The industrial sector’s prospects appear bright, driven by the ever-growing demand for industrial machinery and services across multiple end-use industries, favorable government initiatives, and increased technology adoption.
Given the industry’s tailwinds, fundamentally sound industrial stocks Caterpillar Inc. (CAT), Heidelberg Materials AG (HDELY), and Albany International Corp. (AIN) could be ideal portfolio additions.
Rising need for industrial tools and services across several end-use industries, like construction, oil and gas, automotive, power, semiconductor and electronics, metals and mining, healthcare, aerospace, chemicals, and others, have significantly contributed toward the growth of the industrial sector in recent years.
According to a report by the Business Research Company, the global industrial services market is expected to expand at a CAGR of 5.2% during the forecast period and reach $40.75 billion in 2027.
Industrial machinery, including machines, equipment, and tools used in manufacturing, processing, and producing goods across different sectors, has shown remarkable growth. Its considerable expansion is fueled by the demand for automation, the modernization of production processes, and growing manufacturing sectors.
The global industrial machinery market is projected to reach $1.04 trillion by 2032, growing at a CAGR of 5.3% during the forecast period (2023-2032).
The technical textile market is further evolving and growing in leaps and bounds with its higher performance qualities than traditional textiles. The industry captures a wide variety of products to offer to its extensive customer base, which is not limited to apparel but has widespread applications in the medical, automotive, and other sectors.
The global technical textile market is estimated to hit $370 billion by 2032, expanding at a CAGR of 5.3% during the forecast period.
Industrial transformation, often called Industry 4.0, is an ongoing paradigm shift in the industrial sector that involves the adoption of cutting-edge technologies in several aspects of the manufacturing process.
The incorporation of advanced technologies, including cloud computing, machine learning, the Internet of Things (IoT), and AI into the production process creates a flexible, efficient, and connected manufacturing environment. The Industry 4.0 market size is expected to exceed around $482 billion by 2032, exhibiting a CAGR of 20.7%.
Given the industry’s robust outlook, fundamentally strong industrial stocks CAT, HDELY, and AIN could be ideal additions to your portfolio for potential gains.
Let’s discuss the fundamentals of these stocks in detail:
Caterpillar Inc. (CAT)
CAT is a leading manufacturer and seller of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives internationally. The company operates through segments: Construction Industries; Resource Industries; Energy & Transportation; Financial Products; and All Other.
On December 4, CAT announced investing in Nth Cycle, a recycling technology developer, to boost the reuse of metals used to make batteries and construction equipment. The investment is part of a $44 million Series B financing round in a privately held Nth Cycle.
“Caterpillar’s collaboration with Nth Cycle supports our commitment to helping our customers achieve their climate-related objectives and establishing a circular value chain,” said Rod Shurman, Caterpillar's senior vice president of electrification and energy solutions.
On October 31, CAT and Freeport-McMoRan, Inc. (FCX) announced their collaboration for the conversion of the mining company’s fleet of 33 Cat® 793 haul trucks to an autonomous haulage system (AHS) using Cat MineStar™ Command for hauling. This strategic partnership would benefit the companies significantly.
For the third quarter that ended September 30, 2023, CAT’s consolidated sales and revenues grew 12.1% year-over-year to $16.81 billion. The company’s adjusted operating profit rose 41.3% year-over-year to $3.49 billion. Its adjusted profit was $2.83 billion, or $5.52 per share, indicating an increase of 36% from the prior year’s period, respectively.
Furthermore, the company’s total assets came in at $86.79 billion as of September 30, 2023, compared to $81.94 billion as of December 31, 2022.
Street expects CAT’s revenue and EPS for the fourth quarter (ending December 2023) to increase 3.6% and 23.1% year-over-year to $17.20 billion and $4.75, respectively. The company surpassed consensus revenue estimates in each of the trailing four quarters and consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of CAT have gained 9.9% over the past six months and 12.2% over the past year to close the last trading session at $261.43.
CAT’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.
CAT has a B grade for Growth and Value. It is ranked #23 out of 78 stocks in the A-rated Industrial - Machinery industry.
In addition to the POWR Ratings we’ve stated above, we also have CAT ratings for Momentum, Stability, Quality, and Sentiment. Get all CAT ratings here.
Heidelberg Materials AG (HDELY)
Headquartered in Heidelberg, Germany, HDELY produces and distributes cement, aggregates, ready-mixed concrete, and asphalt globally. The company offers cement products, natural stone aggregates, crushed aggregates, and ready-mixed concrete for use in the construction of tunnels, bridges, office buildings, and schools.
On November 28, HDELY launched evoZero®, the world’s first carbon-captured net-zero cement. evoZero has achieved its net-zero footprint with the help of carbon capture and storage technology at the Heidelberg Materials plant in Brevik, Norway. This launch of these unique evoZero products is a paradigm shift in the sector’s decarbonization.
On October 30, HDELY completed its share buyback program with a total volume of up to €1 billion ($1.08 billion). This was launched in August 2021. During this share buyback program, HDELY repurchased a total of about 16.3 million shares at a total value of €993.70 million ($1.07 billion). Share buybacks enable the company to raise shareholder value.
On October 18, HDELY celebrated the start of construction for the pilot carbon capture installation at its plant in Devnya. The ANRAV.beta unit marks a key step in implementing the company’s large-scale ANRAV project in Bulgaria, which was announced earlier this year.
As the first full-chain CCUS project in Eastern Europe, ANRAV will cover carbon capture, transport, geological storage, and utilization. Starting the carbon capture pilot in Bulgaria is a significant step toward the further development of CCUS technologies across Heidelberg Materials.
In the third quarter ended on September 30, 2023, HDELY reported a revenue of €5.61 billion ($6.05 billion). Its operating EBITDA rose 16.8% from the year-ago value to €1.39 billion ($1.49 billion). The company’s operating EBIT came in at €1.08 billion ($1.16 billion), up 23.6% from the previous year’s quarter.
For the first nine months of fiscal year 2023, HDELY’s revenue increased 6% year-over-year to €16.27 billion ($17.54 billion). The company’s result from current operations before depreciation and amortization (RCOBD) rose 17.0% from the year-ago value to €3.18 billion ($3.43 billion).
As per its updated guidance for fiscal year 2023, HDELY expects a moderate increase in its revenue. It expects the result from current operations to be between €2.85 billion ($3.07 billion) to €3 billion ($3.23 billion), which was previously estimated between €2.70 billion ($2.91 billion) to €2.90 billion ($3.13 billion).
For the fiscal year ending December 2024, analysts expect the company’s EPS to increase 0.5% year-over-year to $2.07, while its revenue is estimated to grow 2.5% year-over-year to $23.60 billion for the same period.
Over the past month, the stock has gained 14.9% and 59% over the past year to close the last trading session at $17.22.
HDELY’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 an A grade for Momentum and a B for Growth, Value, and Stability. Within the A-rated Industrial - Building Materials industry, HDELY is ranked #12 of 47 stocks.
Click here to access additional ratings of HDELY for Sentiment and Quality.
Albany International Corp. (AIN)
AIN engages in the textile and materials processing business globally. The company operates through two primary segments - Machine Clothing (MC) and Albany Engineered Composites (AEC). It designs, manufactures, and markets paper machine clothing and offers 3D-woven and injected composite components.
On December 8, AIN’s Board of Directors declared a quarterly dividend of $0.26 per share on the company’s Class A common stock, representing an increase of 4%, or $0.01 per share, from the previous dividend. The dividend is payable on January 8, 2024, to the shareholders of record on December 19, 2023.
This increase in its quarterly dividend reflects the company’s robust capital structure and ability to provide stable growth in the long run.
AIN pays an annual dividend of $1.04, which translates to a yield of 1.14% at the current share price. Its four-year average dividend yield is 1.07%. Moreover, the company’s dividend payouts have increased at a CAGR of 9.6% over the past three years. AIN has raised its dividends for five consecutive years.
On August 31, AIN completed its acquisition of Heimbach Group, a global supplier of paper machine clothing for the production of all grades of paper and cardboard on various machine types and high-tech textile products used in multiple sectors.
Daniel Halftermeyer, President of AIN, said, “We are excited about the opportunities to create additional value for our shareholders and customers through the increased scale, complementary technologies and broader geographic footprint this transaction provides. Together we will effectively combine the strengths of each company to set a new standard in customer value delivery as the industry’s partner-of-choice.”
During the third quarter that ended September 30, 2023, AIN’s net revenues grew 7.9% year-over-year to $281.11 million. The company’s gross profit rose 1.3% from the prior year’s period to $101.83 million. Net income attributable to the company was $27.10 million, or $0.87 per share, compared to $10.70 million, or $0.34 per share in the prior year’s quarter, respectively.
As of September 30, 2023, the company’s total current assets were $856.37 million, compared to $838.44 million as of December 30, 2022.
The company updated its guidance for the full year 2023. AIN now expects total company revenue to range between $1.1 billion and $1.13 billion. Its adjusted earnings per share are expected to be between $3.35 and $3.70. The company expects its adjusted EBITDA to be between $238 and $254 million.
Analysts expect AIN’s revenue for the fourth quarter (ending December 2023) to increase 11% year-over-year to $298.29 million. The consensus EPS estimate of $0.84 indicates a rise of 11.3% year-over-year. Moreover, the company has surpassed the consensus EPS estimates in three of the trailing four quarters, which is remarkable.
AIN’s stock has surged 9.8% over the past month to close the last trading session at $90.85.
AIN’s POWR Ratings reflect its bright growth 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 Sentiment and Stability. AIN ranks 2 out of 5 stocks in the A-rated Industrial - Textiles industry.
Click here to access additional AIN ratings (Growth, Momentum, Quality, and Value).
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CAT shares were unchanged in premarket trading Wednesday. Year-to-date, CAT has gained 11.36%, versus a 22.70% 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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