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4 Top Manufacturing Electronics Stocks to Leverage Solid Market Demand
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The Zacks Manufacturing - Electronics industry has been benefiting from higher economic activities, product innovation and growth in e-commerce business. With the reopening of global economies and subsidence in new coronavirus cases, the industry is expected to continue progressing on strong domestic orders from customers along with higher export demand for products. Eaton Corporation plc (ETN - Free Report) , Emerson Electric Co. (EMR - Free Report) , A. O. Smith Corporation (AOS - Free Report) and Regal Beloit Corporation (RBC - Free Report) are some of the industry participants that are expected to capitalize on the prevalent opportunities. Also, growing adoption of the advanced manufacturing technologies and processes bodes well.
About the Industry
The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery charges, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls and motive power devices. Some of the industry players also provide water-treatment products, engineered flow components, process equipment and turn-key systems. In addition, the firms offer state-of-the-art customer support and after-market services to the end-users. Notably, these companies are increasing investments in developing innovative technologies, boosting customer and employee experience as well as supply-chain modernization programs. The manufacturing electronic companies sell products and services in various types of end-markets including robotics, semiconductor, defense, aerospace, medical equipment and satellite communications.
Trends Shaping the Future of the Manufacturing Electronics Industry
Healthy Domestic Orders & Export Demand: The industry has been benefiting from the resumption of global economic activities. The industry participants have been maintaining the production level with all safety protocols following solid growth witnessed in domestic orders and export demand for electronic products. This is supported by the industry players’ efforts to address supply chain constraints and improvement of distribution network across the industry. Per the Institute for Supply Management’s (ISM) latest report published on Jul 1, the U.S. manufacturing activity expanded for the 13th straight month in June. The ISM’s manufacturing index was 60.6% last month. Notably, the PMI reading above 50 underlines the expansion of manufacturing activities. In addition, new orders registered 66%, mirroring the 13th consecutive month of increase. Further, new export orders rose to 56.2% from 55.4% in the previous month. This highlights the consistent recovery in the sector’s economic activities as more companies are scaling up production with bulk orders. Moreover, a surge in the e-commerce business boosted prospects of several industry participants.
Strength in the Electronics Services Market: The electronics manufacturers are steadily benefiting from a higher uptake of the latest manufacturing technologies and processes from original equipment manufacturers. This, in turn, drove the requirement for integrating advanced electronic components into electronic devices, which is constantly supporting the electronics manufacturing services market as well. In addition, industry players like Emerson Electric with wide exposure to the booming medical and life science markets, are witnessing a positive momentum across their businesses owing to sturdy demand for their products and solutions.
Technological Advancement Benefits: With the gradual development of business models and cutting-edge technologies, several industry players have been banking on digitizing their business operations for a while now. With the digitization, businesses are gaining a detailed insight into their operational performance, demand cycles, delivery status and supply-chain issues. This, in turn, is enabling them to bolster their competitiveness in the market with enhanced operational productivity, product quality and lower costs.
Persistent Woes: Despite the aforementioned tailwinds, some industry participants remain wary of the impact of the coronavirus-related issues on their businesses. Also, the supply-chain disruptions are weighing on the profitability of some industry participants. Further, shortage of skilled workers in the United States is a perennial concern for the industry participants.
Zacks Industry Rank Indicates Rosy Prospects
The Manufacturing – Electronics industry belongs to a 17-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #122, which places it in the top 48% 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 bright 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 positioning in the top 50% of the Zacks-ranked industries is a result of improved earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. The industry’s earnings estimates for 2021 have increased 13.3% over the past year.
Before we present a few promising Manufacturing – Electronics stocks, it is worth taking a look at the industry’s performance and its valuation picture.
Industry Outperforms Sector & the S&P 500
The Zacks Manufacturing – Electronics industry has outperformed its sector as well as the S&P 500 in the past year. The stocks in the industry have collectively gained 55.7% compared with the Zacks Industrial Products sector’s growth of 50.6% and the S&P 500’s rally of 40.1%.
One-Year Price Performance
Manufacturing - Electronics Industry's Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing the manufacturing stocks.
The industry’s forward 12-month P/E ratio is 25.53. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 22.1 and the sector’s 21.25.
Over the past five years, the industry has traded at the highest level of 26.5X forward 12-month earnings and the lowest level of 13.62X. The median level has been 18.73X over the same period.
Manufacturing – Electronics Industry’s Valuation Versus Sector
Manufacturing – Electronics Industry’s Valuation Versus S&P 500
4 Manufacturing - Electronics Stocks Leading the Pack
Eaton: This Dublin, Ireland-based company is a diversified power management entity and a global technology leader in electrical components and systems. The company is well poised to benefit from solid product offerings, research and development programs, acquisitions as well as a strong cash flow position.
Shares of this company have returned 73.2% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 16.78%. In the past 60 days, the company’s earnings estimates have improved 9.8% for 2021 and 4.9% for 2022.
Price and Consensus: ETN
Emerson Electric: Headquartered in St. Louis, MO, the company offers a wide range of products and services to customers in the consumer, commercial and industrial markets. It stands to benefit from strength across its medical, life science, food and beverage, and the residential end markets. The company’s robust backlog level is also likely to aid its top-line performance in the quarters ahead. Moreover, it is likely to benefit from acquisitions it has made over time. Notably, Emerson expects buyouts to have a positive impact of 1% on its sales growth in fiscal 2021 (ending September 2021).
Shares of this company have soared 60.2% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 19.20%. Also, the company’s earnings estimates have improved 4.8% for fiscal 2021 and 4.3% for fiscal 2022 (ending September 2022) in the past 60 days.
Price and Consensus: EMR
A. O. Smith: The company is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. It is poised to gain from robust demand for boilers, service parts and water treatment products in the United States, backed by its strong retail and direct-to-consumer sales channel. Also, buoyant demand in China along with the company’s focus on investments in product developments, automation and production efficiency will likely be beneficial in the quarters ahead.
Shares of this Milwaukee, WI-based company have gained 48.2% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 14.84%. Also, the company’s earnings estimates have been revised 1.1% upward for 2021 and 2% for 2022 in the past 60 days.
Price and Consensus: AOS
Regal Beloit: The company is engaged in manufacturing electrical and mechanical motion control products. It is poised to benefit from improvements in the industrial markets as well as the strengthening heating, ventilation and air conditioning markets. Notably, betterment of order trends across its businesses bodes well for the near term. Further, it has a policy of rewarding its shareholders handsomely.
The stock of this Beloit, WI-based company has jumped 55.5% in the past year. It reported better-than-expected results in each of the trailing four quarters, the average being 29.23%. In the past 60 days, the company’s earnings estimates have moved 7% north for 2021 and 2.3% for 2022.
Price and Consensus: RBC
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Image: Bigstock
4 Top Manufacturing Electronics Stocks to Leverage Solid Market Demand
The Zacks Manufacturing - Electronics industry has been benefiting from higher economic activities, product innovation and growth in e-commerce business. With the reopening of global economies and subsidence in new coronavirus cases, the industry is expected to continue progressing on strong domestic orders from customers along with higher export demand for products. Eaton Corporation plc (ETN - Free Report) , Emerson Electric Co. (EMR - Free Report) , A. O. Smith Corporation (AOS - Free Report) and Regal Beloit Corporation (RBC - Free Report) are some of the industry participants that are expected to capitalize on the prevalent opportunities. Also, growing adoption of the advanced manufacturing technologies and processes bodes well.
About the Industry
The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery charges, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls and motive power devices. Some of the industry players also provide water-treatment products, engineered flow components, process equipment and turn-key systems. In addition, the firms offer state-of-the-art customer support and after-market services to the end-users. Notably, these companies are increasing investments in developing innovative technologies, boosting customer and employee experience as well as supply-chain modernization programs. The manufacturing electronic companies sell products and services in various types of end-markets including robotics, semiconductor, defense, aerospace, medical equipment and satellite communications.
Trends Shaping the Future of the Manufacturing Electronics Industry
Healthy Domestic Orders & Export Demand: The industry has been benefiting from the resumption of global economic activities. The industry participants have been maintaining the production level with all safety protocols following solid growth witnessed in domestic orders and export demand for electronic products. This is supported by the industry players’ efforts to address supply chain constraints and improvement of distribution network across the industry. Per the Institute for Supply Management’s (ISM) latest report published on Jul 1, the U.S. manufacturing activity expanded for the 13th straight month in June. The ISM’s manufacturing index was 60.6% last month. Notably, the PMI reading above 50 underlines the expansion of manufacturing activities. In addition, new orders registered 66%, mirroring the 13th consecutive month of increase. Further, new export orders rose to 56.2% from 55.4% in the previous month. This highlights the consistent recovery in the sector’s economic activities as more companies are scaling up production with bulk orders. Moreover, a surge in the e-commerce business boosted prospects of several industry participants.
Strength in the Electronics Services Market: The electronics manufacturers are steadily benefiting from a higher uptake of the latest manufacturing technologies and processes from original equipment manufacturers. This, in turn, drove the requirement for integrating advanced electronic components into electronic devices, which is constantly supporting the electronics manufacturing services market as well. In addition, industry players like Emerson Electric with wide exposure to the booming medical and life science markets, are witnessing a positive momentum across their businesses owing to sturdy demand for their products and solutions.
Technological Advancement Benefits: With the gradual development of business models and cutting-edge technologies, several industry players have been banking on digitizing their business operations for a while now. With the digitization, businesses are gaining a detailed insight into their operational performance, demand cycles, delivery status and supply-chain issues. This, in turn, is enabling them to bolster their competitiveness in the market with enhanced operational productivity, product quality and lower costs.
Persistent Woes: Despite the aforementioned tailwinds, some industry participants remain wary of the impact of the coronavirus-related issues on their businesses. Also, the supply-chain disruptions are weighing on the profitability of some industry participants. Further, shortage of skilled workers in the United States is a perennial concern for the industry participants.
Zacks Industry Rank Indicates Rosy Prospects
The Manufacturing – Electronics industry belongs to a 17-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #122, which places it in the top 48% 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 bright 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 positioning in the top 50% of the Zacks-ranked industries is a result of improved earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. The industry’s earnings estimates for 2021 have increased 13.3% over the past year.
Before we present a few promising Manufacturing – Electronics stocks, it is worth taking a look at the industry’s performance and its valuation picture.
Industry Outperforms Sector & the S&P 500
The Zacks Manufacturing – Electronics industry has outperformed its sector as well as the S&P 500 in the past year. The stocks in the industry have collectively gained 55.7% compared with the Zacks Industrial Products sector’s growth of 50.6% and the S&P 500’s rally of 40.1%.
One-Year Price Performance
Manufacturing - Electronics Industry's Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing the manufacturing stocks.
The industry’s forward 12-month P/E ratio is 25.53. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 22.1 and the sector’s 21.25.
Over the past five years, the industry has traded at the highest level of 26.5X forward 12-month earnings and the lowest level of 13.62X. The median level has been 18.73X over the same period.
Manufacturing – Electronics Industry’s Valuation Versus Sector
Manufacturing – Electronics Industry’s Valuation Versus S&P 500
4 Manufacturing - Electronics Stocks Leading the Pack
Below we discuss four stocks from the industry that have solid growth opportunities. The stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Eaton: This Dublin, Ireland-based company is a diversified power management entity and a global technology leader in electrical components and systems. The company is well poised to benefit from solid product offerings, research and development programs, acquisitions as well as a strong cash flow position.
Shares of this company have returned 73.2% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 16.78%. In the past 60 days, the company’s earnings estimates have improved 9.8% for 2021 and 4.9% for 2022.
Price and Consensus: ETN
Emerson Electric: Headquartered in St. Louis, MO, the company offers a wide range of products and services to customers in the consumer, commercial and industrial markets. It stands to benefit from strength across its medical, life science, food and beverage, and the residential end markets. The company’s robust backlog level is also likely to aid its top-line performance in the quarters ahead. Moreover, it is likely to benefit from acquisitions it has made over time. Notably, Emerson expects buyouts to have a positive impact of 1% on its sales growth in fiscal 2021 (ending September 2021).
Shares of this company have soared 60.2% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 19.20%. Also, the company’s earnings estimates have improved 4.8% for fiscal 2021 and 4.3% for fiscal 2022 (ending September 2022) in the past 60 days.
Price and Consensus: EMR
A. O. Smith: The company is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. It is poised to gain from robust demand for boilers, service parts and water treatment products in the United States, backed by its strong retail and direct-to-consumer sales channel. Also, buoyant demand in China along with the company’s focus on investments in product developments, automation and production efficiency will likely be beneficial in the quarters ahead.
Shares of this Milwaukee, WI-based company have gained 48.2% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 14.84%. Also, the company’s earnings estimates have been revised 1.1% upward for 2021 and 2% for 2022 in the past 60 days.
Price and Consensus: AOS
Regal Beloit: The company is engaged in manufacturing electrical and mechanical motion control products. It is poised to benefit from improvements in the industrial markets as well as the strengthening heating, ventilation and air conditioning markets. Notably, betterment of order trends across its businesses bodes well for the near term. Further, it has a policy of rewarding its shareholders handsomely.
The stock of this Beloit, WI-based company has jumped 55.5% in the past year. It reported better-than-expected results in each of the trailing four quarters, the average being 29.23%. In the past 60 days, the company’s earnings estimates have moved 7% north for 2021 and 2.3% for 2022.
Price and Consensus: RBC
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>