Despite macroeconomic headwinds, total industrial output increased in September. Moreover, increased adoption of new technologies such as AI should boost the sector's growth. So, quality industrial stocks Caterpillar Inc. (CAT), Columbus McKinnon Corporation (CMCO) and Taylor Devices, Inc. (TAYD) could be wise investments for weekly profits.
Industrial production increased by 0.3% in September 2023. This increase in industrial production is the fourth month in a row, demonstrating a continuing rebound in the manufacturing sector. The rise was mostly driven by an increase in consumer goods demand, particularly in the electronics and automotive industries.
The artificial intelligence (AI) in industrial machinery market is estimated to reach $4.28 billion by 2027, at a CAGR of 29.6%. The wide adoption of AI technology is driving this astonishing rise, which is expected to reshape the industrial landscape.
Furthermore, the industrial machinery market is expected to grow at a 3.6% CAGR until 2028. Investors’ interest in industrial stocks is evident from the Industrial Select Sector SPDR ETF’s (XLI) 4.2% gains over the past six months.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Industrial - Machinery stocks, starting with number 3.
Stock #3: Caterpillar Inc. (CAT)
CAT manufactures and sells construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. The company operates through five segments, Construction Industries; Resource Industries; Energy & Transportation; Financial Products; and All Other.
CAT’s forward non-GAAP P/E of 11.66x is 31.1% lower than the industry average of 16.92x. Its forward non-GAAP PEG of 0.87x is 46.2% lower than the industry average of 1.62x.
CAT’s trailing-12-month ROCE of 50.52% is 305.6% higher than the 12.45% industry average. Its trailing-12-month ROTC of 15.55% is 126.9% higher than the 6.86% industry average.
CAT’s sales and revenues for the fiscal third quarter ended September 30, 2023, have increased 12.1% year-over-year to $16.81 billion. Additionally, its operating profit increased 42.2% year-over-year to $3.45 billion. Also, its adjusted EPS came in at $5.52, representing a 39.7% increase from the prior-year quarter.
Analysts expect CAT’s revenue to increase 13.2% year-over-year to 67.24 billion for the year ending December 2023. Its EPS is expected to grow 48.6% year-over-year to $20.56 for the same period. Shares of CAT have gained 15.3% over the past six months to close the last trading session at $241.67.
CAT’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
CAT also has a B grade for Growth and Momentum. It is ranked #7 out of 79 stocks in the A-rated Industrial - Machinery industry. Click here for the additional POWR Ratings for Value, Stability, Sentiment and Quality for CAT.
Stock #2: Columbus McKinnon Corporation (CMCO)
CMCO designs, manufactures, and markets intelligent motion solutions for moving, lifting, positioning, and securing materials worldwide.
CMCO’s forward EV/EBITDA multiple of 8.93 is 16.8% lower than the industry average of 10.73. Its forward non-GAAP P/E multiple of 11.64% is 31.2% lower than the industry average of 16.92.
CMCO’s trailing-12-month gross profit margin of 36.81% is 21.3% higher than the industry average of 30.35%, while its trailing-12-month levered FCF margin of 7.58% is 20.1% higher than the industry average of 6.31%.
CMCO’s net sales increased 11.5% year-over-year to $258.40 million in the fiscal second quarter that ended September 30, 2023. Its adjusted gross profit increased 15.8% year-over-year to $99.98 million. Also, its adjusted net income and EPS increased 4.9% and 4.1% year-over-year to $21.90 million and $0.76, respectively.
Street expects CMCO’s revenue to increase 9% year-over-year to $1.02 billion for the year ending March 2024. Its EPS is expected to grow marginally year-over-year to $2.95 for the same period. It surpassed EPS estimates three of four trailing quarters. Over the past year the stock has gained 8.4% to close the last trading session at $34.
CMCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #6 in the same industry. It has an A grade for Growth and Sentiment and a B grade for Stability, Value and Momentum. To see additional CMCO’s rating for Quality, click here.
Stock #1: Taylor Devices, Inc. (TAYD)
TAYD engages in design, development, manufacture, and marketing of shock absorption, rate control, and energy storage devices for use in machinery, equipment, and structures in the United States, Asia, and internationally.
TAYD’s trailing-12-month EV/Sales of 1.13x is 31.1% lower than the industry average of 1.64x. Its trailing-12-month EV/EBIT of 6.15x is 60.5% lower than the industry average of 15.58x.
TAYD’s trailing-12-month levered FCF margin of 14.41% is 128.5% higher than the industry average of 6.31%. Its trailing-12-month net income margin of 17.38x is 187.4% higher than the industry average of 6.05x.
For the first quarter that ended August 31, 2023, TAYD’s sales amounted to $9.92 million, an increase of 9.2% year-over-year. Its gross profit came in at $4.38 million, up 25.6% year-over-year. In addition, its net income and EPS came in at $1.85 million and $0.52, representing increases of 84.3% and 79.3%, respectively, from the prior-year quarter.
TAYD’s shares have gained 76.2% over the past year to close the last trading session at $21.95.
It’s no surprise that TAYD has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Momentum and a B grade for Sentiment and Quality. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated TAYD for Growth, Value and Stability. Get all TAYD ratings here.
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CAT shares were trading at $248.81 per share on Tuesday morning, up $7.14 (+2.95%). Year-to-date, CAT has gained 5.99%, versus a 18.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
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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