The industrial sector is booming, driven by rising demand for automation and the modernization of production processes. Given the industry’s steady growth prospects, investors could consider quality industrial stocks Eaton Corporation plc (ETN), Trane Technologies plc (TT), and Carlisle Companies Incorporated (CSL) with strong earnings growth.
The industrial machinery market has been growing steadily over the years, driven by the demand for automation and the modernization of production processes. Manufacturers are progressively integrating advanced technologies such as Artificial Intelligence (AI) and Robotics to boost the efficiency and productivity of their equipment.
These technologies provide numerous advantages, including real-time monitoring, predictive maintenance, and enhanced workplace safety. The global industrial machinery market is projected to grow at a CAGR of 5.3% by 2032. Moreover, U.S. industrial production rose 0.9% in May. Manufacturing output posted a similar gain of 0.9% after declining in the previous two months.
Considering these conducive trends, let's take a look at the fundamentals of the three best industrial stocks.
Eaton Corporation plc (ETN)
Based in Dublin, Ireland, ETN is a power management company worldwide. The company’s Electrical Americas and Electrical Global segments provide electrical components, industrial components, power distribution and assemblies, residential products, single, and three-phase power quality and connectivity products, wiring devices, circuit protection products, and utility power distribution products.
On June 4, 2024, ETN announced its participation in the EU research and innovation project BIG LEAP. Lasting for three and a half years, this Horizon Europe program aims to enhance energy storage efficiency, reliability, and compatibility using second-life batteries from varied electric vehicles.
On May 31, 2024, ETN announced it had completed a significant strategic investment in NordicEPOD AS, formerly a wholly-owned subsidiary of CTS Nordics. NordicEPOD AS designs and assembles standardized power modules for data centers in the Nordic region, which should benefit the company strategically.
ETN’s levered FCF grew at a CAGR of 9.2% over the past three years. Also, its revenue grew at a CAGR of 10% during the same period.
ETN’s trailing-12-month levered FCF margin of 10.52% is 65.9% higher than the industry average of 6.34%. Its trailing-12-month gross profit margin of 37.06% is 19% higher than the industry average of 31.14%.
During the first quarter that ended March 31, 2024, ETN’s net sales increased 8.4% from the prior year’s period to $5.94 billion, and its adjusted earnings increased 28.3% year-over-year to $966 million. Its adjusted earnings per ordinary share grew 27.7% year-over-year to $2.40.
Street expects ETN’s EPS for the quarter ended June 2024 to increase 17.6% year-over-year to $2.60. The company’s revenue is expected to grow 8.2% year-over-year to $6.35 billion for the same quarter. Moreover, the company has topped the consensus EPS estimates in each of the four trailing quarters.
The stock has gained 51.8% over the past nine months to close its last trading session at $318.96.
ETN’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates 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.
The stock has a B grade in Growth, Stability, and Quality. It is ranked #27 out of 78 stocks in the A-rated Industrial - Machinery industry.
Beyond what is stated above, we’ve also rated ETN for Value, Momentum, and Sentiment. Get all ETN ratings here.
Trane Technologies plc (TT)
Headquartered in Swords, Ireland, TT designs, manufactures, sells, and services solutions for heating, ventilation, air conditioning, custom, and custom and transport refrigeration in Ireland and internationally.
On June 7, 2024, TT declared a quarterly dividend of $0.84 per ordinary share, payable on September 30, 2024.
TT pays a $3.36 per share dividend annually, translating to a 1.01% yield on the current share price. Its four-year dividend yield is 1.44%. The company’s dividend payouts have grown at CAGRs of 12.4% and 8.5% over the past three and five years, respectively.
TT’s levered FCF grew at a CAGR of 1.4% over the past three years. Also, its revenue grew at a CAGR of 12.4% during the same period.
TT’s trailing-12-month levered FCF margin of 10.45% is 64.9% higher than the industry average of 6.34%. Its trailing-12-month ROTC of 16.55% is 132.3% higher than the industry average of 7.13%.
TT’s net revenue for the first quarter ended March 31, 2024, increased 18% year-over-year to $5.07 billion. Its adjusted EBITA grew 30% over the prior-year quarter to $706 million. In addition, its adjusted net earnings from continuing operations attributable to TT increased 37.1% year-over-year to $446.10 million, and a net adjusted earnings per common share came in at $1.94, representing an increase of 37.6% year-over-year.
Analysts expect TT’s EPS for the fiscal second quarter ended June 2024 to increase 14.2% year-over-year to $3.06. The company’s revenue will likely grow 8.6% year-over-year to $5.11 billion in the same quarter. Moreover, the company has topped the consensus EPS estimates in each of the four trailing quarters.
Shares of TT have gained 63.3% over the past nine months to close the last trading session at $333.52.
It’s no surprise that TT has an overall rating of B, which equates to Buy in our proprietary rating system.
TT has a B grade for Growth, Sentiment, and Quality. It is ranked #25 out of 86 stocks in the Industrial - Equipment industry.
In addition to the POWR Ratings highlighted above, one can access TT’s ratings for Value, Momentum, and Stability here.
Carlisle Companies Incorporated (CSL)
CSL is a global manufacturer and supplier of building envelope products and solutions. It operates in various regions worldwide and has two main segments: Carlisle Construction Materials and Carlisle Weatherproofing Technologies. Its offerings include single-ply roofing products, engineered metal roofing systems, waterproofing solutions, insulation products, and more, catering to both commercial and residential buildings.
On May 1, 2024, CSL completed the previously announced purchase of MTL Holdings from GreyLion Partners, a leading U.S. private equity firm, for $410 million in cash.
The acquisition of MTL Holdings is consistent with CSL’s Vision 2030 strategy and the strategic pivot to a pure-play building products company with a continued emphasis on synergistic M&A, increased investment in innovation, attracting and retaining top talent, and delivering on its sustainability commitments.
CSL’s EBITDA grew at a CAGR of 22.3% over the past three years. Also, its revenue grew at a CAGR of 6.6% during the same period.
CSL’s trailing-12-month gross profit margin of 36.78% is 18% higher than the 31.14% industry average. Its trailing-12-month EBIT margin of 22.59% is 121.9% higher than the 10.18% industry average.
In the fiscal first quarter (ended March 31, 2024), CSL’s revenue increased 22.8% year-over-year to $1.10 billion, while its operating income increased 86.6% year-over-year to $225.20 million. The company’s adjusted EBITDA grew 57.5% year-over-year to $265.50 million, and adjusted EPS increased 85.1% year-over-year to $3.72.
CSL’s revenue for the fiscal third quarter (ending September 2024) is expected to increase 7.3% to $1.35 billion. Its EPS is expected to increase 20.7% year-over-year to $5.65 in the same quarter. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
CSL’s shares have gained 59.5% over the past year and to close the last trading session at $410.13.
It’s no surprise that CSL has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Momentum, Growth, Quality, and Sentiment. Within the B-rated Industrial - Manufacturing industry, it is ranked #11 out of 34 stocks.
In addition to the POWR Ratings we’ve stated above, we also have CSL’s ratings for Stability and Value. Get all CSL ratings here.
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ETN shares were trading at $319.90 per share on Tuesday afternoon, up $0.94 (+0.29%). Year-to-date, ETN has gained 33.65%, versus a 17.70% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
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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