Aided by government initiatives and technological progress, the industrial sector is well-positioned for a breakthrough. Amid this backdrop, investors could scoop up shares of fundamentally stable and undervalued industrial stocks, Siemens Aktiengesellschaft (SIEGY), TE Connectivity plc (TEL), and Mitsubishi Corporation (MSBHF).
The Biden-Harris Administration has made strategic public investments in U.S. manufacturing, infrastructure, and clean energy industries to reignite manufacturing leadership and boost economic growth. Since taking office, the administration has contributed over $1 trillion to sectors such as semiconductors, clean power, infrastructure, biomanufacturing, and more.
Amid these investments, the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act stand out for their long-withstanding positive effect on their respective industries, facilitating their growth prospects. As a result of these investments, a rise in manufacturing output has been noticed, resulting in a 0.2% increase in the month of November.
Additionally, technological breakthroughs in recent years have also contributed to an overall efficiency and production boost in the manufacturing industry. Features like AI, machine learning, and IoT have performed basic tasks and work that reduced manual labor, resulting in increased productivity, a higher quality of manufactured goods, better decision-making, and overall worker safety.
With the sector poised for significant growth, now is an ideal time to capitalize on undervalued stocks. As demand for infrastructure, technology, and innovation surges, these stocks present a unique opportunity. Investing in them could unlock substantial returns as the sector evolves and flourishes in the coming years.
So, let us dive deep into the fundamentals of three industrial stocks, starting with #3.
Stock #3: Siemens Aktiengesellschaft (SIEGY)
Headquartered in Munich, Germany, SIEGY is a technology company that is focused on automation and digitalization. The company has five segments: Digital Industries; Smart Infrastructure; Mobility; Siemens Healthineers; and Siemens Financial Services.
On December 18, SIEGY secured significant rail contracts in Thailand with Bozankaya and ST Engineering Urban Solutions Ltd. The company is set to deliver 53 new trains, along with the installation of technical equipment for signaling and maintenance services. The contract enhances the company's revenue stream while opening doors for further growth in Southeast Asia.
On December 12, SIEGY announced authorization of its Mireo Plus H hydrogen trains. The authorization allows the company to inaugurate passenger service in the Berlin-Brandenburg and Bavarian regions, where hydrogen-powered trains will be used for the first time.
By introducing these innovative, emission-free trains, SIEGY could strengthen its commitment to sustainability and enhance its growing portfolio of eco-friendly transportation solutions.
In terms of forward non-GAAP P/E, SIEGY is trading at 9.88x, 50.6% lower than the industry average of 19.98x. Likewise, the stock’s forward Price/Book and forward Price/Cash flow multiples of 1.43 and 5.60 are 52.4% and 64.8% lower than their respective industry averages of 3.00x and 15.88x.
For the fiscal fourth quarter that ended September 30, 2024, SIEGY’s revenue marginally increased year-over-year to €20.81 billion ($21.61 billion). Its income from continuing operations rose 13.6% from the year-ago value to €2.18 billion ($2.26 billion). Additionally, the company’s net income and EPS both grew 11.2% from the prior year’s quarter to €2.12 billion ($2.20 billion) and €2.38, respectively.
Analysts expect SIEGY’s revenue and EPS for the fiscal year ending September 2025 to increase 2.9% and 73.3% year-over-year to $82.15 billion and $9.94, respectively. Moreover, the company topped the consensus EPS estimates in all of the four trailing quarters, which is impressive.
Shares of SIEGY have surged 8.4% over the past six months, closing the last trading session at $98.25.
SIEGY’s POWR Ratings mirror its solid fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
SIEGY has a B grade for Value, Momentum, and Stability. Within the B-rated Industrial - Manufacturing industry, it is ranked #5 out of 35 stocks.
In addition to the POWR Ratings highlighted above, you can check SIEGY’s ratings for Growth, Sentiment, and Quality here.
Stock #2: Mitsubishi Corporation (MSBHF)
With its headquarters in Tokyo, Japan, MSBHF is engaged in natural gas, industrial materials and infrastructure, chemicals, mineral resources, automotive and mobility, food and consumer industry, power solutions, and urban development businesses.
On December 5, MSBHF announced a significant investment in Heirloom Carbon Technologies, Inc., the United States’ first commercial Direct Air Capture (DAC) facility operating company. The investment reflects the company’s sustainability ventures and direct participation in future DAC projects being developed by Heirloom, strengthening its market dominance.
On November 22, MSBHF announced a Final Investment Decision (FID) on the Tangguh Ubadari, CCUS, Compression (UCC) Project. The project is set to unlock an additional three trillion cubic feet of natural gas in production volume and supply energy to Asian countries, including Japan. The investment could expand the company’s energy development portfolio.
In terms of forward EV/Sales multiple, MSBHF is trading at 0.76 is 60.4% lower than the industry average of 1.91x. Additionally, its forward Price/Sales of 0.51x is 65.3% lower than the industry average of 1.48x.
For the six months that ended September 30, 2024, MSBHF’s revenues increased 2.2% year-over-year to ¥9.56 trillion ($61.06 billion). Its gross profit grew 8.9% from the year-ago value to ¥1.15 trillion ($7.37 billion). Moreover, the profit for the period amounted to ¥519.96 billion ($3.32 billion), while the profit attributable to the owners of the parent per share stood at ¥109.59.
The consensus revenue estimate of $123.40 billion for the fiscal year ending March 2025 exhibits a year-over-year rise of 782.1%.
The stock has surged 6.3% over the past year to close the last trading session at $16.43.
MSBHF’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MSBHF has an A grade for Stability and Momentum and a B for Value. It is ranked #26 out of 80 stocks within the B-rated Industrial - Services industry.
To access MSBHF’s Growth, Sentiment, and Quality ratings, click here.
Stock #1: TE Connectivity plc (TEL)
Based in Ballybrit, Ireland, TEL manufactures and sells connectivity and sensor solutions. The company has three segments: Transportation Solutions; Industrial Solutions; and Communications Solutions. It offers antennas, application tooling, cable assemblies, connectors, energy and power, fiber optics, heat shrink tubing and more.
In terms of forward non-GAAP P/E, TEL is trading at 17.78x, which is 28.9% lower than the industry average of 25.01x. The stock’s forward Price/Sales ratio of 2.61x is 18.1% below the industry average of 3.18x. Also, its forward EV/EBITDA multiple of 11.53 is 24.2% lower compared to the industry average of 15.22x.
For the fiscal 2024 fourth quarter that ended September 27, TEL’s net sales increased marginally year-over-year to $4.07 billion. Its adjusted operating income grew 8% from the year-ago value to $755 million.
The company’s adjusted income from continuing operations increased by 5.5%, reaching $595 million, while adjusted EPS from continuing operations rose 9.6% to $1.95 compared to the same quarter last year.
Street expects TEL’s revenue and EPS for the fiscal 2025 first quarter ending December 2024 to increase 2.1% and 2.6% year-over-year to $3.91 billion and $1.89, respectively. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.
Shares of TEL have surged 2.3% over the past nine months, closing the last trading session at $143.89.
TEL’s strong prospects are apparent in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
TEL has a B grade for Value, Stability, Sentiment, and Quality. Within the Industrial - Manufacturing industry, it is ranked #2 out of 35 stocks.
Click here to access TEL’s ratings for Growth and Momentum.
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SIEGY shares were unchanged in premarket trading Friday. Year-to-date, SIEGY has gained 7.21%, versus a 24.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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