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3 Industrial Stocks Positioned for Returns

The industrial sector shows promise, driven by robust domestic demand and marked advancements in efficiency and productivity. Within this vibrant landscape, fundamentally strong industrial stocks Carlisle Companies (CSL), Curtiss-Wright Corporation (CW), and Clearwater Paper (CLW) emerge as potential avenues for promising returns. Stay tuned for further insights...

The industrial sector is booming, driven by tech progress and emerging market infrastructure, with rising global demand and increased automation and digitalization investments. Given the industry’s steady growth prospects, investors could consider quality industrial stocks Carlisle Companies Incorporated (CSL), Curtiss-Wright Corporation (CW), and Clearwater Paper Corporation (CLW).

In February, industrial production demonstrated resilience, edging up 0.1% following a decline of 0.5% in January. This positive trend was underscored by a notable increase in manufacturing output, rising by 0.8%. Additionally, the mining sector experienced a robust climb of 2.2%. These indicators reflect a promising outlook for the industrial industry.

Additionally, the integration of advanced technologies, such as the Internet of Things, AI, big data analytics, and automation, is revolutionizing the industrial machinery industry. The industrial machinery market is anticipated to grow at a CAGR of 6% until 2032. Further, the paper and packaging industry is thriving, fueled by increasing demand from e-commerce, healthcare, and textiles. The synthetic paper market is projected to grow at a 6.9% CAGR, reaching $1.17 billion in 2024.

Further, the Biden-Harris Administration's recent announcement earmarks $6 billion to transform America's industrial sector, bolster domestic manufacturing, and cut planet-warming emissions, marking the largest industrial decarbonization investment in U.S. history.

Considering the industry trends, let's take a closer look at the fundamentals of featured industrial stocks:

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 March 18, CSL announced its agreement to acquire MTL Holdings from GreyLion Partners for $410 million in cash. MTL is a leading provider of pre-fabricated edge metal for commercial roofing systems, and it is known for its high-performance products that serve commercial, institutional, and industrial buildings. This acquisition aligns with Carlisle's Vision 2030 strategy to enhance its architectural metals business through expanded product offerings and strengthened capabilities.

On March 1, CSL paid a quarterly dividend of $0.85 per share. It pays an annual dividend of $3.40, yielding 0.88% on the prevailing market price. The company has consistently raised its dividend payouts for the past 46 years, indicating a solid return trajectory.

The company surpassed the consensus EPS and revenue estimates in the fiscal fourth quarter that ended December 31, 2023, generating revenues of $1.13 billion. Its adjusted EBIT and EBITDA rose 22.3% and 17.6% from the year-ago quarter to $261.80 million and $297.10 million, respectively. The company’s adjusted net income improved 21.4% and 29.5% year-over-year to $204.40 million and $4.17 per share, respectively.

In fiscal year 2024, CSL expects its revenues to increase by 5%, led by a 6% rise in Carlisle Construction Materials (CCM) and a 4% growth in Carlisle Weatherproofing Technologies (CWT). Additionally, adjusted EBITDA margins are forecasted to expand by approximately 50 basis points, highlighting CSL's commitment to efficiency and profitability.

Street expects CSL’s revenue and EPS to rise 5.7% and 19.1% year-over-year to $4.85 billion and $18.49, respectively, in the fiscal year 2024. Moreover, the company has surpassed the consensus EPS estimates in three of the trailing four quarters.

The stock has soared 83.2% over the past year and 53.3% over the past six months, closing the last trading session at $388.50.

CSL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, equating to a Buy as per our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

It also has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #9 in the 33-stock Industrial - Manufacturing industry. The industry is rated B.

Click here to access CSL’s Growth, Value, and Stability grades.

Curtiss-Wright Corporation (CW)

CW and its subsidiaries provide engineered products, solutions, and services to aerospace and defense, commercial power, process, and industrial markets globally. Operating through three segments, Aerospace & Industrial; Defense Electronics; and Naval & Power, it offers a wide range of products, including industrial and specialty vehicle products, sensors, controls, electronics, instrumentation, and power generation systems.

On February 12, CW announced that it had entered a Technology Cooperation Agreement with Petroleo Brasileiro S.A. (PBR) to develop a Subsea Canned Motor Boosting System for deployment in the Campos Basin, Brazil. This system, designed for a water depth of 1,500 meters, will utilize CW's canned motor technology and Petrobras' flow assurance expertise to enhance offshore hydrocarbon production. The collaboration aims to offer a reliable alternative to existing subsea pump technologies by reducing unplanned outages and interruptions.

On February 8, CW declared a dividend of $0.20 per share, payable on April 15, 2024. CW pays $0.80 annually as dividends, which translates to a yield of 0.32% at the current price. Its four-year average dividend yield is 0.52%. Its dividend payouts have grown at 5.6% CAGR over the past three years.

CW’s trailing-12-month EBITDA margin of 21.78% is 58.8% higher than the 13.72% industry average. Its trailing-12-month levered FCF margin of 14.56% is 140.1% higher than the 6.07% industry average.

The company exceeded the consensus EPS and revenue estimates in the fiscal fourth quarter that ended December 31, 2023. CW’s adjusted total sales increased 3.7% year-over-year to $786.79 million. Its adjusted operating income increased 1.9% year-over-year to $163 million. The company’s adjusted EPS increased 8% year-over-year to $3.16.

In the fiscal year 2024, the company expects its total sales to range between $2.96 billion and $3.01 billion, reflecting a 4% to 6% increase over 2023. Operating income is projected to be from $514 million to $528 million, with an anticipated growth of 4% to 7%. Operating margin is forecasted to be between 17.4% and 17.6%, potentially rising by 0 to 20 basis points. Free cash flow is expected to be between $415 million and $435 million, potentially increasing by 0% to 5% over the previous year.

CW’s revenue for the fiscal first quarter (ending March 2023) is expected to be $663.93 million, up 5.2% year-over-year. Its EPS is expected to increase 13.5% year-over-year to $1.74 in the same quarter. Also, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.

CW’s shares have gained 47.7% over the past year and 28.1% over the past six months to close the last trading session at $251.21.

It’s no surprise that CW has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has an A grade for Quality and a B in Momentum, Stability, and Sentiment. Within the A-rated Industrial – Machinery industry, it is ranked #11 among 82 stocks.

Beyond the POWR Ratings stated above, we also have CW’s ratings for Growth and Value. You can get all CW ratings here.

Clearwater Paper Corporation (CLW)

CLW manufactures and supplies bleached paperboards and consumer and parent roll tissues internationally. It operates through two segments: Pulp and Paperboard and Consumer Products.

On February 20, CLW unveiled a significant strategic move, announcing a definitive agreement to acquire Graphic Packaging Holding Company's (GPK) Augusta, Georgia bleached paperboard manufacturing facility for $700 million. The facility, boasting an annual capacity of approximately 600 thousand tons, is poised to contribute $140-150 million in adjusted EBITDA annually by 2026, driven by volume and cost synergies.

Arsen Kitch, CLW's President and CEO, expressed confidence in the acquisition, citing its potential to enhance CLW's stature as a premier paperboard supplier and meet the growing demand for sustainable packaging solutions.

During the fiscal fourth quarter, which ended December 31, 2023, CLW’s net sales amounted to $512.80 million. Its adjusted EBITDA rose 127.7% over the prior-year quarter to $63.30 million. Moreover, the company reported an adjusted net income of $22.80 million, compared to a loss of $5.20 million in the prior-year quarter.

Analysts project CLW’s revenue and EPS to rise 14.8% and 41.5% year-over-year to $2.66 billion and $4.88 in the fiscal year 2025. The company has exceeded consensus revenue estimates in three of the trailing four quarters.

Over the past nine months, the stock has gained 42.2%, closing the last trading session at $42.81.

CLW’s solid outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

It has a B grade for Value and Quality and is ranked first among 11 stocks in the B-rated Industrial – Paper industry.

To access CLW’s grades for Growth, Momentum, Stability, and Sentiment, click here.

What To Do Next?

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CSL shares were trading at $388.70 per share on Wednesday afternoon, up $0.20 (+0.05%). Year-to-date, CSL has gained 24.72%, versus a 9.86% 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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