With a $7.60 billion market cap, Mueller Industries, Inc. (MLI) manufactures and sells copper, brass, aluminum, and plastic products in the U.S., the United Kingdom, Canada, South Korea, the Middle East, China, and Mexico. It operates through three segments: Piping Systems; Industrial Metals; and Climate.

MLI reported net sales of $997.74 million, slightly surpassing the analyst estimates of $997 million. The 11.2% year-over-year increase in net sales was primarily due to higher unit shipments in most of its businesses, increased copper prices, and the inclusion of one-month reported sales for its newly acquired Nehring business.

On May 28, Mueller completed its acquisition of Nehring Electrical Works Company , which produces high-quality wire and cable solutions for the utility, telecommunication, electrical distribution, and OEM markets. This acquisition will provide MLI with a strong platform for long-term growth in the electrical and power infrastructure space.

Further, MLI posted second-quarter EPS, the same as the consensus estimate of $1.41. However, the company’s EPS fell to $1.41 from $1.56 reported in the second quarter of 2023.

Greg Christopher, CEO of MLI, said, “Our businesses continue to perform well despite persistent heightened inflation and restrained construction activity. We maintain a positive long-term outlook for our business. Our internal investments are paying off, and we expect they will yield even greater benefits as market conditions improve.”

U.S. manufacturing output grew by 0.4% in June, following an upwardly revised 1% increase in May. Economists, on the other hand, predicted a 0.2% rise. Production at factories rose by 1.1% year-over-year and 3.4% during the second quarter, rebounding from a decline of 1.3% in the first quarter.

However, the manufacturing industry faces several macroeconomic issues, including labor shortage and still-elevated inflation, which could impact MLI’s future performance.

Shares of MLI have gained 16.7% over the month and 40.2% over the past six months to close the last trading session at $65.63.

Let's look at factors that could influence MLI’s performance in the upcoming months.

Mixed Financials

For the second quarter that ended June 29, 2024, MLI’s net sales increased 11.2% year-over-year to $997.74 million. However, its operating income decreased marginally year-over-year to $210 million. Also, the company’s income before income taxes declined 7.5% year-over-year to $222.93 million.

Furthermore, Mueller Industries’ net income came in at $160.16 million, or $1.41 per share, down 9.9% and 9.6% from the prior year’s quarter, respectively. As of June 29, 2024, MLI’s cash and cash equivalents were $825.65 million, compared to $1.17 billion as of December 30, 2023.

As of June 29, 2024, the company’s current liabilities increased to $387.23 million, compared to $317.14 million as of December 30, 2023.

Mixed Analyst Estimates

Analysts expect MLI’s revenue for the third quarter (ending September 2024) to grow 14.2% year-over-year to $936 million. Its EPS for the same period is expected to grow 10.8% year-over-year to $1.32. Moreover, the company has topped consensus revenue and EPS estimates in three of the trailing four quarters.

For the fiscal year ending December 2024, Street expects MLI’s revenue to grow 6.2% from the prior year to $3.63 billion. However, the company’s EPS for the ongoing year is expected to decrease 9.3% from the previous year to $5.

Solid Historical Growth

Over the past five years, MLI’s revenue has grown at a CAGR of 6.5%. The company’s net income and EPS have improved at CAGRs of 43.4% and 43.3% over the same period, respectively. Further, the company’s EBITDA has grown at a CAGR of 28.5% over the same timeframe.

Also, MLI’s levered free cash flow has grown at a CAGR of 31.7% over the past five years.

High Profitability

MLI’s trailing-12-month EBIT margin of 20.96% is 110% higher than the 9.98% industry average. Similarly, the stock’s trailing-12-month EBITDA margin of 22.08% is 60.9% higher than the industry average of 13.72%. Also, its trailing-12-month net income margin of 16.19% is 168.2% higher than the industry average of 6.04%.

Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 23.61%, 18.62%, and 17.95% are favorably compared to the industry averages of 12.40%, 7.17%, and 4.88%, respectively. Its trailing-12-month levered FCF margin of 13.91% is 117.9% higher than the industry average of 6.38%.

Mixed Valuation

In terms of forward non-GAAP P/E, MLI is trading at 13.13x, 31.1% lower than the industry average of 19.06x. Likewise, its forward Price/Cash Flow of 10.71x is 24.9% lower than the industry average of 14.25x. Also, the stock’s forward EV/EBIT multiple of 9.39 is 47.7% lower than the industry average of 17.97.

However, the stock’s forward EV/Sales multiple of 1.84 is 1.6% higher than the industry average of 1.81. Its forward Price/Sales of 2.06x is 37.7% higher than the industry average of 1.49x.

POWR Ratings Reflect Uncertainty

MLI’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MLI has an A grade for Quality, in sync with its high profitability compared to its industry peers. It also has a C grade for Sentiment, in line with its mixed analyst estimates.

Further, MLI has a C grade for Stability, justified by its 60-month beta of 1.06.

Within the B-rated Industrial – Manufacturing industry, MLI is ranked #20 out of 34 stocks.

Beyond what I have stated above, we have also given MLI grades for Growth, Momentum, and Value. Get all MLI ratings here.

Bottom Line

MLI reported mixed results in the second quarter of fiscal 2024, with net sales increasing year-over-year, but net income and EPS showed declines compared to the same quarter of 2023.

Despite facing macro challenges like labor shortages, restrained construction activity, and persistent inflation, Mueller Industries continues to demonstrate resilience, supported by the recent strategic acquisition of Nehring Electrical Works, which bolsters its position in the electrical and power infrastructure space.

While MLI’s long-term prospects appear bright, its mixed analyst estimates and high valuation multiples reflect uncertainty. Thus, waiting for a better entry point in this stock could be wise now.

How Does Mueller Industries, Inc. (MLI) Stack Up Against Its Peers?

Given its near-term uncertain prospects, the odds of MLI outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three A (Strong Buy) or B-rated (Buy) stocks from the Industrial – Manufacturing industry:

Siemens AG (SIEGY)

CompX International Inc. (CIX)

Core Molding Technologies Inc (CMT)

To explore more A or B-rated industrial stocks, click here.

What To Do Next?

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MLI shares were unchanged in premarket trading Thursday. Year-to-date, MLI has gained 40.23%, versus a 14.54% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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