The industrial market is experiencing growth driven by heightened investment in infrastructure and onshoring, facilitated by substantial federal funding. This expansion presents opportunities across both long and short-cycle industries. Therefore, investors could consider investing in top industrial stocks Smurfit Kappa Group Plc (SMFKY), UFP Industries, Inc. (UFPI), and EnerSys (ENS) this week.
Robust infrastructure, including transportation, energy, and communication networks, contributes to the growth of the industrial sector. Moreover, access to international markets and participation in global supply chains also stimulate industrial growth.
In addition, the global industrial machinery market is propelled by automation demand, technological innovations like IoT, AI, and robotics, expanding manufacturing sectors in developing nations, and a growing need for energy-efficient machinery. The global industrial machinery market is projected to grow at a CAGR of 5.3% to reach $1.04 trillion by 2032.
Furthermore, the global industrial Internet of Things market is driven by affordable processors, technological advancements, and a focus on operational efficiency, including the integration of Machine Learning and AI. The global industrial Internet of Things market is expected to expand at a CAGR of 23.2% from 2023 to 2030.
On top of it, the manufacturing industry in the United States is exhibiting solid momentum on the backs of significant government funding. Through the introduction of funds and tax incentives, the U.S. government aims to bolster the industrial sector.
Considering these conducive trends, let’s examine the fundamentals of the three industrial stock picks.
Smurfit Kappa Group Plc (SMFKY)
Based in Dublin, Ireland, SMFKY manufactures and sells diverse paper-based packaging products globally, catering to industries like e-commerce and food and drink. The company also offers recycling solutions and packaging machinery.
On November 29, 2023, SMFKY launched its new SupplySmart digital solution, derived from analyzing over 100,000 supply chains, which resulted in a 66% volume reduction and a 44% decrease in CO2 emissions during transport for a sustainable dishwasher tablet pack in collaboration with Henkel.
The solution helps businesses optimize packaging efficiency and achieve environmental objectives.
On October 27, 2023, SMFKY paid an interim dividend of 33.5 cents per share. The company pays $1.52 annually, which translates to a yield of 4% on the prevailing price level. The company has raised its dividend payouts at a CAGR of 6.4% and 8.2% over the past three and five years.
During the third quarter that ended September 30, 2023, SMFKY reported revenue of €2.70 billion ($2.94 billion). Its operating profit before exceptional items came in at €351 million ($343.15 million), and the company’s EBITDA amounted to €512 million ($557.75 million).
SMFKY’s revenue is expected to be $12.08 billion for the fiscal year ending December 2024. Its EPS for the same period is expected to grow 1% year-over-year to $3.81.
SMFKY’s shares have gained 14% over the past three months to close the last trading session at $38.11.
SMFKY’s POWR Ratings reflect its robust 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.
SMFKY has a B grade for Value, Stability, and Quality. Within the B-rated Industrial - Packaging industry, it is ranked #2 among 20 stocks.
In addition to the POWR Ratings stated above, one can access SMFKY’s additional Growth, Momentum, and Sentiment ratings here.
UFP Industries, Inc. (UFPI)
UFPI manufactures wood and non-wood composites, serving global markets with segments in retail; packaging; and construction. Its products include treated lumber, wood-plastic composites, custom packaging, and construction materials.
On October 31, 2023, Deckorators®, a brand of UFPI, introduced a customizable Privacy Screen system at the 2023 DeckExpo, offering design elements and seclusion for outdoor decks.
It showcased a versatile system with easy installation alongside innovations like step treads for decking lines and the Aluminum Rapid Rail in Textured White and Weathered Brown.
On December 15, 2023, UFPI paid a quarterly dividend of $0.30 per share. The company pays $1.20 annually, which translates to a yield of 1.03% on the prevailing price level. Its four-year average dividend yield is 0.97%.
The company has raised its dividend payouts at CAGRs of 30.1% and 25% over the past three and five years, respectively. Moreover, the company boasts a 30-year record for consecutive years of dividend payments.
During the third quarter, which ended September 2023, UFPI’s net sales stood at $1.83 billion. The company generated net earnings and adjusted EBITDA of $134.18 million and $207.84 million, respectively. Moreover, it reported an EPS of $2.10.
Analysts expect UFPI’s revenue to grow marginally year-over-year to $2.05 billion for the second quarter ending June 2024. Its EPS for the same quarter is expected to be $2.20.
The stock has gained 47.7% over the past nine months to close the last trading session at $115.99.
UFPI’s positive fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Value and Quality. Within the Industrial - Wood industry, it is ranked first of six stocks.
To see UFPI’s additional POWR Ratings for Growth, Stability, and Sentiment, click here.
EnerSys (ENS)
ENS provides stored energy solutions worldwide, operating in segments like Energy Systems; Motive Power; and Specialty. Its offerings include uninterruptible power systems, motive power products for industrial forklifts, and specialty batteries for various applications.
On December 29, 2023, ENS paid a quarterly cash dividend of $0.225 per common share. The company pays $0.90 annually, which translates to a yield of 0.93% on the prevailing price level. Its four-year average dividend yield is 0.92%. The company has raised its dividend payouts at a CAGR of 4.6% and 2.7% over the past three and five years.
In the second quarter that ended October 1, 2023, ENS’ net sales rose marginally year-over-year to $901.03 million. The company's net earnings and net earnings per common share attributable to ENS stockholders increased 89.2% and 85.7% from the previous-year quarter to $65.22 million and $1.56, respectively. Its gross profit rose 18.7% year-over-year to $239.62 million.
Street expects ENS’ revenue to be $898.78 million for the third quarter ended December 2023. Its EPS for the same quarter is expected to grow 87% year-over-year to $2.38. The company surpassed the EPS estimates in three of the trailing four quarters, which is impressive.
ENS’ shares have gained 19.2% over the past six months to close the last trading session at $97.19.
ENS’ POWR Ratings reflect a sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Value, and Quality. Within the Industrial - Equipment industry, it is ranked #15 among 91 stocks.
Click here for ENS’ additional Momentum, Stability, and Sentiment ratings.
What To Do Next?
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SMFKY shares were unchanged in premarket trading Wednesday. Year-to-date, SMFKY has declined -2.61%, versus a -0.72% 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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