The industrial sector has recently experienced notable growth thanks to technological advancements and a surge in demand for goods and services. So, I present quality industrial stocks, CRH plc (CRH), Holcim Ltd (HCMLY), and Owens Corning (OC), well positioned to capitalize on the industry tailwinds.
As industries adapt to the evolving needs of a dynamic world, the industrial sector continues to play a crucial role in propelling economic advancement. In October 2023, the Industrial Production Index (IPI) in the United States reached 102.7, indicating positive production performance as values over 100 are considered favorable.
Technological advancements, such as automation and the integration of Industry 4.0 principles, have transformed industrial processes, enhancing efficiency and productivity.
In addition, artificial intelligence (AI) is revolutionizing the industrial sector by optimizing manufacturing processes, predicting machinery issues, and improving services. The global AI in the industrial machinery market is projected to reach $4.28 billion in 2027, growing at a CAGR of 29.6%.
Furthermore, the global construction materials market benefits from increased infrastructure spending and rising demand for residential apartments, especially in growing markets. The global construction materials market is expected to expand from $1.32 trillion in 2023 to $1.73 trillion by 2030, exhibiting a CAGR of 3.9%.
With these favorable trends in mind, let's delve into the fundamentals of the three Industrial – Building Materials stock picks, beginning with the third choice.
Stock #3: CRH plc (CRH)
Headquartered in Dublin, Ireland, CRH manufactures and distributes building materials in Ireland and internationally. It operates through three segments: Americas Materials; Europe Materials; and Building Products. The company manufactures and supplies cement, lime, aggregates, precast, ready-mixed concrete, asphalt products, etc.
On September 25, 2023, CRH announced that it had repurchased 17.7 million ordinary shares on Euronext Dublin and the London Stock Exchange between June 30, 2023, and September 22, 2023.
The company pays an annual dividend of $0.25, which translates to a forward dividend yield of 0.85%, higher than a four-year average yield of 0.23%.
For six months ended June 30, 2023, CRH’s sales revenue rose 7.6% year-over-year to $16.14 billion. Its EBITDA increased 14% over the prior-year period to $2.52 billion. The company’s group operating profit rose 17.5% year-over-year to $1.63 billion, and EPS from continuing operations came in at $1.57. In addition, its operating cash flow increased 60.7% year-over-year to $998 million.
CRH’s revenue for fiscal year 2023 is expected to increase 9.3% year-over-year to $35.52 billion. Its EPS is expected to be $4.42 in the same year.
Over the past month, the stock has gained 1% to close the last trading session at $59.19.
CRH’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, each weighted optimally.
It has an A grade for Momentum. It is ranked #12 among 48 stocks in the A-rated Industrial – Building Materials industry.
In addition to the POWR Ratings stated above, one can access CRH’s Growth, Value, Stability, Sentiment, and Quality here.
Stock #2: Holcim Ltd (HCMLY)
Headquartered in Zug, Switzerland, HCMLY is a building materials and solutions company that offers cement, clinker, and other cementitious materials, aggregates, roofing systems, contracting, and services.
On September 6, HCMLY announced that it had inaugurated its Innovation Hub in Lyon, France, to showcase sustainable building solutions and promote co-creation for low-carbon, circular, and energy-efficient construction.
The company pays an annual dividend of $0.51, which translates to a yield of 3.66% on the current market prices, compared to a four-year average dividend of 4.04%. It has raised its dividend payouts at a CAGR of 11.7% over the past three years.
In the fiscal third quarter ended September 2023, HCMLY’s group net sales amounted to CHF7.34 billion ($14.50 billion), while its recurring EBIT stood at CHF1.60 billion ($2.27 billion), up 3.2% from the previous-year quarter.
Moreover, during the nine months that ended September 2023, group net sales stood at CHF20.41 billion ($22.97 billion).
The company upgraded its fiscal year 2023 guidance due to positive results in the first nine months. The upgraded projections include organic net sales growth exceeding 6%, organic recurring EBIT growth surpassing 10%, an industry-leading recurring EBIT margin above 17% (up from 16%), free cash flow after leases of around CHF 3 billion, and a reduction of CO₂ per net sales by over 10%.
Analysts expect HCMLY’s EPS to rise 51% year-over-year to $1.18 in the current fiscal year 2023. Its revenue is likely to be $30.86 billion in the current year.
The stock has gained 41.6% over the past year to close the last trading session at $13.85. It has surged 7.8% over the past month.
HCMLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Momentum and Stability. Within the same industry, it is ranked #6. Click here for HCMLY’s Growth, Value, Quality, and Sentiment ratings.
Stock #1: Owens Corning (OC)
OC engages in the manufacturing and sale of insulation, roofing, and fiberglass composite materials. It operates in three segments: Composites; Insulation; and Roofing.
On October 20, OC announced that the company was making strides toward creating a circular shingle economy and reducing landfill waste. The company has progressed in two key shingle recycling initiatives aimed at recycling two million tons annually in the U.S. by 2030. The company remains committed to scaling up its pilot facility for increased material output and evaluation.
During the third quarter, OC returned $187 million to shareholders through dividends and share repurchases. As of the end of the quarter, 10.8 million shares were available for repurchase under the current authorization. The company also paid a quarterly cash dividend of $47 million and repurchased 1 million shares of common stock for $140 million.
The company pays $2.08 annually, which yields 1.60% on the prevailing price level, higher than the four-year average of 1.44%. It has raised its dividend payments at a CAGR of 29.4% over the past five years.
OC’s net sales for the third quarter ended September 30, 2023, came in at $2.48 billion. Its adjusted EBIT grew 6.4% over the prior-year quarter to $518 million. The company’s adjusted EBITDA increased 5.9% year-over-year to $644 million.
In addition, its adjusted earnings increased 7.4% year-over-year to $377 million and adjusted EPS came in at $4.15, representing an increase of 15% year-over-year. Also, its free cash flow rose 58.3% year-over-year to $581 million.
Street expects OC’s EPS for the fiscal fourth quarter ending December 2023 to increase 12.5% year-over-year to $2.80. The company’s revenue will likely reach $2.24 billion in the same quarter. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Shares of OC surged 51.6% year-to-date to close the last trading session at $129.29.
OC’s POWR Ratings reflect this positive outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth, Value, and Quality. It's ranked #2 in the same industry. To see OC’s additional ratings for Stability and Sentiment, click here.
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CRH shares were trading at $59.72 per share on Friday morning, up $0.53 (+0.90%). Year-to-date, CRH has gained 53.87%, versus a 18.96% 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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