The industrial sector is experiencing prosperity propelled by supportive legislation, increased investments in construction, and a technological evolution fostering innovation. The escalating demand in the construction, furniture, and steel sectors delineates a dynamic trajectory for the broader industry’s growth.
Consequently, it would be prudent to consider investing in fundamentally sound industrial stocks, UFP Industries, Inc. (UFPI), Boise Cascade Company (BCC) and Gibraltar Industries, Inc. (ROCK), which are poised to yield significant returns in the future. Let us understand this in detail.
This year, the U.S. manufacturing sector propelled forward, harnessing the impetus derived from the enactment of three pivotal legislations, namely, the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction Act (IRA), signed into law in 2021 and 2022.
Subsequent to the enactment of these acts, the manufacturing sector has experienced a noteworthy surge in construction expenditure. By July 2023, annual outlays for manufacturing construction reached $201 billion, marking a 70% year-over-year upswing and laying the foundation for continued industry expansion in 2024.
Non-residential building spending soared in 2023, projected by the AIA Consensus Construction Forecast Panel to rise by around 20%, a level unseen since the Great Recession. Meanwhile, industrial construction leads with an expected 50% increase, and commercial construction spending has also been poised for a 10% uptick.
Entering 2024, the industrial sector stands to gain significantly as manufacturers embrace smart factories and advanced technologies. This transition is enhancing operational efficiency and supply chain management through digital tools, providing vital visibility.
Given the escalating demands in construction and furniture applications, alongside technological strides in lumber processing, the utilization of lumber is also anticipated to surge. Projections indicate the global lumber market will reach $369.8 billion by 2030 at a CAGR of 3.3%.
Furthermore, steel, a pivotal barometer of the global economy, is also poised for heightened demand. The World Steel Association projects a 1.8% growth in steel demand, reaching 1,814.5 Mt in 2023 after a 3.3% contraction in 2022. Anticipating a continued upswing, 2024 is forecasted to witness a 1.9% increase to 1,849.1 Mt.
In light of these encouraging trends, let us dive into the fundamentals of these three industrial stocks.
UFP Industries, Inc. (UFPI)
UFPI innovates, produces, and markets wood and non-wood composites. Within its Retail arm, it delivers premium treated lumber items. In the Packaging sector, the company crafts tailored and structural packaging solutions, encompassing pallets, corrugated materials, foam, labels, strapping, and films.
On November 14, TimberBase, affiliated with UFPI, introduced TIMBERBASE.COM, a B2B digital platform facilitating the trade of lumber and building materials. This global initiative would amplify UFPI's sourcing advantage by granting access to prized wood resources worldwide.
TimberBase will further optimize this advantage for UFPI's manufacturing operations in North America, Europe, Asia, and Australia through forging new supplier relationships. Additionally, it could offer expanded opportunities for exporting products globally, thereby widening UFPI's geographical reach.
On September 20, UFP Global Holdings Ltd., a UFPI subsidiary, completed the acquisition of 80% equity in the UFP Palets y Embalajes SL for approximately $52 million. UFP Palets comprises the pallet manufacturing operations of Palets Suller Group, a leader in machine-built wood pallets based in Castellón, Spain.
This strategic move could establish a solid foundation for UFPI to enter the Spanish market and expand its value-added packaging business in Europe.
For the nine months that ended September 30, 2023, UFPI’s cash inflow from operating activities increased 33.5% year-over-year to $711.80 million. As of September 30, 2023, the company’s cash and cash equivalents stood at $957.09 million, compared to $559.40 million as of December 31, 2022.
Moreover, its current assets amounted to $2.51 billion, compared to $2.26 billion as of December 31, 2022.
The consensus revenue estimate of $7.39 billion for the fiscal year ending December 2024 reflects a marginal year-over-year improvement. Shares of UFPI have gained 15.1% over the past month and 35.9% over the past year to close the last trading session at $110.63.
UFPI’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
UFPI has an A grade for Momentum and a B for Value and Quality. It has ranked #2 out of six stocks within the Industrial - Wood industry.
In addition to the POWR Ratings I’ve just highlighted, you can see UFPI’s ratings for Growth, Stability, and Sentiment here.
Boise Cascade Company (BCC)
BCC engages in the manufacturing of wood products and the distribution of building materials. Within its Wood Products sector, the company produces laminated veneer lumber and laminated beams. Simultaneously, the Building Materials Distribution segment efficiently disseminates a comprehensive array of top-tier building materials.
On October 20, BCC's Building Materials Distribution (BMD) division bolstered its operational prowess by acquiring a 120,000 sq. ft. warehouse in West Palm Beach, Florida. This move enhances storage and service capacity for the Pompano Beach branch, exemplifying BCC's commitment to customer satisfaction in the South Florida market.
On October 2, BCC concluded the acquisition of Brockway-Smith Company (BROSCO®), a prominent wholesale distributor specializing in doors and millwork. This step would amplify BCC's capacity and reinforce its commitment to serving millwork customers in the Northeast markets with heightened efficiency and excellence.
For the third quarter that ended September 30, 2023, BCC registered sales of $1.83 billion. Additionally, as of September 30, 2023, the company’s cash and cash equivalents stood at $1.27 billion, compared to $998.34 million as of December 31, 2022.
Moreover, current assets came in at $2.47 billion, up from $2.06 billion as of December 31, 2022.
Analysts expect BCC’s revenue to marginally grow year-over-year to $1.63 billion for the fiscal fourth quarter ending December 2023. Similarly, the company’s revenue for the fiscal 2024 first quarter (ending March 2024) is estimated to come in at $1.59 billion, indicating a 2.7% year-over-year improvement.
The stock has gained 25.1% over the past month and 70% year-to-date, closing the last trading session at $114.54.
BCC’s positive prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
BCC has an A grade for Momentum and a B for Value and Quality. It has topped the six-stock Industrial - Wood industry.
Click here to access the additional BCC ratings (Growth, Stability, and Sentiment).
Gibraltar Industries, Inc. (ROCK)
ROCK manufactures and delivers products and services tailored for the renewable energy, residential, agtech, and infrastructure sectors. The company caters to solar developers, institutional and commercial growers, home improvement retailers, wholesalers, distributors, and contractors.
ROCK’s gross profit increased 11.5% year-over-year to $105.38 million for the third quarter that ended September 30, 2023. Its adjusted income from operations rose 18.9% from the year-ago value to $58.59 million.
Furthermore, the company’s adjusted net income and adjusted net income per share grew 19% and 23.2% from the prior year’s period to $42.48 million and $1.38, respectively.
Leveraging ROCK's strong performance in the initial nine months and sustained momentum into the fourth quarter, the company revised its EPS outlook upward. Foreseeing improved profitability and cash flow, ROCK is well-positioned for continued success in the upcoming fiscal year.
The upward adjustment extends to the full-year 2023 earnings guidance, with anticipated GAAP EPS ranging between $3.51 and $3.71, a significant increase from $2.56 in 2022. Similarly, adjusted EPS is expected to fall within $4.05 to $4.15, compared to $3.40 in 2022, signaling robust financial performance.
The consensus revenue estimate of $331.33 million for the fiscal fourth quarter ending December 2023 reflects a 5.6% year-over-year improvement. Similarly, the consensus EPS estimate of $0.88 for the ongoing quarter indicates a 22.7% growth from the previous year’s period. Also, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
ROCK has gained 12.3% over the past month and 33.8% over the past year, closing the last trading session at $68.69.
ROCK’s strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
ROCK has an A grade for Growth and Momentum and a B for Sentiment and Quality. It has topped the 32-stock Industrial - Metals industry.
Click here to access additional ROCK ratings for Value and Stability.
What To Do Next?
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UFPI shares were trading at $110.81 per share on Friday morning, up $0.18 (+0.16%). Year-to-date, UFPI has gained 41.07%, versus a 20.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
3 Industrial Stocks Poised for Potential Big Gains StockNews.com
