The industrial sector is rebounding rapidly after the pandemic-led disruptions. Factory production in the United States is improving, despite supply chain shortages. According to the Federal Reserve, manufacturing output rose 1.2% in October, posting its largest gain since March 2019, after a marginal fall in September.
The trillion-dollar infrastructure spending should have a bolstering effect on the industrial sector. Moreover, the Senate intends to pass the Build Back Better Act by Christmas. The lawmakers have designed the spending strategically for the country to gain an edge against other countries. The global industrial services market is expected to reach $41.05 billion by 2028, growing at a CAGR of 5.12%.
Given the solid growth prospects, industrial stocks EMCOR Group, Inc. (EME), Ryder System, Inc. (R), IES Holdings, Inc. (IESC), and Heritage-Crystal Clean, Inc (HCCI) might be the best buys, considering their fundamental strength. These stocks have an overall A (Strong Buy) rating in our proprietary POWR Ratings system.
EMCOR Group, Inc. (EME)
EME is an electrical and mechanical construction and facilities services, provider. The company’s offerings include design, integration, installation, operation, and maintenance services related to electrical power transmission, distribution system, and lighting systems.
On October 4, EME declared a regular dividend of $0.13 per common share, payable to shareholders on October 29. This reflects upon the company’s strength in its cash flow.
In August, the company announced that it had completed the acquisition of Ohio-based electrical services company Quebe Holdings, Inc. The acquisition was expected to expand EME’s operational capability and strengthen the company’s position in the electrical construction field.
For the fiscal third quarter ended September 30, EME’s revenues increased 14.5% year-over-year to $2.52 billion. Non-GAAP operating income improved 1.2% from the prior-year quarter to $137.42 million. Non-GAAP net income and non-GAAP EPS rose 2.9% and 5.1% from the same period last year to $99.74 million and $1.85, respectively.
The consensus EPS estimate of $1.73 for the next quarter (ending March 2022) indicates a 12.3% year-over-year increase. Likewise, the consensus revenue estimate for the upcoming quarter of $2.47 billion reflects an improvement of 7.1% from the prior-year quarters. Moreover, EME has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 38.5% over the past year, 30.5% year-to-date to close yesterday’s trading session at $119.34.
EME’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
EME has a Value, Momentum, Stability, Sentiment, and Quality grade of B. In the 87-stock Industrial – Services industry, it is ranked #5. The industry is rated B.
Click here to see the additional POWR Ratings for EME (Growth).
Ryder System, Inc. (R)
R is a logistics and transportation company, operating globally through the broad segments of Fleet Management Solutions (FMS); Supply Chain Solutions (SCS); and Dedicated Transportation Solutions (DTS).
On October 27, R announced that it had entered into a definitive agreement to acquire all of the outstanding equity of Midwest Warehouse & Distribution System. The multi-client warehouse capability should provide R with a new growth prospect and expand its supply chain presence. The transaction is expected to add $135 million (Approx.) in annual revenue to R’s supply chain solutions business segment in 2022.
On the same day, the company announced two share repurchase programs. With the provision to buy back up to 2 million shares of the common stock, the new repurchase program is expected to give capital flexibility. The anti-dilutive share repurchase program that authorized up to 2.5 million shares of common stock repurchase might mitigate the dilutive impact of shares issued under the employee stock plans.
R’s total revenues increased 14.3% year-over-year to $2.46 billion in the fiscal third quarter ended September 30. Non-GAAP earnings rose 115.5% from the same period last year to $137.50 million, while non-GAAP EPS improved 110.7% from the prior-year quarter to $2.55. Non-GAAP operating revenue increased 10.8% year-over-year to $1.98 billion.
Street EPS estimate for the current quarter (ending December 2021) of $2.46 reflects a rise of 196.4% from the same period last year. Likewise, the Street revenue estimate of $2.48 billion for the ongoing quarter indicates a 12.3% year-over-year increase. In addition, R has topped consensus EPS estimates in three out of the trailing four quarters, which is impressive.
R’s shares have gained 40.3% over the past year to close yesterday’s trading session at $83.08. It has gained 34.5% year-to-date.
It’s no surprise that R has an overall A rating, which translates to Strong Buy in our POWR Rating system.
R has an A grade for Growth and a B grade for Value, Momentum, and Quality. It is ranked #4 in the Industrial – Services industry.
To see the additional POWR Ratings for Stability and Sentiment for R, click here.
IES Holdings, Inc. (IESC)
IESC is an integrated electrical and technology systems designer and an infrastructure products and services provider in the United States. The company operates through the segments of Commercial & Industrial; Communications; Infrastructure Solutions; and Residential.
On October 6, IESC announced that it has invested in North Carolina-based Software-as-a-Service (SaaS) company, Automation Intellect. The companies are expected to work closely together, and IESC’s communications segments are expected to become the preferred installation vendor for Automation Intellect. This should enable IESC to expand its service offering and customer base while gaining access to advanced technologies.
For the third fiscal quarter ended June 30, IESC’s revenues increased 38.5% year-over-year to $405.90 million. Adjusted net income and adjusted EPS, attributable to common stockholders, came in at $20.80 million and $0.99, respectively, up 65.1% and 65% from the same period last year. Adjusted EBITDA rose 58.7% from the prior-year quarter to $29.20 million.
Over the past year, the stock has gained 30.1% to close yesterday’s trading session at $47.99. It has gained 4.2% year-to-date.
IESC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
IESC has a Growth, Momentum, Stability, Sentiment, and Quality grade of B. It is ranked #6 in the Industrial – Services industry.
Click here to see the additional POWR Rating for Value for IESC.
Heritage-Crystal Clean, Inc (HCCI)
HCCI provides parts cleaning, hazardous and non-hazardous wastes and used oil collection services for small to mid-sized customers in the vehicle maintenance and industrial fields through its subsidiary Heritage Crystal Clean, LLC.
HCCI’s total revenues increased 41.4% year-over-year to $123.18 million in the fiscal third quarter ended September 11. Operating income rose 359.9% from the prior-year quarter to $24.86 million. Net income and net income per share improved 367.6% and 364.7% from the same period last year to $18.51 million and $0.79, respectively.
Analysts expect EPS to increase 134.5% year-over-year to $0.68 in the current quarter (ending December 2021). Likewise, Street expects revenue to rise 21.2% from the prior-year quarter to $159.98 million in the ongoing quarter. HCCI has beaten consensus EPS estimates in each of the trailing four quarters.
The stock has gained 66.5% over the past year and 52.3% year-to-date to close yesterday’s trading session at $32.09.
HCCI has an overall rating of A, which translates to Strong Buy in our POWR Rating system.
The stock has an A grade for Sentiment and a B grade for Growth, Value, Momentum, and Quality. It is ranked #1 in the same industry.
In addition to the POWR Rating grades we’ve stated above, one can see the HCCI rating for Stability here.
EME shares were trading at $120.82 per share on Wednesday afternoon, up $1.48 (+1.24%). Year-to-date, EME has gained 32.71%, versus a 23.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.4 Industrial Stocks That Look Like Great Buys According to POWR Ratings appeared first on StockNews.com