics, construction, automotive, oil and gas, aerospace, healthcare, chemicals, food and beverages, metals and mining, and more.
The global industrial machinery market is expected to total a staggering $1.04 trillion by 2032, exhibiting a CAGR of 5.3% during the forecast period (2023-2032). The market is committed to producing machines that elevate the quality and efficiency of products across several industries. Also, it consistently innovates to improve the safety, efficiency, and versatility of machinery.
Shift from traditional methods to automation and the modernization of production processes with the growing integration of digital technology can contribute to the industrial machinery market’s rapid success.
Meanwhile, the global industrial services market is projected to reach $51.98 billion by 2032, growing at a CAGR of 5.7% from 2023 to 2032.
The industrial packaging sector further has a pivotal role in maintaining the effectiveness of goods. The segment provides tailored products to many industries for the packaging of goods during travel, storage, and handling to protect commodities and increase supply chain effectiveness.
Ongoing trends like sustainability and eco-friendly products have also fueled its growth prospects. The global industrial packaging market is estimated to reach $132.80 billion by 2032, growing at a CAGR of 6.8% during the forecast period.
Manufacturers are increasingly incorporating the latest, advanced technologies, such as the Internet of Things (IoT), big data analytics, robotics, artificial intelligence (AI), and machine learning (ML) into their production facilities and processes to unlock new levels of efficiency, productivity and competitiveness.
The Industry 4.0 market size is estimated to grow at a CAGR of 21.8% during the forecast period (2023-2027). The increasing focus on smart factories equipped with cutting-edge technologies, the need for simplification of complex manufacturing activities, and enhanced demand for automation are primary factors propelling the market’s growth.
Given the industry’s robust outlook, fundamentally strong industrial stocks KMTUY, FUJIY, and SMFKY could be ideal additions to your portfolio for potential gains.
Let’s discuss the fundamentals of these stocks in detail:
Komatsu Ltd. (KMTUY)
Headquartered in Tokyo, Japan, KMTUY manufactures and sells construction, mining, and utility equipment and forest and industrial machinery globally. The company operates through three segments: Construction, Mining and Utility Equipment; Retail Finance; and Industrial Machinery and Others.
On December 13, KMTUY and General Motors Co. (GM), a leader in hydrogen fuel cell technology, will co-develop a hydrogen fuel cell power module for Komatsu’s 930E electric drive mining truck, the world’s best-selling ultra-class haul truck. The companies will jointly design and validate the technology.
“Finding new ways to power the equipment our customers need to do the vital work of mining and construction is a critical part of our commitment to supporting a more sustainable future,” said Dan Funcannon, vice president of North America engineering and development for Komatsu.
“This is essential work that requires cross-industry collaboration, and we are excited to be working with GM on this important solution for a haulage offering without tailpipe emissions,” Funcannon added.
On November 21, KMTUY announced that its wholly-owned subsidiary in the U.S., Komatsu America Corp., will acquire American Battery Solutions, Inc., a developer and manufacturer of heavy-duty and industrial battery packs.
This strategic acquisition will allow KMTUY to design and manufacture its own battery-powered construction and mining equipment through the integration of ABS’s battery technology with Komatsu’s knowledge and network.
KMTUY’s revenue and EBITDA have grown at respective CAGRs of 19.6% and 33.6% over the past three years. The company’s EBIT has increased 48.6% over the same timeframe, while its net income and EPS have improved at a CAGR of 54%, respectively.
For the second quarter that ended September 30, 2023, KMTUY’s net sales increased 8% year-over-year to ¥923.44 billion ($6.47 billion). Its operating income grew 27% from the year-ago value to ¥149.95 billion ($1.05 billion). Its net income was ¥105.54 billion ($739.57 million), up 21.3% from the prior year’s period.
Furthermore, net income per share attributable to KMTUY rose 21.9% year-over-year to ¥105.86. The company’s total assets came in at ¥5.40 trillion ($37.84 billion) as of September 30, 2023, compared to ¥4.87 trillion ($34.13 billion) as of March 31, 2023.
Street expects KMTUY’s revenue and EPS for the fiscal year (ending March 2024) to increase 210.5% and 12.1% year-over-year to $26.09 billion and $2.84, respectively. Also, the company surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Shares of KMTUY have gained 20.1% year-to-date and 17.2% over the past year to close the last trading session at $26.17.
KMTUY’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
KMTUY has an A grade for Value and a B for Stability. It is ranked #19 out of 78 stocks in the A-rated Industrial - Machinery industry.
In addition to the POWR Ratings we’ve stated above, we also have KMTUY ratings for Momentum, Growth, Quality, and Sentiment. Get all KMTUY ratings here.
FUJIFILM Holdings Corporation (FUJIY)
Based in Tokyo, Japan, FUJIY develops, manufactures, sells, and services imaging, healthcare, materials, and business innovation solutions internationally. The company offers medical devices, cosmetics and supplements, inkjet digital presses and printing plates for printing industries, office devices and services, and more.
On December 6, FUJIY announced that it would invest $200 million in cell therapy manufacturing. The investments will be divided between two subsidiaries focused on cell therapy production. One of them, Fujifilm Cellular Dynamics, is a developer of human induced pluripotent stem cells and cells derived from them.
The other one, Fujifilm Diosynth Biotechnologies, is a contract manufacturer that makes biologics and other therapies. With this funding, FUJIY’s ability to produce a variety of cell-based medicines, from CAR-T treatments to therapies based on natural killers or NK cells, will also be substantially boosted.
FUJIY’s revenue and EBITDA have grown at respective CAGRs of 9.9% and 15.5% over the past three years. The company’s EBIT has increased 22.5% over the same timeframe, while its net income and EPS have improved at CAGRs of 21.8% and 22.2%, respectively.
During the second quarter that ended September 30, 2023, FUJIY’s revenue increased marginally year-over-year to ¥727.71 billion ($5.10 billion). Its operating income rose 2.9% from the year-ago value to ¥73.33 billion ($513.86 million). The company’s net income came in at ¥59.29 billion ($415.48 million), indicating 9.9% growth from the prior year’s quarter.
In addition, the company’s cash and cash equivalent was ¥322.18 billion ($2.26 billion) as of September 2023, compared to ¥268.61 billion ($1.88 billion) as of March 2023.
As per its updated guidance for fiscal year 2023, FUJIY reaffirms its revenue of ¥2.95 trillion ($20.67 billion). It expects its operating income to be ¥290 billion ($2.03 billion) and its net income to reach ¥225 billion ($1.58 billion) for the full year.
For the fiscal year ending March 2024, analysts expect FUJIY’s revenue to increase significantly year-over-year to $20.40 billion. Moreover, the company has surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 3% over the past month and 18.3% over the past year to close the last trading session at $59.95.
FUJIY’s promising outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Momentum and Stability. Within the Industrial - Materials industry, FUJIY is ranked #22 of 90 stocks.
To access additional ratings of FUJIY for Growth, Sentiment, Value, and Quality, click here.
Smurfit Kappa Group Plc (SMFKY)
SMFKY engages in the manufacturing, distribution, and selling of container boards, corrugated containers, and other paper-based packaging products in the Americas and Europe. The company primarily serves consumer goods, industrial goods, and food and beverage markets. It is headquartered in Dublin, Ireland.
On September 12, SMFKY announced that it would acquire WestRock for an agreed $11 billion to create the world’s biggest paper and packaging company, Smurfit WestRock.
This deal will bring together Smurfit Kappa’s industry-leading operational execution and innovation as a European leader in corrugated and containerboard and its large-scale pan-regional Americas presence with WestRock’s leadership in the U.S. and its solid footprint in Brazil and Mexico across corrugated and consumer packaging and create an entity worth around $20 billion.
The combination represents a unique point in time, a value-creation opportunity, for both companies.
SMFKY’s revenue and EBITDA have grown at respective CAGRs of 12.4% and 13.1% over the past three years. The company’s EBIT has increased 18.3% over the same timeframe, while its net income and EPS have grown at CAGRs of 26.2% and 22.4%, respectively.
During the third quarter that ended September 30, 2023, SMFKY reported revenue of €2.70 billion ($2.95 billion), while the company’s EBITDA amounted to €512 million ($561.71 million). Its operating profit before exceptional items came in at €351 million ($385.08 million).
Analysts expect SMFKY’s revenue for the fiscal year (ending December 2024) to increase marginally year-over-year to $12.34 billion. The consensus EPS estimate of $3.81 indicates a 1% rise year-over-year.
SMFKY’s stock has surged 20.3% over the past month and 8.3% over the past year to close the last trading session at $40.39.
SMFKY’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Quality, Value, and Stability. SMFKY is ranked #3 out of 20 stocks in the B-rated Industrial - Packaging industry.
Click here to access additional SMFKY ratings (Growth, Sentiment, and Momentum).
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
KMTUY shares were unchanged in premarket trading Friday. Year-to-date, KMTUY has gained 22.82%, versus a 25.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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