Industrial sector segments like industrial machinery, industry building material, and industrial services have evolved significantly with favorable factors such as rising construction requirements, adoption of smart technologies, and incorporating innovative technologies in manufacturing processes.
Given the industry’s bright prospects, it could be wise to invest in fundamentally strong industrial stocks EMCOR Group, Inc. (EME), Owens Corning (OC), and Curtiss-Wright Corporation (CW) for steady gains.
Industrial sector encompasses a wide variety of organizations catering to the requirements of end-user industries through conversion of raw material to finished products via processing.
With rising adoption of automation and smart technologies enhancing the productivity and efficiency, the industrial machinery market is poised to register a CAGR of 7.5%, reaching a value of $1.30 trillion by 2032.
Further, the evolving demand for residential apartments and overall construction industry’s development has led to a surge in the global construction materials market and is expected to reach $1.87 trillion by 2032, growing at a CAGR of 3.9%. Demand drivers for the market includes increasing infrastructure investments, rising prosperity, and boosting highway investments.
Besides, more and more industries are undergoing digital transformation to improve efficiency and their processes. The rising integration of advanced technologies like IoT and AI in industrial process open new opportunities for specialized services coupled with adoption of 4.0 market. This integration is resulting in substantial growth of industrial services market.
Moreover, investor’s interest in industrial stocks is evident from the SPDR Select Sector Fund - Industrial (XLI) 19.7% returns over the past year.
Given the industry’s solid outlook, investing in fundamentally strong industrial stocks such as EME, OC, and CW could be wise for future gains.
Let’s discuss the fundamentals of these stocks in detail:
EMCOR Group, Inc. (EME)
EME offers construction and facilities, building, and industrial services mainly in the United States and the United Kingdom. The company provides design, integration, installation, start-up, operation, and maintenance services related to power transmission, distribution, and generation systems.
On April 4, EME’s Board of Directors declared a regular quarterly cash dividend of $0.25 per common share. The dividend was paid on April 30, 2024 to stockholders of record as of April 16, 2024.
EME pays an annual dividend of $1.00, which translates to a yield of 0.26% at the current share price. Its four-year average dividend yield is 0.38%. Moreover, the company’s dividend payouts have increased at a CAGR of 23.4% over the past three years.
In terms of forward EV/Sales, EME is trading at 1.21x, 31.7% lower than the industry average of 1.77x. Similarly, the stock’s forward Price/Sales multiple of 1.25 is 13% lower than the industry average of 1.43.
During the first quarter that ended March 31, 2024, EME’s revenues increased 18.7% year-over-year to $3.43 billion. Its gross profit grew 35.1% from the year-ago value to $589.31 million. The company’s net income and EPS came in at $197.15 million and $4.17, up 76.8% and 79.7% from the prior year’s quarter, respectively.
Furthermore, the company’s cash and cash equivalents stood at $840.98 million as of March 31, 2024, versus $789.75 million as of December 31, 2023.
Analysts expect EME’s revenue and EPS for the second quarter (ending June 2024) to increase 15.9% and 24.6% year-over-year to $3.53 billion and $3.68, respectively. Furthermore, the company has surpassed the consensus EPS and revenue estimates in all four trailing quarters.
EME’s stock has gained 75.9% over the past six months and 114.5% over the past year to close the last trading session at $380.78.
EME’s solid fundamentals are reflected in its POWR Ratings. 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, each weighted to an optimal degree.
EME has a B grade for Quality, Momentum, Sentiment, and Growth. It is ranked #2 out of 78 stocks in the B-rated Industrial - Services industry.
In addition to the POWR Ratings we’ve stated above, we also have EME ratings for Stability and Value. Get all EME ratings here.
Owens Corning (OC)
OC manufactures and sells building and construction materials internationally. It operates in three segments: Roofing; Insulation; and Composites. It manufactures and sells laminate and strip asphalt roofing shingles, oxidized asphalt materials, and roofing components used in residential and commercial construction, and specialty applications.
On June 20, OC’s Board of Directors declared a quarterly cash dividend of $0.60 per common share. The dividend will be payable on August 2, 2024, to shareholders of record as of July 15, 2024.
OC pays an annual dividend of $2.24, which translates to a yield of 1.26% at the current share price. Its four-year average dividend yield is 1.38%. Moreover, the company’s dividend payouts have increased at a CAGR of 30.8% over the past three years. Owens has raised its dividends for 5 consecutive years.
On May 15, OC completed the acquisition of Masonite International Corporation, a leading global provider of interior and exterior doors and door systems. All outstanding Masonite common shares were acquired by OC for $133 per share, with an implied transaction value of approximately $3.9 billion.
The acquisition marked a significant milestone for OC and further strengthened its position as a market leader in building and construction materials.
For the first quarter that ended March 31, 2024, OC reported net sales of $2.30 billion. The company’s adjusted EBITDA increased 16% from the year-ago value to $565 million. Its adjusted earnings attributable to OC came in at $316 million and $3.59 per share, up 22.9% and 28.2% year-over-year, respectively.
Furthermore, the company’s operating cash flow was $24 million, against operating outflow of $164 million during the prior year’s quarter.
Street expects OC’s revenue for the second quarter (ending June 2024) to increase 12.8% year-over-year to $2.89 billion, while its EPS for the same quarter is expected to grow 11.9% year-over-year to $4.31, respectively. In addition, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has gained 20.2% and 42.5% over the past year to close the last trading session at $178.24.
OC’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 stock has a B grade for Quality and Momentum. Within the B-rated Industrial – Building Materials industry, OC is ranked #5 of 46 stocks.
Click here to access additional ratings of OC for Value, Stability, Growth, and Sentiment.
Curtiss-Wright Corporation (CW)
CW offers engineered products, solutions, and services mainly to aerospace and defense, commercial power, process, and industrial markets worldwide. It operates in three segments: Aerospace & Industrial; Defense Electronics; and Naval & Power.
On June 3, CW entered into an agreement to acquire the stock of Ultra Nuclear Limited and Weed Instrument Co., Inc., a subsidiary of Ultra Electronics, for $200 million in cash.
The strategic acquisition expands CW’s global portfolio with highly complementary, critical measurement and control solutions supporting the modernization of existing commercial nuclear power plants, and the design of new and advanced power plants including small modular reactors.
On May 21, CW was awarded a $16 million contract by Iron Bow, acting as the prime contractor, to provide the U.S. Air Force with an integrated solution offering optimization and improvement for deployable communications. As per the contract, CW will provide the USAF with its PacStar® 400 series modules and Commercial Solutions for Classified integration.
Also, on May 15, CW was awarded contracts valued in excess of $130 million to provide propulsion valves, pumps and advanced instrumentation and control systems for the U.S. Navy’s Virginia-class nuclear powered attack submarine, Columbia-class submarine and Ford-class aircraft carrier programs.
During the first quarter that ended March 31, 2024, CW’s sales increased 13% year-over-year to $713.17 million, while its gross profit rose 14.6% year-over-year to $253.75 million. Its adjusted operating income grew 23.4% from the prior year’s quarter to $99.96 million.
Also, the company’s net earnings came in at $76.49 million and $1.99 per share, up 34.6% and 34.4% year-over-year, respectively.
According to the updated full-year 2024 guidance, CW expects total sales of $2.98 billion - $3.03 billion, up 5% - 7%. It expects its operating income to range from $518 million to $533 million, up 5% - 8%. The company’s EPS is expected to be $10.10 - $10.40, indicates 8% - 11% growth and free cash flow is expected to range between $415 million and $435 million, up 0% to 5%.
Analysts expect CW’s EPS for the second quarter (ending June 2024) to increase 7.4% year-over-year to $2.31. The company’s revenue is expected to grow 4.5% year-over-year to $735.72 million for the same period. Moreover, the company has topped the consensus EPS and revenue estimates in all of the four trailing quarters.
CW’s stock has surged 24.5% over the past six months and 58.5% over the past year to close the last trading session at $275.39.
CW’s POWR Ratings reflect this robust outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Sentiment, Momentum, and Quality. Within the A-rated Industrial - Machinery, CW is ranked #5 out of 79 stocks.
Click here to access additional ratings of CW for Stability, Growth, and Value.
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EME shares were trading at $375.71 per share on Tuesday afternoon, down $5.07 (-1.33%). Year-to-date, EME has gained 74.67%, versus a 14.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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