After rebounding from their pandemic lows, worsening supply chain disruptions, labor shortages, and rising commodity prices have hurt the industrial sector significantly over the past year. Rising input costs and the upcoming recession could trouble the industry further.
However, the strong demand for industrial goods and favorable government policies to support domestic production should help companies in this space stay afloat. The Manufacturing PMI reading reached 56.1% in May, up 0.7% from the prior month’s reading.
So, it could be wise to invest in quality industrial stocks Core Molding Technologies, Inc. (CMT), Hillenbrand, Inc. (HI), Quanex Building Products Corporation (NX), and Ryerson Holding Corporation (RYI), which look undervalued at their current price levels and possess solid upside potential. Our proprietary POWR Ratings system has rated these stocks ‘Strong Buy’.
Core Molding Technologies, Inc. (CMT)
CMT engages in molding thermoplastic and thermoset structural products internationally. The company offers compression molding of SMC, resin transfer molding (RTM), liquid molding of dicyclopentadiene (DCPD), spray-up, and hand-lay-up, direct long-fiber thermoplastics (D-LFT), structural foam and structural web injection molding (SIM).
It serves medium- and heavy-duty truck, marine, automotive, agriculture, construction, and other commercial products markets.
CMT’s total net sales for its fiscal 2022 first quarter ended March 31, 2022, increased 24.4% year-over-year to $90.59 million. The company’s gross profit came in at $14.51 million, indicating a 14.1% rise from the year-ago period. Its operating income came in at $6.01 million for the quarter, representing a 12.5% rise from the prior-year period.
CMT’s net income came in at $3.86 million, up 11.8% from the year-ago period. Its EPS increased 12.2% year-over-year to $0.46. As of March 31, 2022, the company had $1.33 billion in cash and cash equivalents.
Over the past three years, CMT’s revenue and EBITDA have grown at CAGRs of 5.3% and 80%, respectively. The stock’s 0.35x trailing EV/Sales is 77.1% lower than the 1.52x industry average. In terms of forward Price/Sales, CMT is currently trading at 0.23x, which is 82.1% lower than the 1.28x industry average.
Over the past week, the stock has gained 0.4% to close the last trading session at $9.25.
CMT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Value and Growth and a B grade for Sentiment and Quality. Click here to see the additional ratings for CMT’s Stability and Momentum.
CMT is ranked #1 of 42 stocks in the A-rated Industrial - Manufacturing industry.
Hillenbrand, Inc. (HI)
HI is a diversified industrial company that manufactures and sells premium business-to-business products and services worldwide. The company operates through Advanced Process Solutions; Molding Technology Solutions; and Batesville.
It designs equipment and systems used in processing applications and offers compounding and extruding equipment, bulk materials handling systems, and related engineering services.
For its fiscal year 2022 second quarter, ended March 31, 2022, HI’s net revenue increased 2.7% year-over-year to $742 million. The company’s adjusted EPS came in at $1.01, representing a 3.1% rise from the prior-year period. It had $446 million in cash, cash equivalents, and restricted cash as of March 31, 2022.
The consensus EPS estimate of $3.89 for its fiscal 2022 ending September 30, 2022, represents a 2.6% year-over-year improvement. It surpassed the consensus EPS estimates in each of the four trailing quarters, which is impressive.
Analysts expect the company’s revenue to reach $2.93 billion for the same fiscal year, indicating a 2.2% rise from the prior-year period. HI’s EPS is expected to grow at a 12% rate per annum over the next five years.
Over the past three years, HI’s revenue and EBITDA have grown at CAGRs of 17.6% and 22.1%, respectively. The stock’s 1.27x forward EV/Sales is 16.5% lower than the 1.52x industry average. In terms of forward Price/Sales, HI is currently trading at 0.97x, which is 18.1% lower than the 1.19x industry average.
Over the past week, the stock has gained 2.9% to close the last trading session at $39.86.
HI’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has a B grade for Value, Growth, Sentiment, and Quality. Click here to see the additional ratings for HI’s Stability and Momentum.
HI is ranked #2 in the Industrial - Manufacturing industry.
Quanex Building Products Corporation (NX)
NX manufactures components for original equipment manufacturers (OEM) in the building products industry. The company operates through North American Fenestration, European Fenestration, and North American Cabinet Components segments.
It sells its products through sales representatives, a direct sales force, distributors, and independent sales agents.
For its fiscal 2022 second quarter ended April 30, 2022, NX’s net sales increased 19.4% year-over-year to $322.89 million. The company’s operating income came in at $34.55 million, up 61.6% from the prior-year period.
Its adjusted net income came in at $26.52 million, indicating an 80.4% rise from the prior-year period. NX’s adjusted EPS increased 86.1% year-over-year to $0.80. The company had cash and cash equivalents of $38.90 million as of March 31, 2022.
Analysts expect NX’s EPS to improve 37.1% from the prior-year period to $2.40 for its fiscal 2022 ending October 31, 2022. It surpassed the consensus EPS estimates in three of the trailing four quarters.
The consensus revenue estimate of $1.20 billion for the same fiscal year represents an 11.5% rise from the prior-year period. The company’s EPS is expected to grow at a 15% rate per annum over the next five years.
Over the past three years, NX’s revenue and EBITDA have grown at CAGRs of 8.9% and 16.4%, respectively. The stock’s 0.65x forward EV/Sales is 57% lower than the 1.52x industry average. In terms of forward Price/Sales, NX is currently trading at 0.60x, which is 49.8% lower than the 1.19x industry average.
Over the past week, the stock has gained 2.4% to close the last trading session at $21.47.
NX’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has a B grade for Growth and a B grade for Value. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for NX’s Momentum, Quality, Sentiment, and Stability here.
NX is ranked #1 of 47 stocks in the B-rated Industrial - Building Materials industry.
Ryerson Holding Corporation (RYI)
RYI processes and distributes industrial metals like carbon, stainless, and alloy steels, and aluminum, nickel, and red metals in various shapes and forms, as well as offers processing services in the U.S., Canada, Mexico, and China.
It serves commercial ground transportation, metal fabrication and machine shops, industrial machinery and equipment manufacturing, durable consumer equipment, HVAC manufacturing, food processing and agricultural equipment manufacturing, and oil and gas industries.
RYI announced the acquisition of tool steel processor Ford Tool Steels (FTS) on June 1, 2022. As FTS' sawing and machining capabilities align with those of Southern Tool Steel, a member of the Ryerson Family of Companies, this strategic acquisition will help RYI expand its tool steel franchise going forward.
For its fiscal 2022 first quarter ended March 31, 2022, RYI’s net sales increased 52.4% year-over-year to $1.75 billion. The company’s gross profit came in at $410.10 million, representing a 107.2% rise from the prior-year period. Its operating profit came in at $234.80 million, up 406% from the prior-year period.
While its adjusted net income increased 1542.2% year-over-year to $167.50 million, its EPS increased 1542.3% to $4.27. As of March 31, 2022, the company had $44.70 million in cash and cash equivalents.
Analysts expect the company’s EPS to improve 18.2% year-over-year to $8.82 for fiscal 2022 ending December 31, 2022. RYI surpassed Street EPS estimates in each of the trailing four quarters. Its EPS is expected to grow at a rate of 0.3% per annum over the next five years.
Over the past three years, RYI’s revenue and EBITDA have grown at CAGRs of 10.1% and 43.2%, respectively. The stock’s 0.33x forward EV/Sales is 76.5% lower than the 1.41x industry average. In terms of forward Price/Sales, RYI is currently trading at 0.19x, which is 84.7% lower than the 1.22x industry average.
Over the past week, the stock has lost 8.8% to close the last trading session at $22.30.
RYI’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, equating to Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Growth, Sentiment, and Quality. Click here to see the additional ratings for RYI (Momentum and Stability).
The stock is ranked #1 of 37 stocks in the C-rated Industrial - Metals industry.
CMT shares were trading at $8.92 per share on Thursday afternoon, down $0.33 (-3.57%). Year-to-date, CMT has gained 4.82%, versus a -20.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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