The industrial sector's growth prospects are strong due to rising infrastructure development, advanced building solutions, increased global trade with aircraft leasing, and innovations in aviation and defense technologies. These diverse contributions drive expansion and innovation, enhancing overall efficiency and progress in the sector.
Given this favorable backdrop, it could be wise to consider investing in strong industrial stocks such as Carlisle Companies Incorporated (CSL), AerCap Holdings N.V. (AER), and Textron Inc. (TXT), which have significant upside potential based on price targets.
The industry’s positive outlook is shaped by the increasing population and the corresponding demand for goods and services worldwide, the shift toward Industry 4.0 and plans for 5.0, which enhances productivity and efficiency, new tech trends such as AI and IoT, and supportive government initiatives that boost domestic manufacturing and infrastructure investment.
This year automation, advanced robotics, and smart manufacturing are boosting the global industrial sector by improving productivity, cutting costs, and increasing efficiency. These innovations drive economic growth, attract investment, and enhance competitiveness. Statista forecasts that the manufacturing sector's value will reach $2.0 trillion in 2024, growing at a 1.24% CAGR until 2029.
Meanwhile, the airfreight market is booming due to e-commerce and business trends, with a forecasted CAGR of 6.98%, reaching $417.45 billion by 2027. Similarly, increased global defense spending is significantly driving growth in the aircraft sector, notably contributing to the industrial sector. Furthermore, the air defense systems market is projected to reach $58.51 billion by 2029, expanding at a CAGR of 4.74%.
Let’s analyze the fundamental aspects of the three industrial stocks mentioned above.
Carlisle Companies Incorporated (CSL)
CSL operates as a manufacturer and supplier of building envelope products and solutions internationally. It functions through two segments: Carlisle Construction Materials and Carlisle Weatherproofing Technologies.
On May 1, 2024, CSL announced a $45 million expansion of its Research & Innovation Center in Carlisle, PA, aiming to double its lab space and enhance new product development. This move supports its Vision 2030 strategy, focusing on energy efficiency and innovation.
On the same date, CSL completed the acquisition of MTL Holdings for $410 million in cash. This acquisition aligns with CSL’s Vision 2030 strategy and enhances its portfolio of high-performance building products.
In terms of the trailing-12-month EBITDA margin, CSL’s 26.62% is 93.4% higher than the 13.77% industry average. Likewise, its 27.88% trailing-12-month net income margin is 357.8% higher than the 6.09% industry average. Furthermore, its 32.16% trailing-12-month levered FCF margin is 401.1% higher than the 6.42% industry average.
CSL’s revenue for the second quarter ended June 30, 2024, increased 11% year-over-year to $1.45 billion, while its operating income grew 22.3% year-over-year to $377.50 million. Similarly, the company’s adjusted EBITDA rose 20.2% year-over-year to $417.60 million, and adjusted EPS increased 32.8% year-over-year to $6.24.
For the quarter ending September 30, 2024, CSL’s EPS is expected to increase 25.1% year-over-year to $5.86. Its revenue for the same quarter is expected to grow 9.5% year-over-year to $1.38 billion. It surpassed the Street EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 48.6% to close the last trading session at $388.15. The average analyst price target of $482.50 indicates a 24.3% upside potential.
CSL’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Momentum, Sentiment, and Quality. Within the B-rated Industrial - Manufacturing industry, it is ranked #10 out of 34 stocks. To see CSL’s Growth, Value, and Stability ratings, click here.
AerCap Holdings N.V. (AER)
Headquartered in Dublin, Ireland, AER engages in the lease, financing, sale, and management of commercial flight equipment in China, Hong Kong, Macau, the United States, Ireland, and internationally.
On August 1, 2024, AER announced the delivery of the first three Airbus A321neo aircraft to AirAsia as part of a fifteen-aircraft lease deal. The remaining twelve aircraft will be delivered in 2024 and 2025.
On July 9, 2024, AER announced a lease agreement with Turkish Airlines for ten new Airbus A321neo aircraft. This deal supports Turkish Airlines' fleet modernization and expansion plans.
In terms of the trailing-12-month EBIT margin, AER’s 53.29% is 433.2% higher than the 9.99% industry average. Its 53.72% trailing-12-month EBITDA margin is 290.2% higher than the 13.77% industry average. Additionally, its 82.57% trailing-12-month Capex / Sales is considerably higher than the 2.87% industry average.
For the second quarter that ended June 30, 2024, AER’s total revenues and other income increased 1.8% year-over-year to $1.96 billion. Its net income attributable to AER came in at $448.17 million. Moreover, the company’s EPS came in at $2.28, representing an increase of 7.5% from the previous year’s quarter.
Analysts expect AER’s revenue for the quarter ending September 30, 2024, to increase marginally year-over-year to $1.91 billion. Its EPS for fiscal 2024 is expected to increase 3.2% year-over-year to $11.07. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 45.7% to close the last trading session at $91.71. The average analyst price target of $114 indicates a 24.3% upside potential.
It’s no surprise that AER has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Quality. Within the Air Freight & Shipping Services industry, it is ranked #2 out of 16 stocks. Beyond what we stated above, we also have given AER grades for Growth, Value, Momentum, and Stability. Get all AER ratings here.
Textron Inc. (TXT)
TXT operates in the aircraft, defense, industrial, and finance businesses worldwide. It operates through six segments: Textron Aviation, Bell, Textron Systems, Industrial, Textron eAviation, and Finance.
On August 5, 2024, TXT’s Bell announced that the U.S. Army approved Milestone B for the Future Long Range Assault Aircraft (FLRAA), initiating the Program of Record. This milestone marks the start of the Engineering and Manufacturing Development phase for the advanced assault aircraft.
On July 29, 2024, TXT Aviation announced an agreement with Gama Aviation for three Beechcraft King Air 360C aircraft, set to be delivered in 2025. The aircraft will enhance Gama Aviation's fleet and support life-saving air ambulance services in Scotland.
In terms of the trailing-12-month asset turnover ratio, TXT’s 0.84x is 9.1% higher than the 0.77x industry average. Similarly, its 6.67% trailing-12-month net income margin is 9.5% higher than the 6.09% industry average. Also, its 5.64% trailing-12-month Return on Total Assets is 14.6% higher than the 4.92% industry average.
During the second quarter ending June 29, 2024, TXT’s total revenues increased 3% year-over-year to $3.53 billion. Its segment profit was $343 million. For the same period, the company’s adjusted income from continuing operations remained flat year-over-year at $296 million, while its adjusted EPS from continuing operations was 1.54, up 5.5% from the prior-year quarter.
Street expects TXT’s EPS and revenue for the quarter ending September 30, 2024, to increase 6% and 8.2% year-over-year to $1.58 and $3.62 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters.
Over the past nine months, TXT’s stock has gained 13.7% to close the last trading session at $85.13. The average analyst price target of $100.86 indicates a 41.1% upside potential.
TXT’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Value and a B for Momentum and Quality. It is ranked #9 out of 69 stocks in the Air/Defense Services industry. To access TXT’s rating for Growth, Stability, and Sentiment, click here.
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CSL shares were trading at $384.96 per share on Monday afternoon, down $3.19 (-0.82%). Year-to-date, CSL has gained 23.77%, versus a 12.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
3 Industrial Stocks With Upside Potential Based on Price Targets StockNews.com
