The machinery sector is predicted to expand due to increased industrialization, infrastructural development, automation, and the rise of digitalization and smart manufacturing techniques.
Therefore, it could be wise for investors to buy fundamentally sound machinery stocks Curtiss-Wright Corporation (CW), Taylor Devices, Inc. (TAYD), and Tennant Company (TNC). These stocks are A-rated (Strong Buy) in our proprietary POWR Ratings system.
Machinery efficiency and productivity are increasing as manufacturers adopt cutting-edge technologies. Manufacturers are using new technologies to automate processes, reduce human error, and optimize production schedules. They can now produce more while reducing downtime and operational costs.
AI in the industrial machinery market is expected to grow at a 25% CAGR until 2032. The increasing demand for automation and efficiency in industrial operations should drive this increase. Also, enhancing efficiency and implementing modern production technologies improve product development capacities.
The industrial machinery market is expected to grow at a CAGR of 6% until 2032. Rapid technological improvements in manufacturing industrial machinery are expected to boost innovation, leading to increased productivity, cheaper costs, and higher profits during the forecast period.
Investors’ interest in industrial stocks is evident from the Vanguard Industrials ETF’s (VIS) 6% returns over the past six months.
With these favorable trends in mind, let’s delve into the fundamentals of the three A-rated Industrial - Machinery stocks, beginning with number 3.
Stock #3: Curtiss-Wright Corporation (CW)
CW together with its subsidiaries, provides engineered products, solutions, and services to the aerospace, defense, general industrial, and power generation markets worldwide. It operates through three segments: Aerospace & Industrial; Defense Electronics; and Naval & Power.
CW’s trailing-12-month gross profit margin of 36.93% is 22.5% higher than the industry average of 30.14%. Its trailing-12-month EBIT margin of 17.55% is 80.1% higher than the industry average of 9.74%.
In the fiscal second quarter that ended June 30, 2023, CW’s total net sales increased 15.6% from the prior-year quarter to $704.40 million, while its operating income increased 15% year-over-year to $112.78 million.
The company’s net earnings and adjusted EPS came in at $81 million and $2.15, representing increases of 14.3% and 17.5%, respectively, from the prior-year quarter.
Analysts expect CW’s revenue to increase 8.4% year-over-year to $2.77 billion for the year ending December 2023. Its EPS is expected to grow 12% year-over-year to $9.11 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 40.3% over the past year to close the last trading session at $197.90.
CW’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CW also has a B grade for Momentum, Sentiment, and Quality. It is ranked #9 out of 78 stocks in the A-rated Industrial - Machinery industry. Click here for the additional POWR Ratings for Growth, Value, and Stability for CW.
Stock #2: Taylor Devices, Inc. (TAYD)
TAYD engages in design, development, manufacture, and marketing of shock absorption, rate control, and energy storage devices for use in machinery, equipment, and structures in the United States, Asia, and internationally.
TAYD’s trailing-12-month net income margin of 15.64% is 150.9% higher than the industry average of 6.23%. Its trailing-12-month EBIT margin of 16.94% is 73.8% higher than the industry average of 9.74%.
For the fourth quarter that ended May 31, 2023, TAYD’s sales amounted to $10.72 million increased 11% year-over-year. In addition, its net earnings and EPS came in at $2.07 million and $0.59, representing increases of 36.4% and 37.2%, respectively, from the prior-year quarter.
TAYD’s shares have gained 116.9% over the past year to close the last trading session at $21.49.
TAYD overall A rating equates to a Strong Buy in our POWR Ratings system. It also has an A grade for Momentum and a B grade for Sentiment and Quality.
It is ranked #4 in the same industry. Beyond what is stated above, we’ve also rated TAYD for Growth, Value and Stability. Get all TAYD ratings here.
Stock #1: Tennant Company (TNC)
TNC together with its subsidiaries, designs, manufactures, and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.
TNC’s trailing-12-month ROTC of 10.87% is 60.1% higher than the industry average of 6.79%, while its trailing-12-month ROTA of 8.57% is 69.8% higher than the industry average of 5.05%.
For the fiscal second quarter ended June 30, 2023, TNC’s net sales increased 14.8% year-over-year to $321.70 million. The company’s adjusted EBITDA increased 90.1% year-over-year to $57.60 million.
Also, its net income and adjusted EPS came in at $31.30 million and $1.86, representing increases of 88.6% and 102.6%, respectively, from the prior-year quarter.
Street expects TNC’s revenue to increase 12.3% year-over-year to $1.23 billion for the year ending December 2023. Its EPS is expected to grow 36% year-over-year to $5.58 for the same period. It surpassed EPS estimates in three of the four trailing quarters. Over the past year, the stock has gained 29.3% to close the last trading session at $75.83.
TNC’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 #2 in the same industry. It has a B grade for Value, Stability, Sentiment, Growth, Momentum, and Quality. To see all TNC’s ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
CW shares were trading at $197.10 per share on Friday afternoon, down $0.80 (-0.40%). Year-to-date, CW has gained 18.42%, versus a 13.55% 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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