In 2024, the industrial sector is transforming with a focus on smart machines, digitalization, and sustainability. Enterprises are integrating new technologies to boost energy efficiency, reduce waste, and enhance adaptability. Moreover, digital tools and IoT are improving flexibility and predictive capabilities, leading to more efficient and responsive future factories.
Given this favorable outlook, it could be worthwhile to invest in robust industrial stocks like Columbus McKinnon Corporation (CMCO), Flowserve Corporation (FLS), and Tennant Company (TNC), which have discounted valuations and look poised for a rebound.
Despite high interest rates and regulatory issues, the industrial sector is rebounding with Industry 4.0 and a focus on digital transformation and AI. Meanwhile, increased deal-making is boosting production and supporting growth in services and exports, enhancing competitiveness and economic development. The global industrial services market is expected to grow at a 5.7% CAGR, reaching $44.05 billion by 2028.
Furthermore, the industrial machinery sector is expanding due to advancements in automation, robotics, IoT, and smart manufacturing. These innovations have revolutionized agricultural, construction, and packaging machinery, driving global expansion of the sector. As a result, the industrial machinery market is expected to grow at a 7.5% CAGR from 2024 to 2032.
Let’s analyze the fundamental aspects of the three Industrial - Machinery stocks mentioned above, starting with the third choice.
Stock #3: Columbus McKinnon Corporation (CMCO)
CMCO designs, manufactures, and markets motion solutions for moving, lifting, positioning, and securing materials worldwide. It offers manual, battery, electric, and air hoists; jacks; winches; hydraulic tools; trolleys; lifting tables; skates; material handling equipment; cranes; crane components and kits; and below-the-hook lifting devices.
On July 22, 2024, CMCO announced a quarterly dividend of $0.07 per share, payable on August 19, 2024, to shareholders of record on August 9, 2024. The company has approximately 28.8 million shares outstanding.
In terms of forward non-GAAP P/E, CMCO’s 12.74x is 35.2% lower than the 19.67x industry average. Its 1.11x forward non-GAAP PEG is 37.6% lower than the 1.78x industry average. Similarly, its 9.31x forward EV/EBITDA is 20.4% lower than the 11.69x industry average.
CMCO’s net sales for the fourth quarter ended March 31, 2024, increased 4.6% year-over-year to $265.50 million. Similarly, its non-GAAP adjusted gross profit rose 6.5% from the previous year to $97.13 million. Its adjusted operating income stood at $31.08 million, up 6.6% year-over-year. The company’s adjusted net income and adjusted EPS were $21.79 million and $0.75, respectively.
For the quarter ended June 30, 2024, CMCO’s revenue is expected to increase 2.5% year-over-year to $241.25 million. Its EPS for the quarter ending September 30, 2024, is expected to increase 8.1% year-over-year to $0.82. Over the past nine months, the stock has gained 28.4% to close the last trading session at $39.26.
CMCO’s strong fundamentals are reflected in its POWR Ratings. It 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.
It has a B grade for Value, Stability, and Sentiment. Within the A-rated Industrial - Machinery industry, it is ranked #23 out of 78 stocks. To see CMCO’s Growth, Momentum, and Quality ratings, click here.
Stock #2: Flowserve Corporation (FLS)
FLS designs, manufactures, distributes, and services industrial flow management equipment in the United States, Canada, Mexico, Europe, the Middle East, Africa, and the Asia Pacific. It operates through the Flowserve Pump Division (FPD) and the Flow Control Division (FCD) segments.
On July 23, 2024, FLS acquired cryogenic LNG pumping technology and intellectual property from NexGen Cryo to enhance its LNG product portfolio. This acquisition aims to advance FLS’ decarbonization strategy and improve efficiency in the LNG market.
On April 23, 2024, FLS announced receiving over $150 million in project awards from Middle East-based EPC contractors. These awards, primarily for original equipment pumps, will be reflected in Q2 2024 results, with additional substantial project opportunities expected through 2025.
In terms of forward EV/EBIT, FLS’ 13.75x is 16% lower than the 16.36x industry average. Likewise, its 18.36x forward non-GAAP P/E is 6.7% lower than the 19.67x industry average. Also, its 1.63x forward EV/Sales is 11.3% lower than the 1.84x industry average.
During the second quarter ended June 30, 2024, FLS’ sales increased 7.1% year-over-year to $1.16 billion. Its adjusted gross profit grew 14% from the previous year's quarter to $373.62 million.
For the same quarter, its adjusted operating income of $144.43 million indicates a 27.9% increase over the prior-year quarter. Additionally, adjusted net earnings stood at $96.33 million, or $0.73 per share, up 41.3% and 40.4% year-over-year, respectively.
Analysts expect FLS’ EPS and revenue for the quarter ending September 30, 2024, to increase 29.2% and 2.9% year-over-year to $0.65 and $1.13 billion, respectively. FLS surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 34.6% to close the last trading session at $49.23.
It’s no surprise that FLS has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. FLS is ranked #8 in the same industry. Beyond what we stated above, we also have given FLS grades for Momentum, Stability, and Quality. Get all FLS ratings here.
Stock #1: Tennant Company (TNC)
TNC designs, manufactures, and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company provides a suite of products, including floor maintenance and cleaning equipment, along with other sustainable cleaning technologies.
On May 3, 2024, TNC announced the international expansion of its i-mop family, including the i-mop Lite and i-mop XL Plus, into Brazil, France, Portugal, and Spain. This expansion enhances their global cleaning solutions with advanced, efficient mechanized cleaning products.
On May 1, 2024, TNC declared a regular quarterly cash dividend of $0.28 per share. The dividend will be payable on June 14, 2024, to shareholders of record as of May 31, 2024.
In terms of forward EV/Sales, TNC’s 1.72x is 6.6% lower than the 1.84x industry average. Its 14.60x forward EV/EBIT is 10.8% lower than the 16.36x industry average. Likewise, its 16.29x forward non-GAAP P/E is 17.2% lower than the 19.67x industry average.
For the first quarter, which ended March 31, 2024, TNC’s net sales amounted to $311 million, up 1.7% year-over-year. Its adjusted EBITDA rose 14.6% over the prior-year quarter to $54.90 million. Moreover, the company’s adjusted income increased by 28% year-over-year to $34.70 million, and its adjusted income per share came in at $1.81, up 24.8% year-over-year.
Street expects TNC’s revenue for the quarter ended June 30, 2024, is expected to increase 1.7% year-over-year to $327 million. Its EPS for the quarter ending September 30, 2024, is expected to rise 14.2% year-over-year to $1.53. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 42.7% to close the last trading session at $107.59.
TNC’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has a B grade for Value and Quality. It is ranked #5 out of 78 stocks in the Industrial - Machinery industry. To access TNC’s rating for Growth, Momentum, Stability, and Sentiment, click here.
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.
FLS shares were trading at $50.59 per share on Wednesday afternoon, up $1.36 (+2.76%). Year-to-date, FLS has gained 23.84%, versus a 16.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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