The industrial sector is poised for significant growth due to the need for infrastructure development, manufacturing, and the adoption of technology. Given the industry’s steady growth prospects, investors could buy industrial stocks UFP Industries, Inc. (UFPI), IES Holdings, Inc. (IESC), and Interface, Inc. (TILE).
Technological advancements, increased globalization, and a focus on sustainability drive the global industrial sector. Besides, the rising adoption of automated tools and equipment on factory floors, warehouses, & manufacturing, the emergence of digital technologies such as cloud services, ML, AI, IoT, & others, and the increasing investment towards additive manufacturing bolsters the global industrial landscape.
The global Industry 4.0 is expected to be valued at around $482 billion by 2032, growing at a CAGR of 20.7%.
Moreover, the ever-increasing apparel demand from the fashion industry and the meteoric growth of e-commerce platforms are expected to drive textile market growth. Also, the rapidly growing consumer preference towards sustainable products is forcing major textile companies to focus on restructuring their business and investing in manufacturing practices that target sustainable products. The global textile market is anticipated to grow at a CAGR of 7.4% in revenue until 2030.
The global industrial services industry is expected to grow at a CAGR of 5.1% until 2028. The growth of the market can be attributed to the increasing demand for operational excellence across the industrial sectors coupled with the rising adoption of various technologies, such as the industrial internet of things.
Considering these conducive trends, let’s take a look at the fundamentals of the three Industrial stocks.
UFP Industries, Inc. (UFPI)
UFPI designs, manufactures, and markets wood and non-wood composites, and other materials in North America, Europe, Asia, and Australia. It operates through Retail; Packaging; and Construction segments.
On November 14, 2024, UFPI announced the launch of TimberBase.com, a B2B digital platform for buying and selling lumber and building materials. Purchased from German tech start-up Timber Base GmbH in February 2023, the platform has been upgraded with a more intuitive interface, supported by UFP’s team of international industry experts, to simplify the buying and selling process for customers and suppliers around the world.
UFPI’s trailing-12-month asset turnover ratio of 1.97x is 143.9% higher than the industry average of 0.81x, while its trailing-12-month net income margin of 7.14% is 20.5% higher than the industry average of 5.93%.
For the fiscal third quarter that ended September 30, 2023, UFPI’s net sales stood at $1.83 billion. Its gross profit came in at $364.400 million. Its net earnings came in at $134.18 million and EPS came in at $2.14.
Street expects revenue to be $1.64 billion for the fiscal fourth quarter ended December 2023. Its EPS is expected to be $1.65 for the same quarter.
The stock has gained 44.3% over the past nine months to close the last trading session at $118.63.
UFPI’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Momentum and a B in Value and Quality. It is ranked first in the 5-stock Industrial - Wood industry.
Beyond what is stated above, we’ve also rated UFPI for Growth, Stability, and Sentiment. Get all UFPI ratings here.
IES Holdings, Inc. (IESC)
IESC engages in the design and installation of integrated electrical and technology systems, and provides infrastructure products and services in the United States. The company operates through four business segments: Commercial & Industrial; Communications; Infrastructure Solutions; and Residential.
The stock’s trailing-12-month ROCE margin of 24.79% is 101.4% higher than the industry average of 12.31%. Its ROTC margin of 19.86% is 189.3% higher than the 6.86% industry average.
IESC’s revenues for the fiscal first quarter that ended December 31, 2023, increased marginally year-over-year to $634.40 million. The company’s gross profit increased 50.7% year-over-year to $143.80 million. In addition, its adjusted net income attributable to common stockholders increased 106% year-over-year to $41 million. Also, its adjusted EPS came in at $1.89, registering an increase of 127.7% year-over-year.
Shares of IESC have gained 108.4% over the past nine months to close the last trading session at $101.26.
It’s no surprise that IESC has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
IESC has a B grade for Growth, Momentum, Stability, and Quality. It is ranked #2 in the Industrial - Services industry.
In addition to the POWR Ratings highlighted above, one can access IESC’s ratings for Sentiment and Value here.
Interface, Inc. (TILE)
TILE designs and sells modular carpet products globally. Its offerings include modular carpets, luxury vinyl tiles, and carpet tiles for commercial and residential spaces, along with related services and products.
TILE’s trailing-12-month gross profit margin of 33.46% is 10.4% higher than the industry average of 30.31%, while its trailing-12-month levered FCF margin of 8.49% is 30.4% higher than the industry average of 6.51%.
During the third quarter, which ended on October 1, 2023, TILE reported net sales of $311 million. The company’s adjusted gross profit and operating income increased 1% and 3.8% from the prior year’s quarter to $111.60 million and 32.40 million, respectively. Moreover, its adjusted EBITDA amounted to $43.7 million, up 1.9% year-over-year.
Analyst expects revenue to be $320.30 million for the fiscal fourth quarter ended December 2023. Its EPS is expected to be $0.22 for the same quarter. The company surpassed the EPS estimates in three of the trailing four quarters.
Shares of TILE have gained 50.4% over the past nine months, closing the last trading session at $13.44.
TILE’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
TILE has a B grade for Momentum, Quality, Value, and Sentiment. It is ranked first in the Industrial - Textiles industry.
Click here to access the additional TILE ratings (Growth and Stability).
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.
UFPI shares were trading at $118.63 per share on Monday afternoon, down $1.13 (-0.94%). Year-to-date, UFPI has declined -5.51%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
Investor Alert: Top 3 Industrial Stocks on the Rise StockNews.com
