Despite macroeconomic headwinds, total industrial production rose in January. Moreover, robust government investments and technological advancements are boosting the sector’s prospects. Hence, quality industrial stocks General Electric (GE), Watts Water Technologies (WTS), and Core Molding Technologies (CMT) might be ideal buys. Read more.
The total industrial production in January rose 0.8% from its year-earlier level. Also, manufacturing output increased by 1%, and mining output rose by 2% after two months of substantial decreases for each sector.
Increasing demand for operational excellence across the industrial sectors and the rising adoption of various technologies should help the global industrial services market thrive in the coming years. It is expected to reach an estimated value of $34 billion approximately by 2035, expanding at a CAGR of 9%.
While persistent price pressures, interest rate hikes, and supply chain issues weighed heavily on construction output in the U.S., causing delays and cost hikes last year, the industry is expected to rebound at an annual average growth rate of 3.2% from 2023 to 2026, supported by investment in the transport, electricity, housing, and manufacturing sectors.
Moreover, the industry is also being boosted by investment as part of the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA). The Bipartisan Infrastructure Law has already provided more than $185 billion in funding for over 6,900 projects, including 2,800 bridge repair and replacement projects.
General Electric Company (GE)
GE is a high-tech industrial company that operates in Europe, China, Asia, the Americas, the Middle East, and Africa. The company provides gas and steam turbines, a full balance of plant, upgrade, and service solutions, as well as data-leveraging software for power generation. It serves industrial, government, and other customers.
On February 14, GE announced that Air India, part of Tata Sons, had signed a firm order for 40 GEnx-1B and 20 GE9X engines, plus a multi-year TrueChoice engine services agreement. The deal was signed in coordination with the airline’s firm order for 20 Boeing 787 and 10 Boeing 777X aircraft.
Lawrence Culp, Jr., Chairman and CEO of GE, said, “We look forward to working together to introduce these engines into Air India’s fleet and are committed to ensuring they deliver exceptional performance.”
On February 7, 2023, GE Digital signed a multiyear strategic collaboration agreement with Amazon Web Services, Inc. (AWS) to help utilities accelerate grid modernization.
Both companies will work together to help electric utilities accelerate hybrid cloud adoption when and where needed, along with deploying solutions on the GridOS platform to solve mission-critical challenges at the speed of the energy transition. This should benefit GE’s revenue stream.
On February 10, GE declared a $0.08 per share dividend on the outstanding common stock payable on April 25, 2023.
While GE has a four-year average annual dividend yield of 0.51%, its annual dividend of $0.32 yields 0.38% at the current price level.
GE’s organic revenues increased 11.2% year-over-year to $21.71 billion during the fiscal fourth quarter that ended December 31, 2022. The company’s adjusted profit grew 37.3% year-over-year to $2.16 billion, while its adjusted EPS rose 51.2% from the prior year’s quarter to $1.24.
Analysts expect GE’s revenue for the fiscal year 2024 to come in at $66.81 billion, representing a 7.6% rise year-over-year. Its EPS is expected to rise 77.7% year-over-year to $3.42 in the same year. The company has an impressive earnings surprise history as it has surpassed the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 12.6% over the past nine months to close the last trading session at $84.05.
GE’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
GE has a B grade for Growth and Value. Within the A-rated Industrial-Manufacturing industry, it is ranked #12 out of 36 stocks.
In addition to the POWR Ratings highlighted above, one can access GE grades for Sentiment, Momentum, Stability, and Quality here.
Watts Water Technologies, Inc. (WTS)
WTS designs, manufactures, and sells products and solutions that manage and conserve the flow of fluids and energy into, through, and out of commercial and residential buildings. The company operates primarily in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa.
On February 6, WTS declared a quarterly dividend of 30 cents per share on each outstanding share of the Company’s Class A common stock and Class B common stock, payable on March 15, 2023.
WTS’ annual dividend of $1.20 yields 0.67% at the current price level. Its dividend payouts have increased at an 8.8% CAGR over the past three years and a 9.1% CAGR over the past five years. WTS has raised its dividends for ten consecutive years. It has a four-year average annual dividend yield of 0.8%.
During the fiscal fourth quarter that ended December 31, 2022, WTS’ net sales increased 5.9% year-over-year to $501.90 million, and its gross profit grew 9.7% year-over-year to $218.60 million. The company’s operating income increased 7.4% year-over-year to $67.20 million.
Also, the company’s net income rose 71.1% year-over-year to $68.60 million, while its adjusted EPS increased 12.7% from the year-ago value to $1.60.
Street expects WTS’ revenue for the current quarter ending March 2023 to grow 2.3% year-over-year to $437.75 million. Its EPS is expected to be $1.63 in the same quarter. Moreover, WTS has surpassed the consensus EPS and revenue estimates in all four trailing quarters, which is impressive.
WTS has gained 34.9% over the past six months and 10.6% over the past month to close the last trading session at $175.10.
WTS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
WTS has an A grade for Quality and a B for Stability. Within the same industry, it is ranked #6.
Click here to access additional POWR Ratings for Growth, Value, Momentum, and Sentiment for WTS.
Core Molding Technologies, Inc. (CMT)
CMT and its subsidiaries operate as molders of thermoplastic and thermoset structural products. The company offers a range of manufacturing processes.
CMT’s total net sales rose 25.4% year-over-year to $101.61 million for the third quarter that ended September 30, 2022. Its net income came in at $1.32 million, compared to a loss of $3.31 million in the previous-year quarter. Moreover, its EPS came in at $0.16, compared to a loss per share of $0.41 in the same quarter the previous year.
Analysts expect CMT’s EPS for the to-be-reported fiscal year 2022 to be $1.03, indicating an 87.3% year-over-year growth. Its revenue is expected to be $368.53 million for the same year.
The stock has gained 85% over the past year and 17.1% over the past month, closing the last trading session at $16.06.
It is no surprise that CMT has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth and Sentiment and a B for Value and Quality. CMT is ranked #2 in the same industry.
Beyond the POWR Ratings stated above, we have also rated CMT for Momentum and Stability. Get all CMT ratings here.
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GE shares were unchanged in premarket trading Friday. Year-to-date, GE has gained 65.50%, versus a 6.76% 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.