Despite market volatility, the equipment sector has performed relatively well. A gradual return to normality in global supply chains and increasing raw material availability have helped U.S. manufacturing turn the corner, but persistent labour shortages and low inventories remain an issue.
Despite the near-term challenges, we think adding fundamentally sound equipment stocks Compagnie de Saint-Gobain S.A. (CODYY), EnerSys (ENS), and Preformed Line Products Company (PLPC) could be wise now.
The equipment manufacturing industry’s return to growth in 2022 is part of a broader rebound in U.S. manufacturing production, which saw nominal output rise by an estimated 14% during the year.
AEM president Megan Tanel said, “The equipment manufacturing industry has shown time and again that it is a resilient force in the North American economy, weathering everything from global pandemics to supply chain disruptions with strength and determination. As we look to the future, we can be confident that this industry will continue to adapt and innovate in the face of new challenges, providing stable jobs and economic opportunities for communities across the continent.”
The market is expanding as a result of the expanding usage of electrical and electronic equipment in manufacturing procedures. Electronic instruments and parts, including VFDs, low harmonic drives, vacuum contactors, and motor control centres, can be housed in industrial electrical enclosures.
According to a recent market report by Technavio, the industrial enclosures market will grow at a CAGR of 5.2% until 2027.
Let’s discuss the stocks mentioned above in detail.
Compagnie de Saint-Gobain S.A. (CODYY)
Headquartered in Courbevoie, France, CODYY designs, manufactures, and distributes materials and solutions for well-being worldwide. It operates through five segments: High-Performance Solutions; Northern Europe; Southern Europe; Middle East (ME) & Africa; Americas; and Asia-Pacific.
CODYY’s trailing-12-month ROTC of 8.67% is 22.9% higher than the industry average of 7.05%. Its trailing-12-month ROTA of 5.42% is 4.3% higher than the industry average of 5.20%.
Over the last three years, CODYY’s dividend payouts have grown at a 5.1% CAGR. While CODYY’s four-year average dividend yield is 2.7%, its current dividend translates to a 3.07% yield.
For the year that ended December 2022, CODYY’s revenues came in at €51.20 billion ($16.67 billion), up 15.9% year-over-year. Its operating income increased 18.4% year-over-year to €5.34 billion ($5.86 billion). Its EPS increased 21.9% year-over-year to €5.84.
Analysts expect CODYY’s revenue to increase 2.4% year-over-year to $54.61 billion in 2024. Its EPS is expected to grow 4.4% year-over-year to $1.27 in 2024. CODYY’s shares have gained 51.6% over the past six months to close the last trading session at $11.28.
CODYY’s POWR Ratings reflect this promising outlook. 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.
CODYY has an A grade for Value and a B for Stability, Momentum, and Quality. Within the B-rated Industrial - Equipment industry, it is ranked first among 89 stocks. Click here for the additional POWR Ratings for Growth and Sentiment for CODYY.
EnerSys (ENS)
ENS provides various stored energy solutions for industrial applications worldwide. It operates in three segments: Energy system; Motive power, and Speciality.
ENS’s trailing-12-month asset turnover ratio of 1.01x is 26.4% higher than the industry averages of 0.80x.
ENS has paid dividends for nine consecutive years. While ENS’s four-year average dividend yield is 0.98%, the company’s annual dividend of $0.70 yields 0.86% at the current price level.
ENS’s gross profit increased 9% year-over-year to $920.20 million for the fiscal 2022 third quarter that ended January 1, 2023. Its adjusted operating profit came in at $84.90 million, increased by 40.8% year-over-year. Also, its adjusted EPS came in at $1.27, up 25.7% year-over-year.
Street expects ENS’s revenue to increase 5.5% year-over-year to $3.87 billion in 2024. Its EPS is estimated to increase 22.5% year-over-year to $6 in 2024. It surpassed EPS estimates in all four trailing quarters. Over the past nine months, the stock has gained 42.9% to close the last trading session at $83.30.
It’s no surprise that ENS has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, Sentiment, Quality, and Stability. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated ENS for Momentum. Get all ENS ratings here.
Preformed Line Products Company (PLPC)
PLPC designs and manufactures products and systems used in the building and maintenance of overhead, ground-mounted, and underground networks for energy, telecommunications, cable operator, information, and other industries, along with its subsidiaries.
PLPC’s trailing-12-month gross profit and EBITDA margins of 33.78% and 14.64% are 13% and 10.8% higher than the industry averages of 29.90% and 13.21%, respectively.
PLPC has paid dividends for eight consecutive years. While PLPC’s four-year average dividend yield is 1.29%, the company’s annual dividend of $0.80 yields 0.64% at the current price level.
For the fiscal fourth quarter ended December 31, 2022, PLPC’s net sales increased 29.3% year-over-year to $169.92 million. Its operating income came in at $24.20 million, up 102.3% year-over-year. Also, its net income increased at 84% year-over-year to 16.51 million. Its EPS came in at $3.28, up 83.2% year-over-year.
Over the past nine months, the stock has gained 109.9% to close the last trading session at $126.96.
PLPC’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 #5 in the same industry. It has a B for Growth, Value, Stability, and Sentiment. To see additional PLPC’s rating for Momentum, and Quality, click here.
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CODYY shares were trading at $11.37 per share on Tuesday morning, up $0.09 (+0.80%). Year-to-date, CODYY has gained 16.50%, versus a 8.54% 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.
Best 3 Equipment Stocks Based on the Industry StockNews.com
