The total industrial production rose 1.6% year-over-year in December despite labor shortages, supply chain issues, and soaring inflation. Moreover, increased government investments are accelerating the industrial sector’s growth. The Bipartisan Infrastructure Law has already provided more than $185 billion in funding for over 6,900 projects, including 2,800 bridge repair and replacement projects.
The law also allocated $8 billion to the Infrastructure for Rebuilding America (INFRA) program for highway, multimodal freight, and rail projects over the next five years. This is expected to drive demand for industrial products and services through multiple projects.
According to a report by BlueWeave Consulting, the global construction equipment market is projected to reach $263.20 billion by 2029, growing at a 6% CAGR. Increasing construction activity and favorable government initiatives are among the major factors expected to support the market’s expansion.
Investor’s interest in industrial stocks is evident from the Industrial Select Sector SPDR Fund’s (XLI) 9.4% returns over the past three months. Against this backdrop, it could be wise to invest in fundamentally sound industrial stocks, Caterpillar Inc. (CAT), Myers Industries, Inc. (MYE), and Core Molding Technologies, Inc. (CMT), this year.
Caterpillar Inc. (CAT)
CAT manufactures construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. Its segments include Construction Industries; Resource Industries; Energy & Transportation; Financial Products; and All Other.
On January 6, 2023, CAT announced an investment in Lithos Energy, Inc., a battery technology business that manufactures lithium-ion battery packs. As the company continues to create electrified products, Lithos' experience in producing battery packs for comparable challenging conditions could strategically benefit CAT.
Moreover, on December 15, 2022, CAT announced a partnership with Luck Stone, the largest family-owned and operated producer of crushed stone, sand, and gravel in the nation, to deploy CAT's autonomous solution to Luck Stone's Bull Run Plant in Chantilly, Virginia.
By deploying its current Cat® MineStarTM Command for Hauling system on a fleet of 777G trucks at the Bull Run quarry, CAT hopes to expedite autonomous solutions outside of the mining industry.
For the fiscal third quarter that ended September 30, 2022, CAT’s total sales and revenue grew 20.9% year-over-year to $14.99 billion. Its adjusted operating profit rose 45.6% from the prior year’s period to $2.47 billion. The company’s adjusted profit stood at $2.08 billion, up 43% year-over-year, while its adjusted EPS rose 48.5% from the year-ago value to $3.95.
CAT has raised its dividends for 29 consecutive years. It pays a $4.80 per share dividend annually, which translates to a 1.81% yield on the current price level. The company’s dividend payments have grown at an 8.7% CAGR over the past five years, and its four-year average dividend yield is 2.45%.
The consensus revenue estimate of $58.55 billion for the fiscal year that ended December 2022 indicates a 14.9% year-over-year improvement. The consensus EPS estimate of $13.92 for the same year reflects a rise of 28.8% from the prior year. Furthermore, CAT surpassed its consensus EPS in all four trailing quarters, which is impressive.
In addition, the consensus revenue and EPS estimate of $62.14 billion and $15.24 for the current fiscal year ending December 2023 indicates a 6.1% and 9.4% year-over-year improvement. Shares of CAT have gained 42.8% over the past six months to close the last trading session at $264.54.
CAT’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock also has a Sentiment grade of B. In the 82-stock A-rated Industrial - Machinery industry, it is ranked #16.
Beyond what we stated above, we also have CAT’s ratings for Growth, Value, Momentum, Quality, and Stability. Get all CAT ratings here.
Myers Industries, Inc. (MYE)
MYE is a multinational manufacturer and distributor. The company’s segments include Material Handling and Distribution. It caters to retail and truck tire dealers, commercial auto and truck fleets, truck stop operations, auto dealers, general service and repair shops, and government agencies.
In October 2022, the company raised its financial outlook for the full-year 2022. MYE now expects net sales growth in the high teens range, with roughly 45% of the growth due to the acquisitions of Trilogy Plastics and Mohawk Rubber.
Capital expenditures are expected to arrive between $25 and $28 million, and the effective tax rate could arrive at roughly 26%. Moreover, adjusted EPS is expected to come between $1.50 and $1.70.
The company’s net sales grew 14% year-over-year to $228.07 million in the fiscal third quarter that ended September 30, 2022. Its adjusted operating income rose 75.7% from the prior year’s period to $22.01 million, while its adjusted EBITDA increased 57.2% year-over-year to $27.17 million.
Additionally, MYE’s adjusted net income came in at 15.02 million, up 76.9% year-over-year, and its adjusted EPS increased by 78.3% from the year-ago value to $0.41.
MYE pays a $0.54 per share dividend annually, which translates to a 2.28% yield on the current price level. Its four-year average dividend yield is 3.04%.
Analysts expect MYE’s revenue and EPS to increase 19.2% and 70.1% year-over-year to $907.33 million and $1.65, respectively, for the fiscal year that ended December 2022. Also, the company’s revenue and EPS for the current fiscal year are expected to grow 7.7% and 15.5% from the previous year's values to $977.09 million and $1.91, respectively.
The stock has gained 2.4% over the past month and 33.9% over the past year to close the last trading session at $23.71.
MYE’s strong fundamentals are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
MYE has a B grade for Growth, Stability, Sentiment, and Quality. Within the A-rated Industrial - Manufacturing industry, it is ranked #4 of 36 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see MYE ratings for Value and Momentum here.
Core Molding Technologies, Inc. (CMT)
CMT is a provider of engineered materials. It specializes in molded structural components, primarily for the building products, utilities, transportation, and power sports industries in North America and Mexico. Molders of structural thermoplastic and thermoset products make up CMT’s sole operating segment.
On November 8, 2022, David Duvall, the company’s President, and Chief Executive Officer, said, “Major programs continue to ramp up this year, and net new wins are on track totaling $24 million. We are also delighted to have signed a new agreement with UFP Industries, Inc. (UFPI), which extends our relationship for another 5 years.”
CMT continues to prioritize long-term relationships with large, blue-chip organizations such as UFPI, in addition to its mission of providing value-added solutions to various key industries.
For the fiscal third quarter that ended September 30, CMT’s total net sales increased 25.4% year-over-year to $101.61 million, and its gross margin grew 107.4% year-over-year to $13.30 million. Its adjusted EBITDA rose marginally year-over-year to $8.43 million.
Moreover, the company’s net income and EPS came in at $1.32 million and $0.16, compared to a loss and loss per share of $3.31 million and 0.41 in the prior year’s period, respectively.
The consensus revenue and EPS estimate of $373.75 million and $1.35 for the ongoing fiscal year (ending December 2023) indicate 1.4% and 31.1% year-over-year improvements, respectively. Furthermore, CMT surpassed its consensus EPS in all three trailing quarters.
Shares of CMT have gained 49.3% over the past six months and 79.6% over the past year to close the last trading session at $15.00.
CMT’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Growth and Sentiment. Within the Industrial - Manufacturing industry, it is ranked #2 of 36 stocks.
To see additional POWR Ratings for Stability, Quality, Value, and Momentum for CMT, click here.
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CAT shares were trading at $263.00 per share on Monday afternoon, down $1.54 (-0.58%). Year-to-date, CAT has gained 10.31%, versus a 5.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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