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4 Stocks to Outshine in the Prospering Security Services Industry
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Players in the Zacks Security and Safety Services industry are benefiting from the surge in demand for cyber-security products as well as those ensuring infrastructure safety at offices, factories and residential complexes. Demand growth from online platforms is also aiding the industry players.
However, the new strains of COVID-19, impacting businesses in Europe and the United States, are expected to be concerning. Johnson Controls International plc (JCI - Free Report) , NortonLifeLock Inc. , MSA Safety Incorporated (MSA - Free Report) and NAPCO Security Technologies, Inc. (NSSC - Free Report) are likely outperformers from the industry.
About the Industry
The Zacks Security and Safety Services industry comprises companies that provide sophisticated and interactive security solutions and related services. Such products and services are mainly used for residential, commercial and institutional purposes. Meanwhile, a few industry players develop electrical weapons for personal defense as well as military, federal, law enforcement and private security.
There are also companies, which provide solutions for the recovery of stolen vehicles, wireless communication devices, equipment for the safety of facility infrastructure and employees, a variety of services to automobile owners and insurance companies, and products for detecting hazards. A number of these companies serve the manufacturing, electronics, construction, telecommunications, aerospace, medical and other end markets.
What’s Shaping the Future of the Security and Safety Services Industry?
Favorable Trends: With hacking activities rising across the globe, the demand for cyber-security products and services like firewalls and unified threat management is surging. Also, a favorable trend toward ensuring the safety and security of infrastructure at offices, factories and residential buildings is aiding many industry players. In addition to these, people preferring to buy products through e-commerce platforms, especially amid the pandemic, are advantageous.
Pandemic Concerns: The coronavirus outbreak has had deep impacts on the activities of the industry players (for some it was positive and for others it was adverse). Even though the severity of the impacts of the pandemic has lessened from the first few months of 2020, the second wave is concerning. Johnson Controls expects the threat from the new Covid-19 strains to impact its businesses in many countries of Europe and the United States. Prolongation of the virus outbreak may hurt renovation projects and construction activities related to commercial buildings. Furthermore, the industry players are expected to be hurt by the headwinds related to international business, high costs and expenses, and disturbed foreign trade relations.
Huge Debts: A constant update of products and services in the industry to keep up with evolving customer needs makes steady investments necessary. In addition to these, companies often make acquisitions to broaden their product portfolios and geographical footprints. Such massive investments often leave companies with a highly leveraged balance sheet. Notably, Johnson Controls had long-term debt of $7.5 billion as of the end of December 2020.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Security and Safety Services industry is a 22-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #65, which places it in the top 26% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates healthy near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of promising earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s earnings estimates for the current year and the next have moved up 8.8% and 26.6% from the estimate mentioned at the end of June 2020.
Before we discuss a few stocks from the industry, let’s have a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms Sector, Outperforms S&P 500
The Zacks Security and Safety Services industry has underperformed its sector and outperformed the S&P 500 in the past year. The industry gained 85.6% compared with the sector’s growth of 135.1% and the S&P 500’s rally of 67%.
One-Year Price Performance
Security and Safety Services Industry’s Valuation
P/E ratio is commonly used for valuing security and safety services stocks.
The industry’s forward 12-month P/E ratio is 22.01. This clearly shows that the industry is trading below the S&P 500’s forward 12-month P/E ratio of 22.58 and the sector’s 28.18.
Over the past five years, the industry has traded at the highest level of 22.01X forward 12-month P/E and the lowest level of 11.09X. The median level over the same period was 16.84X.
Security and Safety Services Industry’s Valuation Versus Sector
Security and Safety Services Industry’s Valuation Versus S&P 500
4 Security and Safety Services Stocks With Solid Prospects
Below we have discussed four stocks from the industry, each carrying a Zacks Rank #2 (Buy) at present, which can be on investors’ lists.
Johnson Controls: The diversified technology company engages in providing efficient energy solutions, building systems and integrated infrastructure. Focus on product launches, existing solid offerings, the OpenBlue digital platform and acquisitions are likely to benefit the company. However, weak construction demand in China and North America is expected to be concerning.
Shares of this Cork, Ireland-based company have rallied 132.1% in the past year. It reported better-than-anticipated results in the last four quarters, with an earnings surprise of 14.04%, on average. Also, the company’s earnings estimates have moved 2.8% north for fiscal 2021 (ending September 2021) and 4.7% for fiscal 2022 (ending September 2022) in the past 60 days.
Price and Consensus: JCI
NortonLifeLock: The company provides cybersecurity solutions. Popular brands include Norton System Works, Norton Anti-Virus and Norton Internet Security. Software and application products like intrusion detection, virus protection and others are also provided by the company. The rise in hacking events across the globe had increased the demand for cybersecurity-related products. In addition to the favorable demand environment, the company’s acquisitive nature is anticipated to be beneficial. However, intense competition is expected to be concerning.
This Tempe, AZ-based company’s shares appreciated 27.2% in the past year. Its earnings performances have been impressive in the past four quarters, the average being 24.06%. In the past 60 days, the company’s earnings estimates have moved up 2.2% for fiscal 2021 (ending March 2021) and 3.9% for fiscal 2022 (ending March 2022).
Price and Consensus: NLOK
MSA Safety: The company engages in providing security products for use in industrial manufacturing, oil & gas, construction, fire service, military, petrochemical, mining, and other markets. Its products secure facility infrastructure and people. Solid product offerings, healthy backlog and balance sheet, and operational execution are likely to be tailwinds for the company.
Shares of this Cranberry Township, PA-based company grew 51.3% in the past year. It reported better-than-anticipated results in three of the preceding four quarters and missed estimates once. The earnings surprise for the trailing four quarters was 8.86%, on average. In the past 60 days, the company’s earnings estimates have moved 2.9% north for 2021 and increased 4.3% for 2022.
Price and Consensus: MSA
NAPCO Security: The company manufactures and supplies electronic security devices with advanced technologies. It also provides fire alarm systems and wireless communication services. A healthy source of recurring revenues, a solid balance sheet and product offerings are advantageous for the company.
This Amityville, NY-based company’s stock gained 91.7% in the past year. It delivered better-than-expected results in the last reported quarter, with earnings surpassing estimates by 30.77%. In the past 60 days, the company’s earnings estimates have moved 1.4% north for fiscal 2021 (ending June 2021) and 1.7% for fiscal 2022 (ending June 2022).
Price and Consensus: NSSC
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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4 Stocks to Outshine in the Prospering Security Services Industry
Players in the Zacks Security and Safety Services industry are benefiting from the surge in demand for cyber-security products as well as those ensuring infrastructure safety at offices, factories and residential complexes. Demand growth from online platforms is also aiding the industry players.
However, the new strains of COVID-19, impacting businesses in Europe and the United States, are expected to be concerning. Johnson Controls International plc (JCI - Free Report) , NortonLifeLock Inc. , MSA Safety Incorporated (MSA - Free Report) and NAPCO Security Technologies, Inc. (NSSC - Free Report) are likely outperformers from the industry.
About the Industry
The Zacks Security and Safety Services industry comprises companies that provide sophisticated and interactive security solutions and related services. Such products and services are mainly used for residential, commercial and institutional purposes. Meanwhile, a few industry players develop electrical weapons for personal defense as well as military, federal, law enforcement and private security.
There are also companies, which provide solutions for the recovery of stolen vehicles, wireless communication devices, equipment for the safety of facility infrastructure and employees, a variety of services to automobile owners and insurance companies, and products for detecting hazards. A number of these companies serve the manufacturing, electronics, construction, telecommunications, aerospace, medical and other end markets.
What’s Shaping the Future of the Security and Safety Services Industry?
Favorable Trends: With hacking activities rising across the globe, the demand for cyber-security products and services like firewalls and unified threat management is surging. Also, a favorable trend toward ensuring the safety and security of infrastructure at offices, factories and residential buildings is aiding many industry players. In addition to these, people preferring to buy products through e-commerce platforms, especially amid the pandemic, are advantageous.
Pandemic Concerns: The coronavirus outbreak has had deep impacts on the activities of the industry players (for some it was positive and for others it was adverse). Even though the severity of the impacts of the pandemic has lessened from the first few months of 2020, the second wave is concerning. Johnson Controls expects the threat from the new Covid-19 strains to impact its businesses in many countries of Europe and the United States. Prolongation of the virus outbreak may hurt renovation projects and construction activities related to commercial buildings. Furthermore, the industry players are expected to be hurt by the headwinds related to international business, high costs and expenses, and disturbed foreign trade relations.
Huge Debts: A constant update of products and services in the industry to keep up with evolving customer needs makes steady investments necessary. In addition to these, companies often make acquisitions to broaden their product portfolios and geographical footprints. Such massive investments often leave companies with a highly leveraged balance sheet. Notably, Johnson Controls had long-term debt of $7.5 billion as of the end of December 2020.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Security and Safety Services industry is a 22-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #65, which places it in the top 26% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates healthy near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of promising earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s earnings estimates for the current year and the next have moved up 8.8% and 26.6% from the estimate mentioned at the end of June 2020.
Before we discuss a few stocks from the industry, let’s have a look at the industry’s shareholder returns and current valuation first.
Industry Underperforms Sector, Outperforms S&P 500
The Zacks Security and Safety Services industry has underperformed its sector and outperformed the S&P 500 in the past year. The industry gained 85.6% compared with the sector’s growth of 135.1% and the S&P 500’s rally of 67%.
One-Year Price Performance
Security and Safety Services Industry’s Valuation
P/E ratio is commonly used for valuing security and safety services stocks.
The industry’s forward 12-month P/E ratio is 22.01. This clearly shows that the industry is trading below the S&P 500’s forward 12-month P/E ratio of 22.58 and the sector’s 28.18.
Over the past five years, the industry has traded at the highest level of 22.01X forward 12-month P/E and the lowest level of 11.09X. The median level over the same period was 16.84X.
Security and Safety Services Industry’s Valuation Versus Sector
Security and Safety Services Industry’s Valuation Versus S&P 500
4 Security and Safety Services Stocks With Solid Prospects
Below we have discussed four stocks from the industry, each carrying a Zacks Rank #2 (Buy) at present, which can be on investors’ lists.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Johnson Controls: The diversified technology company engages in providing efficient energy solutions, building systems and integrated infrastructure. Focus on product launches, existing solid offerings, the OpenBlue digital platform and acquisitions are likely to benefit the company. However, weak construction demand in China and North America is expected to be concerning.
Shares of this Cork, Ireland-based company have rallied 132.1% in the past year. It reported better-than-anticipated results in the last four quarters, with an earnings surprise of 14.04%, on average. Also, the company’s earnings estimates have moved 2.8% north for fiscal 2021 (ending September 2021) and 4.7% for fiscal 2022 (ending September 2022) in the past 60 days.
Price and Consensus: JCI
NortonLifeLock: The company provides cybersecurity solutions. Popular brands include Norton System Works, Norton Anti-Virus and Norton Internet Security. Software and application products like intrusion detection, virus protection and others are also provided by the company. The rise in hacking events across the globe had increased the demand for cybersecurity-related products. In addition to the favorable demand environment, the company’s acquisitive nature is anticipated to be beneficial. However, intense competition is expected to be concerning.
This Tempe, AZ-based company’s shares appreciated 27.2% in the past year. Its earnings performances have been impressive in the past four quarters, the average being 24.06%. In the past 60 days, the company’s earnings estimates have moved up 2.2% for fiscal 2021 (ending March 2021) and 3.9% for fiscal 2022 (ending March 2022).
Price and Consensus: NLOK
MSA Safety: The company engages in providing security products for use in industrial manufacturing, oil & gas, construction, fire service, military, petrochemical, mining, and other markets. Its products secure facility infrastructure and people. Solid product offerings, healthy backlog and balance sheet, and operational execution are likely to be tailwinds for the company.
Shares of this Cranberry Township, PA-based company grew 51.3% in the past year. It reported better-than-anticipated results in three of the preceding four quarters and missed estimates once. The earnings surprise for the trailing four quarters was 8.86%, on average. In the past 60 days, the company’s earnings estimates have moved 2.9% north for 2021 and increased 4.3% for 2022.
Price and Consensus: MSA
NAPCO Security: The company manufactures and supplies electronic security devices with advanced technologies. It also provides fire alarm systems and wireless communication services. A healthy source of recurring revenues, a solid balance sheet and product offerings are advantageous for the company.
This Amityville, NY-based company’s stock gained 91.7% in the past year. It delivered better-than-expected results in the last reported quarter, with earnings surpassing estimates by 30.77%. In the past 60 days, the company’s earnings estimates have moved 1.4% north for fiscal 2021 (ending June 2021) and 1.7% for fiscal 2022 (ending June 2022).
Price and Consensus: NSSC
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 best buy-and-hold tickers for the entirety of 2021?
Last year's 2020 Zacks Top 10 Stocks portfolio returned gains as high as +386.8%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2021 today >>