The macroeconomic issues are having a significant impact on the manufacturing industry. The industry is strongly dependent on raw materials, which are subject to global market volatility and are in short supply due to labor and transportation shortages. However, manufacturing output increased by 0.1% in February, while capacity utilization remained steady at 78%.
Given the long-term prospects of the industry, it could be wise for investors to buy manufacturing stocks The Timken Company (TKR), Vishay Precision Group, Inc. (VPG), and Core Molding Technologies, Inc. (CMT), considering their fundamental strength.
The Biden-Harris Administration has proposed new initiatives to boost American competitiveness, expand manufacturing jobs, and reduce industrial greenhouse gas emissions.
Furthermore, rising Industry 4.0 adoption, increased government support for industrial automation, increased emphasis on industrial automation in manufacturing processes, surging demand for software systems that save time and money, increasing supply chain complexities, and increased emphasis on regulatory compliances are all driving the market growth.
The global smart manufacturing market is expected to grow at a 14.9% CAGR until 2030.
Take a look at the detailed discussion of the stocks mentioned above:
The Timken Company (TKR)
TKR designs, manufactures, and manages engineered bearings and industrial motion products worldwide. It operates in two segments: Mobile Industries and Process Industries.
TKR’s forward EV/EBITDA of 8.37x is 21% lower than the industry average of 10.59x. Its forward Price/Sales multiple of 1.22 is 4.1% lower than the industry average of 1.27.
TKR’s trailing-12-month asset turnover ratio of 0.82x is 2.9% higher than the 0.80x industry average. Its trailing-12-month ROTC of 9.86% is 41.7% higher than the 6.96% industry average.
For the fourth quarter ended December 31, 2022, TKR’s net sales increased 7.4% year-over-year to $1.08 billion. Its gross profit grew 27% from its year-ago value to $296.10 million. Also, its net income came in at $99.10 million, up 48.6% year-over-year. The company’s EPS came in at $1.32, an increase of 61% year-over-year.
The consensus revenue estimate of $4.83 billion for the year ending 2023 represents a 7.3% increase year-over-year. Its EPS is expected to grow 15.1% year-over-year to $6.93 in 2023. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 52.2% over the past nine months to close its last trading session at $81.44.
TKR’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TKR also has an A grade for Sentiment and a B for Value and Quality. It is ranked #3 of 34 stocks in the A-rated Industrial - Manufacturing industry. To access additional ratings for TKR’s Growth, Stability, and Momentum, click here.
Vishay Precision Group, Inc. (VPG)
VPG designs, manufactures, and markets specialized sensors, weighing solutions, and measurement systems. It operates through three segments: Sensors, Weighing Solutions, and Measurement Systems. The company offers its products under the Alpha Electronics, Powertron, Celtron, and Revere brands, among others.
VPG’s forward EV/Sales of 1.37x is 50.7% lower than the industry average of 2.77x. Its forward Price/Sales multiple of 1.38 is 50.1% lower than the industry average of 2.76.
VPG’s trailing-12-month asset turnover ratio of 0.77x is 27.8% higher than the 0.60x industry average. Its trailing-12-month ROTC of 7.70% is 274.1% higher than the 2.06% industry average.
For the fiscal fourth quarter ended December 31, 2022, VPG’s net revenue increased 6.9% year-over-year to $96.24 million. Its gross profit rose 13.8% from the year-ago value to $39.70 million. The company’s adjusted net earnings increased 35.1% year-over-year to $10.40 million, while its adjusted EPS grew 35.7% from the prior-year quarter to $0.76.
Analysts expect VPG’s revenue and EPS to increase 29.9% and marginally year-over-year to $412.88 million and $2.65, respectively. It has surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 48.3% to close the last trading session at $41.82.
VPG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked first in the same industry. It has an A grade for Sentiment and a B for Momentum, Value, Stability, and Quality. Click here to see VPG’s rating for Growth.
Core Molding Technologies, Inc. (CMT)
CMT operates as a molder of thermoplastic and thermoset structural products primarily for North America and Mexico’s building products, utilities, transportation, and power sports industries.
CMT’s forward EV/Sales of 0.47x is 68.8% lower than the industry average of 1.51x. Its forward Price/Sales multiple of 0.40 is 64.9% lower than the industry average of 1.15.
CMT’s trailing-12-month asset turnover ratio of 1.96x is 158.4% higher than the 0.76x industry average. Its trailing-12-month ROTC of 7.84% is 13.8% higher than the 6.89% industry average.
CMT’s total net sales increased 18.1% year-over-year to $86.44 million in the fourth quarter that ended December 31, 2022. Its adjusted EBITDA increased 22.6% year-over-year to $6.06 million. Moreover, its net income increased 995.7% year-over-year to $4.83 million, whereas its EPS increased significantly from its year-ago value to $0.57.
CMT’s revenue is expected to increase by 3.4% year-over-year to $397.67 million in 2024. Its EPS is expected to grow 10.3% year-over-year to $1.60 in 2024. CMT’s shares have gained 101.3% over the past nine months to close the last trading session at $18.38.
CMT’s 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.
It has an A grade for Sentiment and a B in Value and Quality. Within the same industry, it is ranked #2. Click here to access additional POWR Ratings for Growth, Momentum, and Stability for CMT.
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TKR shares were trading at $80.39 per share on Tuesday morning, down $1.05 (-1.29%). Year-to-date, TKR has gained 14.16%, versus a 7.98% 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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