Due to supply chain constraints, labor shortages, and surging raw material costs, industrial production declined 0.7% sequentially in December and 1.7% year-over-year. However, favorable government investments are expected to boost domestic manufacturing.
Under the Bipartisan Infrastructure Law, the Biden administration announced a $185 billion investment in infrastructure, launching more than 6,900 projects, including 2,800 bridge repair and replacement projects.
According to The Business Research Company’s report, the industrial machinery market is expected to grow at a CAGR of 6.7% to $708.30 billion by 2027. Moreover, investors’ interest in the industrial sector is evident from the Vanguard Industrials ETF’s (VIS) 9.4% returns over the past three months.
Amid this backdrop, investors could look to buy fundamentally strong industrial stocks Crane Holdings, Co. (CR), Hillenbrand, Inc. (HI), and Myers Industries, Inc. (MYE).
Crane Holdings, Co. (CR)
CR manufactures and sells engineered industrial products worldwide. The company has four business segments: Aerospace & Electronics, Process Flow Technologies, Payment & Merchandising Technologies, and Engineered Materials.
On December 15, 2022, CR announced that it had filed a Form 10 Registration Statement with the U.S. Securities and Exchange Commission (SEC) relating to its previously announced plan to separate into two simplified businesses. This is expected to optimize investment and capital allocation, accelerate growth and unlock shareholder value.
In terms of the trailing-12-month gross profit margin, CR’s 39.70% is 36.7% higher than the 29.03% industry average. Its 12.17% trailing-12-month net income margin is 85.9% higher than the 6.54% industry average. Likewise, its 21.95% trailing-12-month ROCE is 56.8% higher than the industry average of 13.99%.
CR’s adjusted operating profit for the fiscal fourth quarter that ended December 31, 2022, increased 54.5% year-over-year to $153 million. Its adjusted operating profit margin came in at 18.6%, compared to 12% in the year-ago period.
Its adjusted net income increased 57.2% year-over-year to $121.50 million. Additionally, its adjusted EPS came in at $2.13, representing an increase of 62.6% from the prior-year quarter.
Analysts expect CR’s EPS and revenue for the quarter ending March 31, 2023, to increase 4.6% and 3% year-over-year to $1.89 and $825.12 million, respectively. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 24.7% to close the last trading session at $119.71.
CR’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Industrial - Machinery industry, it is ranked #12 out of 83 stocks. The company has a B grade for Quality.
Click here to see the additional POWR Ratings of CR for Growth, Value, Momentum, Stability, and Sentiment.
Hillenbrand, Inc. (HI)
HI is a diversified industrial company that operates in the United States and internationally under two segments: Advanced Process Solutions (APS) and Molding Technology Solutions.
In terms of the trailing-12-month EBIT margin, HI’s 14.11% is 45.7% higher than the 9.69% industry average. Its 7.10% trailing-12-month net income margin is 8.6% higher than the 6.54% industry average. Likewise, its 18.22% trailing-12-month ROCE is 30.2% higher than the industry average of 13.99%.
On February 1, 2023, HI announced that it had completed its transformation into a pure-play industrial company as it had closed the sale of its Batesville business segment to an affiliate of private investment firm LongRange Capital.
HI’s President and CEO Kim Ryan said, “The completion of this transaction is a defining moment in Hillenbrand’s journey and allows us to concentrate our investments where we see strong growth potential, including durable plastics, food, and recycling.”
On December 1, 2022, HI announced its acquisition of the Peerless Food Equipment division of Illinois Tool Works Inc. The company is expected to create shareholder value through this acquisition.
HI’s gross profit increased marginally year-over-year to $242.70 million for the fiscal fourth quarter that ended September 30, 2022. Net income attributable to HI increased 3.3% from the year-ago value to $56.80 million. The company’s adjusted EPS came in at $1.05, representing an increase of 5% from the prior-year quarter.
HI's EPS for the quarter ending June 30, 2023, is expected to increase 12.5% year-over-year to $1.04. Its revenue for the quarter ending March 31, 2023, is expected to increase 2.7% year-over-year to $762.10 million.
The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 14.2% to close the last trading session at $48.94.
HI’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of B, which translates to Buy in our proprietary rating system. In addition, it has a B grade for Value, Sentiment, and Quality. It is ranked #6 of 36 stocks in the A-rated Industrial - Manufacturing industry.
Click here to see the additional POWR Ratings of HI for Growth, Momentum, and Stability.
Myers Industries, Inc. (MYE)
MYE is an international manufacturing and distribution company engaged in the distribution of tire service supplies. It operates through The Material Handling and Distribution segments and sells its products under the Akro-Mils, Jamco, Ameri-Kart, and Trilogy Plastics brands, among others.
In terms of the trailing-12-month asset turnover ratio, MYE’s 1.70x is 122.6% higher than the 0.76x industry average. Likewise, its 24.01% trailing-12-month Return on Common Equity is 79.3% higher than the industry average of 13.39%.
For the fiscal third quarter that ended September 30, 2022, MYE’s net sales increased 14% year-over-year to $228.07 million. The company’s adjusted operating income increased 75.7% from the prior-year quarter to $22.01 million.
In addition, its adjusted EBITDA increased 57.2% year-over-year to $27.17 million, while its adjusted net income increased 76.9% year-over-year to $15.02 million. Also, its adjusted EPS came in at $0.41, representing an increase of 78.3% year-over-year.
Analysts expect MYE’s EPS and revenue for the quarter that ended December 31, 2022, to increase 26.1% and 10.6% year-over-year to $0.29 and $220.63 million, respectively. In addition, MYE shows a commendable earning surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has gained 16.7% to close the last trading session at $24.52.
MYE’s POWR Ratings reflect this promising outlook. MYE has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is ranked #4 in the Industrial - Manufacturing industry. It has a B grade for Growth, Stability, Sentiment, and Quality.
We have also given MYE grades for Value and Momentum. Get all MYE ratings here.
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CR shares were trading at $118.86 per share on Tuesday morning, down $0.85 (-0.71%). Year-to-date, CR has gained 18.33%, versus a 6.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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