Although the industrial sector faced multiple headwinds that dampened its growth in the recent past, technological innovation, high demand, and easing inflation could fuel the sector’s growth. Therefore, investors could benefit from fundamentally strong industrial stocks EnerSys (ENS), Preformed Line Products Company (PLPC), and The L.S. Starrett Company (SCX).
Technologies such as 3D printing, artificial intelligence, and big data analytics are increasingly being used in manufacturing, resulting in higher productivity, lower operating costs, and higher margins.
Although persistent inflation has caused an increase in energy and material costs, the industrial sector has shown strength. Investors’ interest in industrial stocks is evident from the Vanguard Industrials Index Fund (VIS) 13% returns over the past three months.
Additionally, the global machinery and equipment market is expected to grow at a CAGR of 3.2% between 2023 and 2028. Also, the industrial machinery market is expected to grow to $708.3 billion in 2027 at a CAGR of 6.7%.
Given these factors, investors could look to buy the featured industrial stocks. Let’s take a closer look at their fundamentals.
EnerSys (ENS)
ENS provides various stored energy solutions for industrial applications worldwide. It operates in three segments: Energy Systems, Motive Power, and Specialty.
In terms of the trailing-12-month levered FCF margin, ENS’ 6.03% is 13.3% higher than the 5.33% industry average. Likewise, its 1.01x trailing-12-month asset turnover ratio is 28% higher than the industry average of 0.79x.
For the fiscal fourth quarter ended March 31, 2023, ENS’ non-GAAP net earnings increased 50.5% year-over-year to $75.40 million. Its adjusted EBITDA increased 34.6% year-over-year to $118.20 million. In addition, its non-GAAP net EPS came in at $1.82, representing a 51.7% increase over the prior-year period.
ENS’ EPS and revenue for the quarter ending September 30, 2023, are expected to increase 61.5% and 7.1% year-over-year to $1.79 and $963.11 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 64% to close the last trading session at $106.78.
ENS’ strong fundamentals are reflected in its POWR Ratings. The stock 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.
Within the Industrial - Equipment industry, it is ranked #1 out of 91 stocks. The stock has an A grade for Growth and a B for Value, Stability, Sentiment and Quality.
Click here to see the additional ratings of ENS for Momentum.
Preformed Line Products Company (PLPC)
PLPC designs and manufactures products and systems that are used in the construction and maintenance of overhead, ground-mounted, and underground networks. The company offers optical ground wire products and splice transmission and distribution lines, connectors for substations, string hardware products, polymer insulators, wildlife protection, substation fittings, and motion control devices.
In terms of the trailing-12-month Return on Total Assets, PLPC’s 10.55% is 107.4% higher than the 5.08% industry average. Its 6.01% trailing-12-month CAPEX/Sales is 106.6% higher than the 2.91% industry average. Likewise, its 13.18% trailing-12-month Return on Total Capital is 87.9% higher than the industry average of 7%.
PLPC’s net sales for the first quarter that ended March 31, 2023, increased 31.5% year-over-year to $181.82 million. Its net income increased 74.1% year-over-year to $21.42 million. Additionally, its EPS attributable to PLPC shareholders came in at $4.28, representing a 71.9% increase over the prior-year quarter.
Over the past year, the stock has gained 198.5% to close the last trading session at $178.50.
PLPC’s POWR Ratings reflect its positive outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #5 in the same industry. It has an A grade for Growth and a B for Value, Sentiment, and Quality.
In total, we rate PLPC on eight different levels. Beyond what we stated above, we have also given PLPC grades for Momentum and Stability. Access all the ratings, here.
The L.S. Starrett Company (SCX)
SCX manufactures and sells industrial, professional, and consumer measuring and cutting tools and related products worldwide.
In terms of the trailing-12-month Return on Total Assets, SCX’s 9.02% is 77.5% higher than the 5.08% industry average. Its 9.35% trailing-12-month levered FCF margin is 75.7% higher than the 5.33% industry average. Likewise, its 9.90% trailing-12-month Return on Total Capital is 41.2% higher than the industry average of 7.01%.
SCX’s net sales for the fiscal third quarter ended March 31, 2023, increased 2% year-over-year to $61.68 million. The company’s net income increased 74.4% year-over-year to $7.47 million. In addition, its EPS came in at $0.99, representing a 73.7% increase over the prior-year quarter.
The stock has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 74.7% to close the last trading session at $12.23
SCX’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked #3 in the Industrial - Equipment industry. In addition, it has an A grade for Value and a B grade for Momentum, Sentiment, and Quality. We have also given SCX grades for Growth and Stability. Get all SCX ratings here.
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ENS shares were trading at $105.60 per share on Thursday morning, down $1.18 (-1.11%). Year-to-date, ENS has gained 43.56%, versus a 18.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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