Over the past year, industrial manufacturers were hit by headwinds of inflation, supply chain issues, and a tight labor supply. Despite this, manufacturing output in January moved up 1%.
With the government looking to boost manufacturing domestically, industrial stocks General Electric Company (GE) and Core Molding Technologies, Inc. (CMT) could be solid buys to cash in on the industry tailwinds. Given their financial strength, these stocks could be relied upon, irrespective of the market’s condition.
Now that supply constraints are easing, industrial companies no longer have to hold back on capital expenditures. Industrial companies appear to be increasingly investing in automation and technology and embracing the adoption of emerging digital technologies.
Moreover, the Biden administration’s bipartisan infrastructure law is expected to boost domestic manufacturing, with $185 billion announced in funding projects across the United States.
Additionally, the industrial machinery market is projected to grow at a CAGR of 6.7%, reaching $708.30 billion in 2027. Investors’ interest in the industrial sector is evident from the Vanguard Industrials ETF’s (VIS) 6.2% returns over the past six months.
Let’s find out how industrial stocks GE and CMT should be able to navigate any market condition.
General Electric Company (GE)
GE operates as a high-tech international industrial company. It offers gas and steam turbines, a full balance of plant, upgrade, and service solutions, as well as data-leveraging software for power generation, industrial, government, and other customers.
GE’s EBITDA grew at a CAGR of 6% over the past three years. Its EBIT grew at a CAGR of 11.4% over the past three years.
On February 7, 2023, GE Digital announced its multi-year strategic collaboration agreement with Amazon Web Services, Inc. (AWS), aimed at helping utilities accelerate grid modernization.
Mahesh Sudhakaran, General Manager of Grid Software at GE Digital, said, "This collaboration brings together GE Digital’s GridOS hybrid cloud software capabilities with the expertise and infrastructure support of AWS to help utilities transform their operations and meet their goal of providing reliable, affordable, and clean energy.”
On February 8, 2023, GE Renewable Energy’s Grid Solutions business announced its multi-million dollar contract with Nepal Electricity Authority (NEA) to automate 39 substations across Nepal, including the construction of six Master Control Centers (MCCs).
Grid Systems Integration Business Leader for GE Grid Solutions, Johan Bindele, believes the modernization of these substations would significantly improve the quality of power transmission in Nepal.
For the fiscal fourth quarter that ended December 31, 2022, GE’s total revenues increased 7% year-over-year to $21.78 billion. The company’s adjusted earnings increased 51.8% year-over-year to $1.36 billion. Additionally, its adjusted EPS came in at $1.24, representing a 51.2% increase from the prior-year period.
GE’s EPS and revenue for the fiscal year 2024 are expected to increase 81% and 7.4% year-over-year to $3.48 and $67.13 billion, respectively. The stock has gained 12.5% over the past six months to close the last trading session at $84.71.
GE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Industrial - Manufacturing industry, it is ranked #10 out of 36 stocks. It has a B grade for Growth and Value. We have also given GE grades for Momentum, Stability, Sentiment, and Quality. Get all GE ratings here.
Core Molding Technologies, Inc. (CMT)
CMT operates as a molder of thermoplastic and thermoset structural products. The company offers a range of manufacturing processes, including compression molding of the sheet molding compound, resin transfer molding, liquid molding of dicyclopentadiene, spray-up, and hand-lay-up, direct long-fiber thermoplastics, and structural foam and structural web injection molding.
CMT’s revenue grew at a CAGR of 16.2% over the past five years. Its EBITDA grew at a CAGR of 72.6% over the past three years.
For the fiscal third quarter that ended September 30, 2022, CMT’s revenues increased 25.4% year-over-year to $101.61 million. Its net income came in at $1.32 million, compared to a $3.31 million loss in the year-ago quarter. Additionally, its adjusted EBITDA increased significantly year-over-year to $8.43 million, while its net EPS came in at $0.16, compared to a loss per share of $0.41 in the prior-year quarter.
CMT’s EPS for the fiscal year 2022 is expected to increase 87.3% year-over-year to $1.03. Its revenue for the fiscal year 2023 is expected to increase 1.4% year-over-year to $373.75 million. Over the past nine months, the stock has gained 68.1% to close the last trading session at $16.81.
CMT’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked #2 in the same industry. In addition, it has an A grade for Growth and Sentiment and a B for Value.
Click here to see the additional ratings of CMT for Momentum, Stability, and Quality.
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GE shares were trading at $85.03 per share on Wednesday afternoon, up $0.32 (+0.38%). Year-to-date, GE has gained 67.43%, versus a 3.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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