The industrial sector is expected to remain buoyed owing to steady demand for industrial goods and services. Besides, approximately 742.30 million square feet of industrial space were under construction as of November.
Moreover, the bipartisan infrastructure bill that went into effect about a year ago allocated more than $185 billion in funding and over 6,900 specific projects across all 50 states, which is expected to boost the industrial sector.
The global industrial services market is expected to be worth $65 billion by 2030, growing at a 7% CAGR. Globalization, foreign direct investment, and urbanization are expected to drive the growth of the global industrial services market.
Given the industry’s promising outlook, it could be wise to buy fundamentally strong industrial stocks Caterpillar Inc. (CAT) and Powell Industries, Inc. (POWL), which look poised to deliver solid returns in the near term.
Caterpillar Inc. (CAT)
CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company operates through its five segments: Construction Industries; Resource Industries; Energy & Transportation; Financial Products; and All Other.
On November 22, 2022, CAT announced a successful demonstration of its first battery electric 793 large mining truck and declared a significant investment to transform its Arizona-based proving ground into a sustainable testing and validation hub.
CAT has paid dividends for 33 consecutive years. Over the last three years, CAT’s dividend payouts have grown at a 6.9% CAGR. While CAT’s four-year average dividend yield is 2.46%, its current dividend translates to a 1.97% yield.
CAT’s total sales and revenues came in at $15 billion for the third quarter that ended October 2, 2022, up 20.9% year-over-year. Its operating profit came in at $2.43 billion, up 45.7% year-over-year, while its EPS came in at $3.87, up 48.8% year-over-year.
Analysts expect CAT’s revenue to increase 14.9% year-over-year to $58.59 billion in 2022. The stock’s EPS is estimated to grow 28.6% year-over-year to $13.9 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past three months, the stock has gained 49.7% to close the last trading session at $243.14.
CAT’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CAT has a B grade for Sentiment. Within the B-rated Industrial – Machinery industry, it is ranked #13 out of 79 stocks. Click here for the additional POWR Ratings for Value, Growth, Quality, Momentum, and Stability for CAT.
Powell Industries, Inc. (POWL)
POWL, together with its subsidiaries, designs, develops, manufactures, sells, and services custom-engineered equipment and systems to distribute, control, and monitor electrical energy.
On December 5, 2022, Brett A. Cope, Powell’s Chairman and CEO, said, “This strong performance is in large part a direct result of our focused and deliberate efforts around our strategic initiatives to diversify our business, strengthen our services offerings, emphasize technology and ensure that Powell is positioned for future success.”
POWL has paid dividends for eight consecutive years. While POWL’s four-year average dividend yield is 3.68%, its current dividend translates to a 2.98% yield.
POWL’s revenues stood at $162.68 million for the fourth quarter that ended September 30, 2022, up 25.7% year-over-year. Its net income came in at $8.74 million, up 167.9% year-over-year, while its EPS came in at $0.73, up 160.7% year-over-year.
Street expects POWL’s revenue to increase 7.6% year-over-year to $573.13 billion in 2023. Its EPS is estimated to grow 10% per annum for the next five years. It has surpassed EPS estimates in three out of four trailing quarters. Over the past three months, the stock has gained 70.3% to close the last trading session at $34.90.
It’s no surprise that POWL has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. It has a B grade for Growth, Value, and Quality. It is ranked #2 in the Industrial – Machinery industry. Click here to access the additional POWR Ratings for POWL (Stability, Momentum, and Sentiment).
CAT shares were trading at $240.38 per share on Wednesday afternoon, down $2.76 (-1.14%). Year-to-date, CAT has gained 19.00%, versus a -18.82% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
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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