The industrial automation market is a dynamic and rapidly evolving sector that revolutionizes traditional manufacturing processes by integrating cutting-edge technologies.

Hence, investors could consider watching fundamentally sound industrial stocks: Honeywell International Inc. (HON), Parker-Hannifin Corporation (PH), and Rockwell Automation, Inc. (ROK) in 2024.

The industrial automation market is expected to grow at a CAGR of 7.4% until 2028. Industries execute automation processes to increase productivity and decrease the employees costing and other associated expenses. Therefore, it has become crucial for companies to exploit their productivity through automation, which leads to the shifting demands of the end-users.

Moreover, the rising demand for high-quality products that comply with strict government and regulatory standards is pushing companies to implement automation solutions. These technologies ensure product consistency and compliance with regulations. Notably, the influx of acquisitions is leading to significant investments to boost the overall market.

Considering these factors, let’s take a look at the fundamentals of the three automation stocks.

Honeywell International Inc. (HON)

HON engages in aerospace technologies, building automation, energy and sustainable solutions, and industrial automation businesses internationally. It operates through Aerospace; Honeywell Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions segments.

On August 14, HON launched INNCOM Direct, an easy-to-install energy management system that uses automation to help improve energy efficiency in mid-market hotel properties. Its launch supports HON’s business alignment around three compelling megatrends, including automation and the energy transition.

On July 22, HON was selected by United Airlines to provide a wide range of avionics for new 737 MAX aircraft set up to enter service over the next decade, including technologies such as the industry’s only 3D weather radar, flight recorders, and advanced traffic avoidance systems.

HON’s trailing-12-month ROCE of 33.78% is 163.4% higher than the industry average of 12.82%. Also, the stock’s trailing-12-month ROTC and ROTA of 11.29% and 8.34% are 59.2% and 69% higher than the industry averages of 7.08% and 4.93%, respectively.

For the second quarter, which ended on June 30, 2024, HON’s net sales increased by 4.7% year-over-year to $9.58 billion. Its operating income of $1.98 billion reflects a growth of 5% from the prior year’s quarter. Net income attributable to HON and its EPS stood at $1.54 billion and $2.36, up 3.8% and 6.3% year-over-year, respectively.

According to the company’s updated 2024 outlook, HON expects its sales to range between $39.10 billion and $39.70 billion. It also anticipates adjusted EPS in the range of $10.05 to $10.25, reflecting a solid increase of 6% to 8%. And its free cash flow has been raised to $5.50 billion - $5.90 billion for the full year.

Street expects HON’s revenue and EPS for the third quarter (ending September 2024) to increase 7.6% and 10.3% year-over-year to $9.91 billion and $2.50, respectively. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.

HON’s stock has increased 3% over the past six months and 10.2% over the past year to close the last trading session at $207.03.

HON’s POWR Ratings reflect its outlook. The stock has a B grade for Stability. It is ranked #47 in the 78-stock A-rated Industrial - Machinery industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Beyond what is stated above, we’ve also rated HON for Value, Quality, Growth, Momentum, and Sentiment. Get all HON ratings here.

Parker-Hannifin Corporation (PH)

PH manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems.

In terms of the trailing-12-month net income margin, PH’s 14.27% is 123.8% higher than the 6.47% industry average. Likewise, its 25.40% trailing-12-month ROCE is 98.1% higher than the industry average of 12.82%. Furthermore, the stock’s 10.80% trailing-12-month ROTC is 51.4% higher than the industry average of 7.13%.

PH’s sales for the fiscal fourth quarter, which ended on June 30, 2024, stood at $2.23 billion. Its net income rose 10.6% over the prior-year quarter to $784.96 million. The company’s earnings per share increased 10.7% year-over-year to $6.01.

PH’s revenue is expected to increase 1.1% year-over-year to $4.90 billion for the first quarter ending September 2024. Its EPS is expected to grow 3% year-over-year to $6.14. The company surpassed its EPS estimates in each of the trailing four quarters, which is promising.

Shares of PH have gained 26.4% over the past three months to close the last trading session at $635.40.

PH’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

PH has a B grade for Quality and Stability. It is ranked #32 out of 86 stocks in the Industrial - Equipment industry.

In addition to the POWR Ratings highlighted above, one can access PH’s ratings for Growth, Value, Sentiment, and Momentum here.

Rockwell Automation, Inc. (ROK)

ROK offers industrial automation and digital transformation solutions. The company operates through three segments: Intelligent Devices; Software & Control; and Lifecycle Services. It provides hardware and software products and services, network and security infrastructure solutions, and consulting and professional services.

ROK’s trailing-12-month levered FCF margin of 12.41% is 92% higher than the 6.47% industry average.

ROK’s sales for the third quarter ended June 30, 2024, amounted to $2.05 billion. Its gross profit increased 4.9% from the previous quarter to $833.40 billion. Its adjusted net income and non-GAAP EPS amounted to $311.30 million and $2.71.

Analysts expect ROK’s EPS for the quarter ending December 31, 2024, to increase 9.2% year-over-year to $2.23. Its revenue for the quarter ending March 31, 2025, is expected to grow 1.8% year-over-year to $2.16 billion.

It surpassed the consensus revenue and EPS estimates in each of the trailing four quarters. ROK’s stock has gained 3.7% over the past month to close the last trading session at $277.89.

ROK’s fundamentals are reflected in its POWR Ratings. ROK has a B grade for Quality. It is ranked #55 out of 78 stocks in the A-rated Industrial - Machinery industry.

Click here to access the additional ROK ratings (Momentum, Value, Stability, Growth, and Sentiment).

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HON shares were trading at $208.11 per share on Friday afternoon, up $1.08 (+0.52%). Year-to-date, HON has gained 0.86%, versus a 21.46% rise in the benchmark S&P 500 index during the same period.

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.

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