Instruments – Control industry is expected to benefit from the increasing demand for energy-efficient production processes, safety and security concerns and software systems. In the United States, process manufacturing is supported by the replacement of obsolete industrial control systems with state-of-the-art technologies. Disruptions in the supply chain due to the pandemic have hurt the process automation and instrumentation market. Nevertheless, Watts Water Technologies ( WTS Quick Quote WTS - Free Report) , Allied Motion Technologies ( AMOT Quick Quote AMOT - Free Report) and Transcat ( TRNS Quick Quote TRNS - Free Report) are well positioned to benefit from the growing importance of energy efficiency and cost reduction, digitized technologies, adoption of industrial automation and the optimum utilization of resources. Industry Description
The Zacks Instruments – Control industry comprises manufacturers of precision and specialty motion control components and systems that are used in a wide range of industries. These companies deliver sophisticated flow measurement, control and communication solutions for air, water and other forms of gas and liquid used for commercial and residential purposes. The companies offer an array of products for fuel, combustion, fluid, actuation, electronic applications, energy control and optimization, particularly for the process industry. Some industry players offer heating, ventilation and air conditioning products. These include water heaters and electric heating systems for under-floor radiant applications for boiler manufacturers and alternative energy control packages. Few firms provide water re-use products, consisting of drainage and rainwater harvesting solutions.
What's Shaping the Future of Instruments - Control Industry
Increasing focus on adopting automation across all industry verticals and spending more on new technologies is expected to drive growth over the next few years. North America is expected to continue dominating the market in terms of adopting automation. Rising infrastructural investments in the energy and power sector, increasing demand for food and beverages, along with favorable government policies, are aiding the growth. The process automation and instrumentation market for the pharmaceutical industry is also growing due to low-cost factors and a changing regulatory environment. Focus on high-quality equipment indicates increasing buyer maturity and willingness to partner with process control industry players. Process Automation to Drive Growth: The industry’s growth is largely driven by emphasis on digitized technologies such as the Industrial Internet of Things. The demand for process automation and instrumentation products is dependent on manufacturing activities. Moreover, demand for safety automation systems and multivariable pressure transmitters is likely to provide significant growth opportunities. The use of process instrumentation equipment offers a host of benefits, including improvement in the quality of the product and emission reduction. So, the increase in adoption of technology across various industries, as well as growing regulation and compliance will continue to be major growth drivers. Growing Demand for Digitized Technologies: Field instruments play a significant role in process control by measuring the key elements such as temperature, pressure, flow and level in process industries such as chemicals, mining and pharmaceuticals. These consist of transmitters that primarily measure pressure, flow, temperature, level and humidity of liquid and gases, which are essential for achieving optimum productivity. Importantly, such instruments are used in environmental, social and governance practices to reduce consumption of natural resources, adopting an eco-friendly portfolio of products and solutions. A differentiated product offering gives greater opportunities for companies to strengthen their market position. Field Instruments to Lead the Pack: Zacks Industry Rank Indicates Bright Prospects
The Zacks Instruments – Control industry is housed within the broader Zacks
Computer and Technology sector. It currently has a Zacks Industry Rank #85, which places it in the top 34% of more than 250 Zacks industries. The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Interestingly, our research shows that the top 50% of the Zacks-ranked industries outperform 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 an outcome of a positive earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts have gained confidence in this group’s earnings growth potential. The industry’s earnings estimates for the current year and the next have increased 21.1% and 4.4%, respectively, over the past year. Before we present a few instruments control stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and valuation picture. Industry Outperforms Sector, S&P 500
The Zacks Instruments – Control industry has outperformed both the broader Zacks Computer and Technology sector and the S&P 500 composite in the past year.
The industry has gained 55% compared with the S&P 500’s rise of 34.5%. The broader sector has risen 43.5%. One-Year Price Performance
Industry's Current Valuation
The Enterprise Value-to-EBITDA (EV/EBITDA) ratio is commonly used for valuing instruments control stocks. The industry has a trailing 12-month EV/EBITDA of 15.65X compared with the S&P 500’s 17.34X. It is also below the sector’s trailing 12-month EV/EBITDA of 16.19X.
Over the past five years, the industry has traded as high as 17.07X, as low as 6.54X with a median of 11.27X, as the chart below shows. Enterprise Value-to-EBITDA Ratio (Past Five Years)
3 Instruments Control Stocks to Watch
Watts Water Technologies: Headquartered in North Andover, MA, Watts Water provides one of the broadest plumbing, heating and water quality product lines in the world. The company is focused on enhancing organic growth, driving margin expansion and reinvesting in productivity initiatives. It continues to benefit from aggressive cost reduction actions, along with a strong balance sheet. The Zacks Consensus Estimate for its current-year earnings has been revised 4.3% upward over the past 30 days. The stock has gained 67.6% in the past year. It currently carries a Zacks Rank #2 (Buy). Price and Consensus: WTS Allied Motion Technologies: Headquartered in Amherst, NY, Allied Motion manufactures precision and specialty controlled motion products and solutions for the global market. The company is known for its expertise in electro-magnetic, mechanical and electronic motion technology. Its major served markets include Vehicle, Medical, Aerospace and Defense, and Industrial. The consensus estimate for its current-year earnings has been revised 3.8% upward over the past 30 days. The stock has returned 49.8% in the past year. It carries a Zacks Rank #2. Price and Consensus: AMOT Transcat: Headquartered in Rochester, NY, Transcat is a leading provider of accredited calibration, repair, inspection and laboratory instrument services. It operates in two segments — Service and Distribution. The company is focused on providing best-in-class services and products to highly regulated industries, particularly the Life Science industry. It also operates as a leading value-added distributor that markets, sells and rents new and used national and proprietary brand instruments to customers primarily in North America. Transcat is leveraging the complementary nature of its two operating segments, service capabilities and distribution platform to drive organic sales growth. The consensus estimate for its current-year earnings has been revised 13.5% upward over the past 30 days. The stock has soared 114.1% in the past year. It sports a Zacks Rank #1 (Strong Buy). Price and Consensus: TRNS
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