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4 Stocks to Gain From the Promising Industrial Manufacturing Industry
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The Zacks Manufacturing – General Industrial industry is poised for growth on the back of the recovery in domestic and export orders for industrial products and the surge in the e-commerce business. Efforts to digitalize business operations have been enhancing the industry players' competitiveness.
Strength in end markets, along with improvement in the supply chain, is expected to foster the industry’s growth. Industry players bank on frequent innovation investments to stay competitive in the market. Ingersoll Rand Inc. (IR - Free Report) , RBC Bearings Incorporated (RBC - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and Chart Industries, Inc. (GTLS - Free Report) are a few industry participants that might capitalize on these opportunities.
About the Industry
The Zacks Manufacturing – General Industrial industry comprises companies that produce a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. Industrial manufacturing companies also reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation and utilities industries.
4 Trends Shaping the Future of the Manufacturing General Industrial Industry
Favorable Trends: The industry has been benefiting from the recovery in manufacturing activities, supported by a rise in domestic and export orders for industrial products. Industrial production increased by 0.4% in March 2024 for the second successive month, with a 0.5% rise in manufacturing output. The ISM’s manufacturing index registered 50.3% in March 2024, indicating expansion of the U.S. manufacturing activity. In March, the New Order Index returned to expansion territory, with an increase of 2.2 percentage points from the previous month’s levels. The uptick in new orders, in conjunction with the slowdown in inflation, augurs well for industrial manufacturing companies.
Easing Supply-Chain Disruptions: While supply-chain disruptions persist, primarily related to the availability of electronic components, the situation has improved, as evident from the ISM report’s Supplier Deliveries Index, which reflected faster deliveries in March. Easing supply-chain issues should support industrial manufacturing companies’ growth in 2024. An anticipated reduction in raw material costs should aid the bottom line of the industry participants.
Technological Advancement Benefits: The U.S. industrial manufacturing companies have been focused on digitizing their business operations with new technologies and business models. Digitization has been enabling several manufacturers to boost their competitiveness with enhanced operational productivity, product quality and lower costs. A surge in the e-commerce business has been proving beneficial for the companies.
High Leverage: The companies bank on the frequent upgrade of products and services to stay competitive in the market, thus making steady investments necessary. However, these frequent investments adversely impact the margins and profitability of the companies. These firms often make acquisitions to strengthen their businesses, expand their product portfolio and extend their regional presence. Such frequent investments usually leave many companies with a highly-leveraged balance sheet.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Manufacturing – General Industrial industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #69. This rank places it in the top 27% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of solid earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are keeping more faith in this group's earnings growth potential. The industry’s earnings estimates for the current year have moved up 2.7% in the past year.
Given the industry’s bright near-term prospects, we will present a few stocks worth considering for your portfolio. But before that, it is worth taking a look at the industry’s stock market performance and current valuation.
Industry Outperforms Both Sector & S&P
The Zacks Manufacturing – General Industrial industry has outperformed both the broader sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has appreciated 27% compared with the sector and the S&P 500 Index’s growth of 23.6% and 23.5%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 22.02X compared with the S&P 500’s 20.75X. It is also above the sector’s P/E ratio of 18.26X.
In the past five years, the industry has traded as high as 26.92X, as low as 15.92X and at the median of 20.81X, as the chart below shows.
Price-to-Earnings Ratio
Price-to-Earnings Ratio
4 Manufacturing-General Industrial Stocks Leading the Pack
Applied Industrial Technologies: Based in Cleveland, OH, the company is a distributor of value-added industrial products — including engineered fluid power components, bearings, specialty flow-control solutions and power transmission products. It is poised to benefit from strength across the food and beverage, lumber and wood, mining and refining end markets. Also, AIT’s product development initiative, buyouts and shareholder-friendly policies raise its attractiveness. For fiscal 2024, Applied Industrial predicts year-over-year sales growth of 1-3%.
The Zacks Rank #1 (Strong Buy) company reported better-than-expected results in each of the last four quarters, the earnings surprise being 8.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here. In the past 60 days, the company’s earnings estimates have increased 1.2% for fiscal 2024 (ending June 2024). It has gained 39.3% in the past year.
Price and Consensus: AIT
Chart Industries: Headquartered in Ball Ground, GA, Chart Industries specializes in engineering and manufacturing process technologies and equipment for gas and liquid molecules in the United States and abroad. The company is expected to benefit from its record backlog level along with strength in key end markets like hydrogen, small-scale LNG, water treatment, traditional energy, clean mining and carbon capture.
The Zacks Rank #1 company reported better-than-expected results thrice in the last four quarters, the earnings surprise being 75.9%, on average. The Zacks Consensus Estimate for GTLS’ 2024 earnings has been revised upward by 6.4% in the past 60 days. Shares of this company have gained 15.8% in the past year.
Price and Consensus: GTLS
Ingersoll Rand: Headquartered in Davidson, NC, Ingersoll Rand is a global industrial company with expertise in industrial and mission-critical flow creation technologies. The company is poised to benefit from its solid product portfolio, innovation capabilities and focus on boosting aftermarket businesses. Higher orders for compressors, industrial vacuums and blowers are likely to drive its performance in the quarters ahead.
The Zacks Rank #2 (Buy) company reported better-than-expected results in each of the last four quarters, the earnings surprise being 15.9%, on average. The Zacks Consensus Estimate for Ingersoll Rand’s 2024 earnings has been revised upward by 1.6% in the past 60 days. The company’s shares have gained 63.5% in the past year.
Price and Consensus: IR
RBC Bearings: Based in Oxford, CT, RBC Bearings is a leading manufacturer and distributor of engineered bearings and precision components. The company stands to gain from strength in its Aerospace segment. Solid momentum in the commercial aerospace market, driven by the recovery in build rates from large OEMs (original equipment manufacturers) and stability in the aftermarket business, bodes well for the company.
The Zacks Rank #2 company reported better-than-expected results thrice in the trailing four quarters, the earnings surprise being 6.4%, on average. Shares of this company have gained 6.8% in the past year.
Price and Consensus: RBC
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4 Stocks to Gain From the Promising Industrial Manufacturing Industry
The Zacks Manufacturing – General Industrial industry is poised for growth on the back of the recovery in domestic and export orders for industrial products and the surge in the e-commerce business. Efforts to digitalize business operations have been enhancing the industry players' competitiveness.
Strength in end markets, along with improvement in the supply chain, is expected to foster the industry’s growth. Industry players bank on frequent innovation investments to stay competitive in the market. Ingersoll Rand Inc. (IR - Free Report) , RBC Bearings Incorporated (RBC - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and Chart Industries, Inc. (GTLS - Free Report) are a few industry participants that might capitalize on these opportunities.
About the Industry
The Zacks Manufacturing – General Industrial industry comprises companies that produce a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. Industrial manufacturing companies also reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation and utilities industries.
4 Trends Shaping the Future of the Manufacturing General Industrial Industry
Favorable Trends: The industry has been benefiting from the recovery in manufacturing activities, supported by a rise in domestic and export orders for industrial products. Industrial production increased by 0.4% in March 2024 for the second successive month, with a 0.5% rise in manufacturing output. The ISM’s manufacturing index registered 50.3% in March 2024, indicating expansion of the U.S. manufacturing activity. In March, the New Order Index returned to expansion territory, with an increase of 2.2 percentage points from the previous month’s levels. The uptick in new orders, in conjunction with the slowdown in inflation, augurs well for industrial manufacturing companies.
Easing Supply-Chain Disruptions: While supply-chain disruptions persist, primarily related to the availability of electronic components, the situation has improved, as evident from the ISM report’s Supplier Deliveries Index, which reflected faster deliveries in March. Easing supply-chain issues should support industrial manufacturing companies’ growth in 2024. An anticipated reduction in raw material costs should aid the bottom line of the industry participants.
Technological Advancement Benefits: The U.S. industrial manufacturing companies have been focused on digitizing their business operations with new technologies and business models. Digitization has been enabling several manufacturers to boost their competitiveness with enhanced operational productivity, product quality and lower costs. A surge in the e-commerce business has been proving beneficial for the companies.
High Leverage: The companies bank on the frequent upgrade of products and services to stay competitive in the market, thus making steady investments necessary. However, these frequent investments adversely impact the margins and profitability of the companies. These firms often make acquisitions to strengthen their businesses, expand their product portfolio and extend their regional presence. Such frequent investments usually leave many companies with a highly-leveraged balance sheet.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Manufacturing – General Industrial industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #69. This rank places it in the top 27% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of solid earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are keeping more faith in this group's earnings growth potential. The industry’s earnings estimates for the current year have moved up 2.7% in the past year.
Given the industry’s bright near-term prospects, we will present a few stocks worth considering for your portfolio. But before that, it is worth taking a look at the industry’s stock market performance and current valuation.
Industry Outperforms Both Sector & S&P
The Zacks Manufacturing – General Industrial industry has outperformed both the broader sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has appreciated 27% compared with the sector and the S&P 500 Index’s growth of 23.6% and 23.5%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 22.02X compared with the S&P 500’s 20.75X. It is also above the sector’s P/E ratio of 18.26X.
In the past five years, the industry has traded as high as 26.92X, as low as 15.92X and at the median of 20.81X, as the chart below shows.
Price-to-Earnings Ratio
Price-to-Earnings Ratio
4 Manufacturing-General Industrial Stocks Leading the Pack
Applied Industrial Technologies: Based in Cleveland, OH, the company is a distributor of value-added industrial products — including engineered fluid power components, bearings, specialty flow-control solutions and power transmission products. It is poised to benefit from strength across the food and beverage, lumber and wood, mining and refining end markets. Also, AIT’s product development initiative, buyouts and shareholder-friendly policies raise its attractiveness. For fiscal 2024, Applied Industrial predicts year-over-year sales growth of 1-3%.
The Zacks Rank #1 (Strong Buy) company reported better-than-expected results in each of the last four quarters, the earnings surprise being 8.2%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here. In the past 60 days, the company’s earnings estimates have increased 1.2% for fiscal 2024 (ending June 2024). It has gained 39.3% in the past year.
Price and Consensus: AIT
Chart Industries: Headquartered in Ball Ground, GA, Chart Industries specializes in engineering and manufacturing process technologies and equipment for gas and liquid molecules in the United States and abroad. The company is expected to benefit from its record backlog level along with strength in key end markets like hydrogen, small-scale LNG, water treatment, traditional energy, clean mining and carbon capture.
The Zacks Rank #1 company reported better-than-expected results thrice in the last four quarters, the earnings surprise being 75.9%, on average. The Zacks Consensus Estimate for GTLS’ 2024 earnings has been revised upward by 6.4% in the past 60 days. Shares of this company have gained 15.8% in the past year.
Price and Consensus: GTLS
Ingersoll Rand: Headquartered in Davidson, NC, Ingersoll Rand is a global industrial company with expertise in industrial and mission-critical flow creation technologies. The company is poised to benefit from its solid product portfolio, innovation capabilities and focus on boosting aftermarket businesses. Higher orders for compressors, industrial vacuums and blowers are likely to drive its performance in the quarters ahead.
The Zacks Rank #2 (Buy) company reported better-than-expected results in each of the last four quarters, the earnings surprise being 15.9%, on average. The Zacks Consensus Estimate for Ingersoll Rand’s 2024 earnings has been revised upward by 1.6% in the past 60 days. The company’s shares have gained 63.5% in the past year.
RBC Bearings: Based in Oxford, CT, RBC Bearings is a leading manufacturer and distributor of engineered bearings and precision components. The company stands to gain from strength in its Aerospace segment. Solid momentum in the commercial aerospace market, driven by the recovery in build rates from large OEMs (original equipment manufacturers) and stability in the aftermarket business, bodes well for the company.
The Zacks Rank #2 company reported better-than-expected results thrice in the trailing four quarters, the earnings surprise being 6.4%, on average. Shares of this company have gained 6.8% in the past year.
Price and Consensus: RBC