The industrial sector flourishes in the era of Industry 4.0, harnessing the power of technological investments and sustainable practices. Strategic innovations propel growth, strategically positioning the industry for enduring success in a dynamically evolving landscape.
Therefore, promising industrial stocks Cummins Inc. (CMI), Owens Corning (OC), and Interface, Inc. (TILE) could be ideal additions to one’s portfolio today.
Technological advancements, increased globalization, and a focus on sustainability drive the global industrial sector. Besides, Industry 4.0, representing the integration of cutting-edge technologies in manufacturing processes, gives rise to smart factories. Therefore, it bolsters the global industrial landscape. The global Industry 4.0 is expected to be valued at around $482 billion by 2032, growing at a CAGR of 20.7%.
Moreover, the industrial sector enjoys demand through various channels, underscoring its robustness and keeping its sub-sectors afloat.
For instance, the industrial machinery market experiences steady growth driven by automation demand, manufacturing sector expansion, and technological advancements like IoT and AI. It is projected to grow at a CAGR of 5.3% to reach $1.04 trillion by 2032.
In addition, due to growing urbanization and the rising need for infrastructure development, the global construction material market is expected to grow at a 3.9% CAGR to reach $1.74 trillion by 2030.
Moreover, the growth of the global textile market is tied to increased fashion demand and growing e-commerce. The global textile market's revenue is anticipated to grow at a CAGR of 7.6% from 2023 to 2030.
Considering these conducive trends, let’s examine the fundamentals of the three industrial stock picks.
Cummins Inc. (CMI)
CMI is a global leader in designing and manufacturing diesel and natural gas engines, electric and hybrid powertrains, and related components. Operating through five segments, the company serves diverse markets, providing comprehensive solutions for vehicles, power generation, and electrified systems.
On December 5, CMI introduced three new generator models powered by the reliable KTA50 engine series. These generators offer increased power choices, featuring compact design, high-altitude and high-temperature capabilities, innovative alternators, and an efficient PowerCommand® 3.3 control system.
Joining CMI's existing KTA50 powered line, these models provide versatile solutions for various power needs, showcasing CMI's commitment to innovation in power generation.
In the third quarter ended September 30, 2023, CMI's net sales grew 15% from the previous-year quarter to $8.43 billion. Net income attributable to CMI came in at $656 million, up 64% year-over-year. It reported EPS and adjusted EBITDA of $15.19 and $1.26 billion, up 42.2% and 28.6% from the prior year's quarter.
For the fiscal year 2023, the company is anticipating the revenue to grow 18% to 21% from the previous fiscal year, and its EBITDA to range from 15.2% to 15.4% of sales.
CMI’s revenue and EPS are expected to grow 19.7% and 21.6% year-over-year to $33.59 billion and $19.84 for the fiscal year ending December 2023, respectively. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.
CMI’s shares increased 6% over the past six months and 11.3% over the past month to close the last trading session at $248.27.
CMI’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CMI has a B grade for Quality. Within the A-rated Industrial - Machinery industry, it is ranked #14 of 78 stocks.
In addition to the POWR Ratings stated above, one can access CMI’s additional Growth, Value, Momentum, Stability, and Sentiment ratings here.
Owens Corning (OC)
OC is a global company that manufactures and sells insulation, roofing, and fiberglass composite materials. The company operates in Composites (glass reinforcements); Insulation (thermal and acoustic products); and Roofing (asphalt shingles) segments. It serves a broad customer base, from installers and retailers to distributors and contractors.
On December 7, OC declared a fourth-quarter dividend of $0.60 per common share, indicating a 15% increase compared to the prior quarterly dividend. The dividend is payable to shareholders on January 19, 2024. Its annual dividend of $2.40 yields 1.57% on prevailing prices.
In the third quarter that ended September 30, 2023, OC's net sales stood at $2.48 billion. The company reported adjusted EBITDA and earnings of $644 million and $377 million, up 5.9% and 7.4% year-over-year, respectively. Also, its adjusted EPS grew 15% from the previous year’s quarter to $4.15.
Analysts expect OC’s EPS to rise 8.1% year-over-year to $13.92 for the fiscal year 2023. Its revenue is expected to be $9.62 billion in the same quarter. The company surpassed the EPS estimates in each of the trailing four quarters.
The stock has gained 65.7% over the past nine months and 79.1% year-to-date to close the last trading session at $152.78.
OC’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth, Value, and Quality. Within the A-rated Industrial - Building Materials industry, it is ranked first among 47 stocks.
To see OC’s additional POWR Ratings for Stability and Sentiment, click here.
Interface, Inc. (TILE)
TILE designs and sells modular carpet products globally. Its offerings include modular carpets, luxury vinyl tiles, and carpet tiles for commercial and residential spaces, along with related services and products.
On October 10, TILE launched Past Forward, a global carpet tile collection commemorating 50 years of innovation. Designed by David Oakey, the collection merges historic and modern design, offering 14 versatile products for contemporary commercial spaces.
Past Forward is made from 100 percent recycled content nylon and aligns with TILE's sustainability goals, as well as the Carbon Neutral Floors™ program.
During the third quarter, which ended on October 1, 2023, TILE reported net sales of $311 million. The company's adjusted gross profit and operating income increased 1% and 3.8% from the prior year’s quarter to $111.60 million and 32.40 million, respectively. Moreover, its adjusted EBITDA amounted to $43.7 million, up 1.9% year-over-year.
The company anticipates its net sales to range from $1.25 billion to $1.27 billion for the fiscal year 2023.
Street expects TILE’s revenue to be $281 million for the first quarter ending March 2024. Its EPS is expected to grow 28.6% year-over-year to $0.09 for the same quarter. The company surpassed the EPS estimates in three of the trailing four quarters.
TILE’s shares have gained 48.8% over the past nine months and 47.1% over the past six months to close the last trading session at $11.99.
TILE’s POWR Ratings reflect a sound outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Momentum, Sentiment, and Quality. Within the A-rated Industrial - Textiles industry, it is ranked first out of five stocks.
Click here for TILE’s additional Growth and Stability ratings.
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CMI shares were trading at $245.51 per share on Friday morning, down $2.76 (-1.11%). Year-to-date, CMI has gained 4.24%, versus a 24.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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