Despite labor shortages and supply chain disruptions, the industrial sector is experiencing notable growth by embracing Industry 4.0 with tech investments, sustainability focus, and smart factory adoption.
Therefore, investors could consider investing in promising industrial stocks Holcim Ltd (HCMLY), Universal Forest Products, Inc. (UFPI), and Boise Cascade Company (BCC).
Before delving deeper into the fundamentals of these stocks, let’s see what’s shaping the industrial sector's prospects.
The industry’s commitment to technological advancements and strategic innovations propels its expansion, positioning it for sustained success in an evolving industrial landscape.
Additionally, surging demand for predictive maintenance and growth in the oil and gas sectors drive the industrial service industry. Moreover, customized service portfolios and monitoring equipment through IoT are becoming increasingly essential, aligning with the growing demand for such services. The global industrial services market is poised to expand at a CAGR of 5.7% to reach $51.98 billion by 2032.
Besides, the construction and building materials market is experiencing significant growth, propelled by factors such as the increased utilization of advanced technologies, a growing demand for applications like integrated malls and online platforms, and a keen emphasis on technological innovation and optimization to enhance product usage.
The global Hardware & Building Materials Market is anticipated to achieve a revenue of $32.66 billion this year. The industry is expected to expand at a CAGR of 6.3% to reach $44.26 billion by 2028.
Furthermore, the growth of the industrial wood market is attributed to increasing demand in sectors such as construction, furniture, and packaging, driven by the versatile applications of wood products. Also, increasing urbanization, growing construction activities, and the rising demand for sustainable and eco-friendly materials boost the sector’s prospects.
The global wood products market is projected to expand at a CAGR of 6.6% to reach $964.41 billion by 2027.
Considering these conducive trends, let’s examine the fundamentals of the three industrial stock picks.
Holcim Ltd (HCMLY)
Headquartered in Zug, Switzerland, HCMLY is a global building materials company offering products like cement and concrete for diverse construction projects worldwide, including infrastructure, housing, commercial, and industrial developments. The company also provides retail services and waste management solutions.
On November 29, HCMLY partnered with IUCN to enhance its nature strategy, concentrating on measurable biodiversity and water targets. The partnership includes validating biodiversity baselines, advising on freshwater protection, and integrating biodiversity into urban building standards.
The collaboration aims to raise awareness and contribute to a nature-positive future, building on Holcim's environmental leadership and recognition by CDP for climate and water management.
The company pays an annual dividend of $0.51, which translates to a yield of 3.54% on the current market prices, compared to a four-year average dividend yield of 4.03%. It has raised its dividend payouts at a CAGR of 11.7% over the past three years.
In the third quarter, which ended September 2023, HCMLY generated net sales of CHF7.34 billion ($8.35 billion). Its recurring EBIT increased 3.2% from the prior year quarter to CHF1.60 million ($1.82 billion). Moreover, during the nine months that ended September 2023, group net sales stood at CHF20.41 billion ($23.21 billion).
The company revised its fiscal year 2023 guidance upward following favorable outcomes in the initial nine months. HCMLY anticipates organic net sales growth above 6%, organic recurring EBIT growth above 10%, an industry-leading recurring EBIT margin above 17% (up from above 16%), and a reduction of CO₂ per Net Sales above 10%. The Free Cash Flow after leases is expected to be around CHF3 billion ($3.41 billion).
Street expects HCMLY's revenue to grow 3.7% year-over-year to $7.12 billion for the fourth quarter ending December 2023.
HCMLY’s shares have returned 39.4% over the past year and 17.4% over the past month to close the last trading session at $14.30.
HCMLY’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HCMLY has an A grade for Stability and Momentum. Within the A-rated Industrial - Building Materials industry, it is ranked #8 out of 48 stocks.
In addition to the POWR Ratings stated above, one can access HCMLY’s additional Growth, Value, Sentiment, and Quality ratings here.
UFP Industries, Inc. (UFPI)
UFPI operates globally, specializing in wood and non-wood composites. It has three segments—Retail; Packaging; and Construction, offering diverse products from treated lumber to custom packaging solutions.
On November 14, UFPI’s affiliate TimberBase, launched TIMBERBASE.COM, a B2B digital platform for global lumber and building material transactions. The platform offers real-time order tracking and live chat and aims to modernize the timber industry's trading activities, strengthening UFP Industries' global trading presence.
The company has a four-year average yield of 0.97%. It pays $1.20 annually, translating to a yield of 1.10% on the current market price. It has raised its dividend payouts at a CAGR of 22.2% over the past three years.
For the third quarter, which ended September 30, 2023, UFPI's net sales and gross profit stood at $1.83 billion and $364.40 million, respectively. Its new product sales as a percent of total sales rose to 9.7% from 7.8% in 2022.
The company achieved net earnings and adjusted EBITDA of $134.18 million and $207.84 million, respectively. 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.
UFPI’s revenue is expected to grow marginally year-over-year to $2.05 billion for the second quarter ending June 2024. Its EPS is expected to be $2.20 for the same quarter.
Shares of UFPI increased 36.1% over the past year and 37.8% year-to-date to close the last trading session at $109.24.
UFPI’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
UFPI has an A grade for Momentum and a B for Value. Within the Industrial - Wood industry, it is ranked #2 among six stocks.
Click here for UFPI’s additional Growth, Stability, Sentiment, and Quality ratings.
Boise Cascade Company (BCC)
BCC manufactures wood products and distributes building materials in the U.S. and Canada. Its offerings include lumber, plywood, and engineered wood products for residential and commercial construction, sold through dealers and home improvement centers.
On November 8, BCC announced that its Building Materials Distribution (BMD) division moved its Lathrop branch to Modesto, California, following the completion of a property purchase. The new facility includes an office space and a 190,000 sq. ft. warehouse served by rail, aligning with the company's growth strategy to enhance service and expand product offerings in existing markets.
On October 2, the company completed the acquisition of Brockway-Smith Company (BROSCO) for a purchase price of $168 million, inclusive of estimated working capital at closing of $51 million, which is subject to post-closing adjustments. The company funded the acquisition and related costs with cash on hand.
For the fiscal third quarter that ended September 30, 2023, BCC's sales stood at $1.83 billion. The company generated income from operations and net income of $185.63 million and $143.07 million, respectively. For the nine months ended September 30, the net increase in cash and cash equivalents grew significantly year-over-year to $274.62 million.
Analysts expect BCC’s revenue to grow marginally year-over-year to $1.63 billion for the fourth quarter ending December 2023. Its EPS is expected to be $2.47 for the same quarter. The company surpassed the EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 64% over the past year and 71% year-to-date to close the last trading session at $112.84.
BCC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
BCC has an A grade for Momentum and a B for Value and Quality. Within the Industrial-Wood industry, it is ranked first.
To see BCC’s additional POWR Ratings for Growth, Stability, and Sentiment, click here.
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HCMLY shares were trading at $14.56 per share on Wednesday morning, up $0.26 (+1.79%). Year-to-date, HCMLY has gained 41.50%, versus a 20.64% 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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