The industrial sector's prospects appear bright due to rising demand for manufactured goods and the implementation of advanced technologies to boost efficiency and productivity.
With the industry showing promise, fundamentally sound industrial stocks Heidelberg Materials AG (HDELY), UFP Industries, Inc. (UFPI), and Gibraltar Industries, Inc. (ROCK) could be wise investments now.
Before delving into why these stocks might offer promising returns in the near term, let's examine the factors influencing the industrial sector's prospects.
The industrial sector is expected to thrive this year as technology for innovative manufacturing and resilience methods becomes more widely adopted. The integration of automation with artificial intelligence is expected to increase efficiency and productivity.
Following a 0.5% decline in January, industrial production increased by 0.1% in February 2024. Moreover, the global market for Industry 4.0 is anticipated to reach $165.5 billion by 2030, with a CAGR of 20.6%. Investors’ interest in industrial stocks is evident from the Industrial Select Sector SPDR ETF’s (XLI) 21.6% gains over the past six months.
Considering these conducive trends, let’s take a look at the fundamentals of the three Industrial stocks.
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.
HDELY’s trailing-12-month gross profit margin of 61.99% is 117.5% higher than the 28.51% industry average. Its trailing-12-month Return on Common Equity of 12.03% is 89.8% higher than the 6.34% industry average. Also, its 6.74% trailing-12-month Return on Total Capital is 32.6% higher than the 5.08% industry average.
In the year ended on December 31, 2023, HDELY reported an operating revenue of €21.31 billion ($23.12 billion). The company’s operating EBIT came in at €3.02 billion ($3.28 billion), up 32.5% from the previous year’s quarter. Its profit attributable to Heidelberg Materials AG shareholders and EPS rose 20.8% and 23.4% from the year-ago value to €1.93 billion ($2.09 billion) and €10.43, respectively.
Street expects HDELY's revenue and EPS for the year ending December 31, 2024, to increase 2.8% and 6.8% year-over-year to $23.56 billion and $2.41, respectively. Over the past year, the stock has gained 62.7% to close the last trading session at $21.66.
HDELY's POWR Ratings reflect this promising outlook. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HDELY has an A grade for Value and Momentum and a B for Stability and Quality. Within the A-rated Industrial - Building Materials industry, it is ranked #2 out of 46 stocks. To see HDELY's additional ratings for Growth and Sentiment, click here.
UFP Industries, Inc. (UFPI)
UFPI designs, manufactures, and markets wood and non-wood composites and other materials in North America, Europe, Asia, and Australia. It operates through Retail; Packaging; and Construction segments.
UFPI’s trailing-12-month Return on Common Equity of 17.58% is 46% higher than the industry average of 12.05%. Its trailing-12-month asset turnover ratio of 1.88x is 136.8% higher than the industry average of 0.79x. Its 12.80% trailing-12-month Return on Total Assets is 163.1% higher than the 4.87% industry average.
During the fourth quarter that ended December 31, 2023, UFPI’s net sales came in at $1.52 billion. Its adjusted EBITDA stood at $165.56 million. Additionally, net earnings and EPS came in at $103.91 million and $1.62, respectively.
As of December 31, 2023, UFPI’s total current liabilities stood at $567.98 million, compared to $611.84 million as of December 31, 2022.
For the quarter ending September 30, 2024, UFPI’s EPS and revenue are expected to increase 1.1% and 1.9% year-over-year to $2.12 and $1.86 billion, respectively. Over the past year, the stock has gained 55.1% to close the last trading session at $118.36.
UFPI’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked first among five stocks in the B-rated Industrial - Wood industry. It has an A grade for Momentum and a B for Value and Quality. Click here to see UFPI's additional ratings for Growth, Stability, and Sentiment.
Gibraltar Industries, Inc. (ROCK)
ROCK is a leading manufacturer and distributor of building products serving North America and Asia markets. Focusing on renewable energy, residential, AdTech, and infrastructure sectors, it offers diverse solutions tailored to industry needs.
ROCK’s trailing-12-month levered FCF margin of 13.33% is 102.4% higher than the 6.58% industry average. Likewise, the stock’s trailing-12-month net income margin of 8.02% is 34.5% higher than the industry average of 5.96%. Its trailing-12-month Return on Total Assets of 8.80% is 80.8% higher than the industry average of 4.87%.
During the fourth quarter, which ended December 31, 2023, ROCK’s net sales grew 4.8% year-over-year to $328.81 million. The company’s adjusted income from operations and net income rose 9.7% and 15.9% from a year-ago quarter to $34.38 million and $26.02 million, respectively. Also, its adjusted net income per share increased 18.1% from the year-ago quarter to $0.85.
Analysts expect ROCK’s revenue and EPS for the quarter ending March 31, 2024, to increase 1% and 3.3% year-over-year to $296.30 million and $0.72, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. ROCK shares have gained 70.9% over the past year to close the last trading session at $79.34.
It’s no surprise that ROCK has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B for Growth, Sentiment, and Quality. It is ranked #4 out of 34 stocks in the Industrial - Metals industry.
Beyond what is stated above, we’ve also rated ROCK for Value and Stability. Get all ROCK ratings here.
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HDELY shares were trading at $21.95 per share on Tuesday morning, up $0.29 (+1.32%). Year-to-date, HDELY has gained 23.11%, versus a 10.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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