Despite macroeconomic uncertainties, industrial production in the US remained stable in February, with a slight increase in manufacturing output. Additionally, the government has launched several initiatives to support and strengthen the industrial sector in the country.
Hence, I think quality industrial stocks General Electric Company (GE), Ryder System, Inc. (R), Limbach Holdings, Inc. (LMB), and Core Molding Technologies, Inc. (CMT) are poised for growth and could be ideal additions to your watchlist.
Manufacturing output rose 0.1% last month, while capacity utilization remained unchanged in February at 78%. Furthermore, the industry enjoys favorable investor sentiment, as evident from Industrial Select Sector SPDR Fund’s (XLI) 9.8% return over the past six months, outperforming S&P 500’s 1.6% gain.
Due to a lack of investment over the years and recent disruptions to supply chains caused by the pandemic, there is now a renewed effort by both US companies and the federal government to strengthen domestic manufacturing.
Moreover, the US government has passed three pieces of legislation to boost economic competitiveness, innovation, and industrial productivity. These include the Bipartisan Infrastructure Law (BIL), the CHIPS & Science Act, and the Inflation Reduction Act of 2022, which together introduce $2 trillion in new federal spending over the next decade.
Additionally, the government is increasing investment in infrastructure, including transportation and broadband networks, which should support the growth of industries.
Take a look at the detailed discussion of the stocks mentioned above:
General Electric Company (GE)
GE operates as a high-tech international industrial company. It offers gas and steam turbines, a full balance of plant, upgrade, service solutions, and data-leveraging software for power generation, industrial, government, and other customers.
On March 7, 2023, GE announced a new order for its first High-Efficiency (HE) upgrade for the GT26 fleet to be selected in Australia.
In 2024, GE will modernize EnergyAustralia’s Tallawarra A power plant, powered by a GT26 gas turbine installed nearly thirteen years ago.
On February 7, 2023, GE Digital announced a multi-year strategic collaboration agreement with Amazon Web Services, Inc. (AWS) to assist utilities in accelerating grid modernization.
Mahesh Sudhakaran, General Manager of Grid Software, said, “This collaboration brings together GE Digital’s GridOS hybrid cloud software capabilities with the expertise and infrastructure support of AWS to help utilities transform their operations and meet their goal of providing reliable, affordable, and clean energy.”
In terms of trailing-12-month EV/Sale, GE is currently trading at 1.47x, which is 11.4% lower than the industry average of 1.66x.
On February 14, GE declared a $0.08 per share dividend on the company's outstanding common stock, payable on April 25, 2023.
While GE has a four-year average dividend yield of 0.60%, it pays $0.32 as dividends annually, translating to a 0.35% yield at the current price. Its dividend payments have grown at a CAGR of 2.3% over the past three years.
During the fiscal fourth quarter that ended December 31, 2022, GE’s total revenues rose 7.3% year-over-year to $21.79 billion. The company’s adjusted earnings increased 51.8% year-over-year to $1.36 billion. Also, its adjusted EPS came in at $1.24, representing a 51.2% increase from the prior-year quarter.
GE’s EPS and revenue are expected to be $0.13 and $13.54 billion in the fiscal first quarter ending March 2023. The company has surpassed revenue estimates in three of the four trailing quarters, which is impressive.
The stock has gained 74.6% over the past nine months to close the last trading session at $89.92. It has gained 8.3% over the past month.
GE’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GE has a B grade for Growth and Momentum. It is ranked #9 out of 34 stocks in the A-rated Industrial – Manufacturing industry.
Click here to access additional POWR Ratings for Value, Stability, Sentiment, and Quality for GE.
Ryder System, Inc. (R)
R operates as a logistics and transportation company worldwide. It operates through three segments: Fleet Management Solutions; Supply Chain Solutions; and Dedicated Transportation Solutions.
On March 10, R announced a discount program for women-owned businesses that are a member of the Women in Trucking Association, under which, buyers can take advantage of a pre-owned commercial vehicle sales promotion of 5% off the purchase price for a limited time.
The sales event expands on R’s commitment to providing customers with the flexibility, choice, and control necessary for efficient fleet management.
On February 15, R authorized a new discretionary share repurchase program under which the company’s management is authorized to repurchase up to 2 million shares of common stock, at its discretion, from February 10, 2023, through February 10, 2025 (two years).
This program is designed to provide management with capital structure flexibility while concurrently managing objectives related to target balance sheet leverage, acquisition opportunities, and shareholder returns.
R’s forward non-GAAP P/E multiple of 7.16 is 56.3% lower than the industry average of 16.38. Its forward P/S of 0.32x is 75.4% lower than the 1.29x industry average.
R pays $2.48 as dividends annually, translating to a 2.98% yield at the current price. This compares to the four-year average dividend yield of 3.63%. Its dividend payments have grown at CAGRs of 3.2% and 5.4% over the past three years and five years, respectively.
R’s total revenues rose 18.8% year-over-year to $3.09 billion in the fiscal 2022 fourth quarter that ended December 31, 2022. Its non-GAAP operating revenue increased 14.5% year-over-year to $2.41 billion. The company’s net earnings came in at $206 million, up 13.8% from the prior-year quarter, while its EPS came in at $4.18, up 24.8% from the prior-year quarter.
Street expects R’s revenue to rise 4.8% year-over-year to $2.99 billion for the current quarter ending March 2023. Its EPS for the current quarter is likely to be $2.94. Additionally, R has topped consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 16.7% over the past six months to close the last trading session at $84.26.
R’s positive outlook is reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
R has a B grade for Value and Stability. The stock is ranked #10 out of 80 stocks in the A-rated Industrial – Services industry.
Beyond what we’ve stated above, we have also given R grades for Growth, Momentum, Sentiment, and Quality. Get all the R ratings here.
Limbach Holdings, Inc. (LMB)
LMB is an integrated building systems solutions firm with expertise in the design, prefabrication, installation, management, and maintenance of mechanical, electrical, plumbing, and control systems, as well as heating, ventilation, and air-conditioning (HVAC) system. It operates in two segments, General Contractor Relationships and Owner Direct Relationships.
LMB’s forward P/S of 0.32x is 74.9% lower than the 1.29x industry average. Its forward EV/EBITDA multiple of 5.29 is 49% lower than the industry average of 10.36.
LMB’s revenue rose 13.1% year-over-year to $143.48 million in the fiscal fourth quarter that ended December 31, 2022. Its gross profit increased 14.5% year-over-year to $29.23 million.
In addition, its adjusted EBITDA grew 21.2% from the year-ago value to $11.57 million. Its net income and EPS amounted to $3.81 million and $0.35, respectively.
The consensus EPS estimate of $1.02 for the fiscal year 2023 represents a 59.9% improvement year-over-year. The consensus revenue estimate of $499.84 million for the current year indicates a marginal increase year-over-year. The company has an impressive earnings surprise history, surpassing the EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 162.3% to close the last trading session at $14.15. It has gained 17.9% over the past month.
LMB’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
Also, the stock has an A grade for Quality and a B for Growth, Value, and Sentiment. Within the A-rated Industrial – Services industry, it is ranked #2.
To access LMB’s additional POWR Ratings for Momentum and Stability, click here.
Core Molding Technologies, Inc. (CMT)
CMT is a provider of engineered materials. It specializes in molded structural components, primarily for North America and Mexico's building products, utilities, transportation, and power sports industries.
CMT’s forward EV/Sales multiple of 0.43 is 70.5% lower than the industry average of 1.47. Its forward P/S of 0.36x is 66% lower than the 1.07x industry average.
CMT’s total net sales increased 18.1% year-over-year to $86.44 million in the fiscal fourth quarter that ended December 31, 2022. Its gross margin grew 36.2% year-over-year to $11.55 million and adjusted EBITDA rose 22.6% year-over-year to $6.06 million.
Moreover, the company’s net income and net income per share rose significantly year-over-year to $4.83 million and $0.57, respectively.
Analysts expect CMT’s revenue for the fiscal year 2023 to be $384.77 million, indicating a 2% year-over-year growth. The company’s EPS for the same year is expected to increase marginally from the prior year to $1.45.
Shares of CMT have gained 80.5% over the past nine months and 51.8% over the past six months to close the last trading session at $16.62.
It is no surprise that CMT has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Sentiment and a B for Value and Quality. Within the Industrial – Manufacturing industry, it is ranked #2.
Click here to see CMT’s additional POWR Ratings (Stability, Growth, and Momentum)
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GE shares rose $0.38 (+0.42%) in premarket trading Tuesday. Year-to-date, GE has gained 77.22%, versus a 2.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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