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5 Industrial Stocks Near 52-Week Highs That Can Scale Higher
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Last year, the world faced an unprecedented crisis in the form of COVID-19 pandemic, which impacted every aspect of life. The crisis dealt a massive blow to the manufacturing sector that was already reeling under the protracted U.S.-China trade tensions and weak global demand. The pandemic led to supply chain disruptions, and affected availability of employees and workers. The industrial companies had to temporarily suspend manufacturing activity, primarily due to low demand or to comply with government mandates to curb the virus spread. Meanwhile, the industry players resorted to extensive cost cutting and lean manufacturing actions, and strengthening their balance sheets.
The scenario improved mid-year as economies started reopening and businesses resumed operations. Per the Institute for Supply Management, the U.S Manufacturing Purchasing Managers’ Index (PMI) remained above 50 since June, which indicates expansion in the manufacturing sector. In fact, the PMI registered an impressive 60.7% in December 2020 — the highest in two and half years. Both the new order and production indices have been growing for seven consecutive months.
Notwithstanding the contraction in the March-May period, the PMI averaged 52.5% in 2020. In a year’s time, the industrial products sector rallied 23.3%, outperforming the S&P 500’s growth of 17.6%.
2021 Looks Promising
Vaccine rollouts have been instilling optimism regarding an economic recovery. Given that manufacturing sector accounts for 11% of the U.S. economy, it is a positive development for the sector. Per our latest Earnings Trends report, the Industrial Products sector is expected to deliver a 22.3% growth in earnings in 2021 — a major turnaround from the COVID-19 induced anticipated drop of 21.4% in earnings in 2020.
We put our Sectors (all 16 of them) into two groups: the top half (i.e., sectors with the best average Zacks Rank) and the bottom half (the sectors with the worst average Zacks Rank). Over the last 10 years, using a one week rebalance, the top half beat the bottom half by more than twice as much. (To learn more visit: About Zacks Sector Rank)
The industrial products sector, with a Zacks Sector Rank #3, remains in the top half.
Thus, we suggest you to stay invested in the sector to reap the benefits of robust prospects ahead. To zero in on stocks that are winning currently and have the potential to gain further, we suggest betting on stocks near a 52-week high. The 52-week investment strategy relies on the new investment mantra, “buy high and sell higher.”
Investing in stocks near their 52-week high is similar to following the momentum strategy, which is based on the premise that once a trend is established, it is likely to continue. The surge is driven by a broad set of factors including impressive sales, robust profitability and bullish earnings prospects. Major developments may also send stocks soaring.
However, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting 52-week highs are not necessarily overpriced.
Stocks That Fit the Bill
Given their positive earnings revisions and great value metrics, we believe these five industrial stocks, all of which are near their 52-week highs, will continue moving north for now. The stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Momentum Style Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
We have chosen stocks that are relatively undervalued compared to their peers, in terms of earnings, ensuring continuation of their rally for some time.
ParkerHannifin Corporation (PH - Free Report) : The Cleveland, OH-based company manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide.
Strength in end markets including life science, semiconductor, military original equipment manufacturers, aerospace military maintenance, repair and overhaul, rail and power generation end markets are likely to supplement Parker-Hannifin's top-line performance in the days ahead. Moreover, its unique Win Strategy and several cost-control measures are likely to continue acting as tailwinds.
The company has a Zacks Rank #2 and a Momentum Style Score of B. The company has an expected long-term earnings growth of 11.8%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings suggests year-over-year growth of 12.9%. The estimate has been revised upward by 3% over the past 60 days. It has a trailing four-quarter earnings surprise of 36.9%, on average. The stock gained 38.3% in a year’s time and closed at $287.76 on Jan 12, near its 52-week high of $290.21.
Fortune Brands Home & Security, Inc. : Headquartered in Deerfield, IL, the company provides home and security products for residential home repair, remodeling, new construction, and security applications.
The company is poised to benefit from solid product portfolio and strength in its operating segments in the quarters ahead. Also, solid momentum across the company’s Fiberon business and investments in product innovation are likely to favor performance. Its focus on cost control, improving operational efficiency and supply-chain optimization are also expected to contribute to margins.
The company has a Zacks Rank #2 and a Momentum Style Score of B. It has an expected long-term earnings growth of 9.6%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings indicates year-over-year growth of 16.6%. The estimate has moved north by 3% over the past 60 days. It has a trailing four-quarter earnings surprise of 23%, on average. The stock gained 31.3% in a year’s time and closed at $89.43 on Jan 12, near its 52-week high of $92.59.
Reliance Steel & Aluminum Co. (RS - Free Report) : Domiciled in Los Angeles, CA, the company is a leading metals service center company engaged in value-added materials management and metals processing services.
The company is likely to benefit from acquisitions, broad and diversified product base and wide geographic footprint. Its core business strategy is to enhance operating results by strategic acquisitions. The buyout of All Metals has strengthened the company’s toll processing and logistics services businesses. Reliance Steel is also witnessing a strong recovery in the automotive market and a rebound in non-residential construction.
The company has a Zacks Rank #2 and a Momentum Style Score of A. The company has an expected long-term earnings growth of 9%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings has been revised upward by 16.8% over the past 60 days. The figure indicates year-over-year growth of 10%. It has a trailing four-quarter earnings surprise of 80.4%, on average. The stock appreciated 12% in a year’s time and closed at $135.21 on Jan 12, near its 52-week high of $135.33.
Rexnord Corporation : Headquartered in Milwaukee, WI, Rexnord designs, manufactures, and markets process and motion control, and water management products worldwide.
The company is likely to gain from business diversification, supply-chain optimization and footprint-repositioning programs (“SCOFR”), surge in e-commerce business, and operational execution in the days ahead. Its diversified business structure, investing in acquisitions, innovation and productivity will also drive growth.
The company has a Zacks Rank #2 and a Momentum Style Score of B. The company has an expected long-term earnings growth of 8.3%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings indicates year-over-year improvement of 16.5%. The estimate has moved north by 1.4% over the past 60 days. It has a trailing four-quarter earnings surprise of 10.6%, on average. The stock gained 12% in a year’s time and closed at $46.78 on Jan 12, near its 52-week high of $49.08.
Colfax Corporation : Headquartered in Annapolis Junction, MD, Colfax is a leading manufacturing and engineering company specializing in products and services related to medical technology and fabrication technology.
The company’s focus on strengthening segmental businesses and productivity actions, and investment in innovation is likely to act as a tailwind in the days ahead. Also, its buyouts activities, which include extremity product lines from Stryker Corporation in November, might aid the performance as well. Over the long run, growth in infrastructural investments, exposure in emerging markets and industrial production are likely to contribute to its Fabrication Technology segment, which accounts for around 61% of its revenues.
The company has a Zacks Rank #2 and a Momentum Style Score of B. The company has an expected long-term earnings growth of 7.3%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings suggests year-over-year growth of 48.1%. The estimate has gone up 1% over the past 60 days. It has a trailing four-quarter earnings surprise of 16%, on average. The stock gained 7% in a year’s time and closed at $40.55 on Jan 12, near its 52-week high of $41.03.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
5 Industrial Stocks Near 52-Week Highs That Can Scale Higher
Last year, the world faced an unprecedented crisis in the form of COVID-19 pandemic, which impacted every aspect of life. The crisis dealt a massive blow to the manufacturing sector that was already reeling under the protracted U.S.-China trade tensions and weak global demand. The pandemic led to supply chain disruptions, and affected availability of employees and workers. The industrial companies had to temporarily suspend manufacturing activity, primarily due to low demand or to comply with government mandates to curb the virus spread. Meanwhile, the industry players resorted to extensive cost cutting and lean manufacturing actions, and strengthening their balance sheets.
The scenario improved mid-year as economies started reopening and businesses resumed operations. Per the Institute for Supply Management, the U.S Manufacturing Purchasing Managers’ Index (PMI) remained above 50 since June, which indicates expansion in the manufacturing sector. In fact, the PMI registered an impressive 60.7% in December 2020 — the highest in two and half years. Both the new order and production indices have been growing for seven consecutive months.
Notwithstanding the contraction in the March-May period, the PMI averaged 52.5% in 2020. In a year’s time, the industrial products sector rallied 23.3%, outperforming the S&P 500’s growth of 17.6%.
2021 Looks Promising
Vaccine rollouts have been instilling optimism regarding an economic recovery. Given that manufacturing sector accounts for 11% of the U.S. economy, it is a positive development for the sector. Per our latest Earnings Trends report, the Industrial Products sector is expected to deliver a 22.3% growth in earnings in 2021 — a major turnaround from the COVID-19 induced anticipated drop of 21.4% in earnings in 2020.
We put our Sectors (all 16 of them) into two groups: the top half (i.e., sectors with the best average Zacks Rank) and the bottom half (the sectors with the worst average Zacks Rank). Over the last 10 years, using a one week rebalance, the top half beat the bottom half by more than twice as much. (To learn more visit: About Zacks Sector Rank)
The industrial products sector, with a Zacks Sector Rank #3, remains in the top half.
Thus, we suggest you to stay invested in the sector to reap the benefits of robust prospects ahead. To zero in on stocks that are winning currently and have the potential to gain further, we suggest betting on stocks near a 52-week high. The 52-week investment strategy relies on the new investment mantra, “buy high and sell higher.”
Investing in stocks near their 52-week high is similar to following the momentum strategy, which is based on the premise that once a trend is established, it is likely to continue. The surge is driven by a broad set of factors including impressive sales, robust profitability and bullish earnings prospects. Major developments may also send stocks soaring.
However, given the high price, investors often wonder if the stock is overpriced. While the speculations are not absolutely baseless, all stocks hitting 52-week highs are not necessarily overpriced.
Stocks That Fit the Bill
Given their positive earnings revisions and great value metrics, we believe these five industrial stocks, all of which are near their 52-week highs, will continue moving north for now. The stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Momentum Style Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
We have chosen stocks that are relatively undervalued compared to their peers, in terms of earnings, ensuring continuation of their rally for some time.
ParkerHannifin Corporation (PH - Free Report) : The Cleveland, OH-based company manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide.
Strength in end markets including life science, semiconductor, military original equipment manufacturers, aerospace military maintenance, repair and overhaul, rail and power generation end markets are likely to supplement Parker-Hannifin's top-line performance in the days ahead. Moreover, its unique Win Strategy and several cost-control measures are likely to continue acting as tailwinds.
The company has a Zacks Rank #2 and a Momentum Style Score of B. The company has an expected long-term earnings growth of 11.8%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings suggests year-over-year growth of 12.9%. The estimate has been revised upward by 3% over the past 60 days. It has a trailing four-quarter earnings surprise of 36.9%, on average. The stock gained 38.3% in a year’s time and closed at $287.76 on Jan 12, near its 52-week high of $290.21.
Fortune Brands Home & Security, Inc. : Headquartered in Deerfield, IL, the company provides home and security products for residential home repair, remodeling, new construction, and security applications.
The company is poised to benefit from solid product portfolio and strength in its operating segments in the quarters ahead. Also, solid momentum across the company’s Fiberon business and investments in product innovation are likely to favor performance. Its focus on cost control, improving operational efficiency and supply-chain optimization are also expected to contribute to margins.
The company has a Zacks Rank #2 and a Momentum Style Score of B. It has an expected long-term earnings growth of 9.6%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings indicates year-over-year growth of 16.6%. The estimate has moved north by 3% over the past 60 days. It has a trailing four-quarter earnings surprise of 23%, on average. The stock gained 31.3% in a year’s time and closed at $89.43 on Jan 12, near its 52-week high of $92.59.
Reliance Steel & Aluminum Co. (RS - Free Report) : Domiciled in Los Angeles, CA, the company is a leading metals service center company engaged in value-added materials management and metals processing services.
The company is likely to benefit from acquisitions, broad and diversified product base and wide geographic footprint. Its core business strategy is to enhance operating results by strategic acquisitions. The buyout of All Metals has strengthened the company’s toll processing and logistics services businesses. Reliance Steel is also witnessing a strong recovery in the automotive market and a rebound in non-residential construction.
The company has a Zacks Rank #2 and a Momentum Style Score of A. The company has an expected long-term earnings growth of 9%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings has been revised upward by 16.8% over the past 60 days. The figure indicates year-over-year growth of 10%. It has a trailing four-quarter earnings surprise of 80.4%, on average. The stock appreciated 12% in a year’s time and closed at $135.21 on Jan 12, near its 52-week high of $135.33.
Rexnord Corporation : Headquartered in Milwaukee, WI, Rexnord designs, manufactures, and markets process and motion control, and water management products worldwide.
The company is likely to gain from business diversification, supply-chain optimization and footprint-repositioning programs (“SCOFR”), surge in e-commerce business, and operational execution in the days ahead. Its diversified business structure, investing in acquisitions, innovation and productivity will also drive growth.
The company has a Zacks Rank #2 and a Momentum Style Score of B. The company has an expected long-term earnings growth of 8.3%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings indicates year-over-year improvement of 16.5%. The estimate has moved north by 1.4% over the past 60 days. It has a trailing four-quarter earnings surprise of 10.6%, on average. The stock gained 12% in a year’s time and closed at $46.78 on Jan 12, near its 52-week high of $49.08.
Colfax Corporation : Headquartered in Annapolis Junction, MD, Colfax is a leading manufacturing and engineering company specializing in products and services related to medical technology and fabrication technology.
The company’s focus on strengthening segmental businesses and productivity actions, and investment in innovation is likely to act as a tailwind in the days ahead. Also, its buyouts activities, which include extremity product lines from Stryker Corporation in November, might aid the performance as well. Over the long run, growth in infrastructural investments, exposure in emerging markets and industrial production are likely to contribute to its Fabrication Technology segment, which accounts for around 61% of its revenues.
The company has a Zacks Rank #2 and a Momentum Style Score of B. The company has an expected long-term earnings growth of 7.3%. The Zacks Consensus Estimate for the company’s fiscal 2021 earnings suggests year-over-year growth of 48.1%. The estimate has gone up 1% over the past 60 days. It has a trailing four-quarter earnings surprise of 16%, on average. The stock gained 7% in a year’s time and closed at $40.55 on Jan 12, near its 52-week high of $41.03.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>