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2 Office Equipment Stocks to Buy in a Prospering Industry
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The Zacks Office Automation and Equipment Industry participants like Canon and Seiko Epson (SEKEY - Free Report) are gaining from growing demand for coronavirus-led medical equipment systems and a low-mid class of printers, thanks to the ongoing spike in demand for work-from-home and online learning. Strong capital spending on lithography equipment for memory devices and sensors has been benefiting industry participants. The rapid adoption of Internet of Things and 5G technologies has driven sales of CMOS sensors and communication devices, which bodes well for these companies.
Nevertheless, the industry is facing supply-chain disruption due to the coronavirus pandemic. Further, coronavirus-led remote working is hurting demand for office products. Macro-economic slowdown, increasing forex risk in emerging markets and heightened price competition are hurting industry participants.
Industry Description
The Zacks Office Automation and Equipment Industry comprises companies that provide products and services related to e-commerce, shipping, digital delivery, printing, digital cameras, healthcare and industrial businesses. The industry participants are located primarily in Japan and the United States. The industry has been witnessing rapid evolution with the advancement in Internet and printing technology. Change in customer preference from monochrome to color products and from hardware to services and solution has been noteworthy. Companies like Canon are launching new full-frame mirrorless products amid declining demand for SLR cameras. Industry participants cater to a broad market from Small Office Home Office (SOHO) and Small and Midsize Business (SMB) to large enterprises. The work and learn-from-home trend has been beneficial to industry participants.
3 Trends Shaping the Future of the Office Automation and Equipment Industry
Supply-Chain Constraints Hurting Growth: Companies in the industry are suffering production and supply-chain constraints. Additionally, increased product offerings from local manufacturers along with their low-cost alternatives are forcing industry participants to slash prices. This is eating into the industry participants’ bottom line.
Sluggish Demand for Office Equipment Mars Prospects: Soft demand for copiers and office equipment due to increasing adoption of smartphones and portable devices has been detrimental to the industry’s growth. Heavy investments in technology to innovate and customize products specific to client requirements is dragging down margins. Additionally, with product life cycles being short, investments in research and development are increasing.
Remote Working Lowering Demand: The increasing adoption of bring-your-own-device (BYOD) in offices is boosting demand for automated software solutions, thereby lowering the need for office equipment and printers. Moreover, accelerating digital exchange of information, particularly aided by the coronavirus outbreak, has lowered print volume. Markedly, the coronavirus-induced work-from-home wave has boosted demand for video communication and remote working solutions. This is expected to mar industry participants’ prospects.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Office Automation and Equipment industry is housed within the broader Zacks Computer And Technology sector. It carries a Zacks Industry Rank #72, which places it in the top 28% 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 positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Dec 31, 2020, the industry’s earnings estimates for the current year have moved 109.3% north.
But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector, Lags S&P 500
The Zacks Office Automation and Equipment industry has underperformed the Zacks S&P 500 composite but outperformed its own sector in the past year.
The industry has returned 26.8% over this period against the Zacks Computer and Technology sector’s increase of 24.7% and the S&P 500’s rally of 27.1%.
One Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Office Automation and Equipment stocks, the industry is currently trading at 11.44X compared with the S&P 500’s 21.77X and the sector’s 29.01X.
Over the past five years, the industry has traded as high as 24.13X and as low as 10.55X, recording a median of 16.62X, as the chart below shows.
Further, strong demand for medical equipment is anticipated to boost Canon’s Medical System division’s top-line growth.
Canon, in its business policy briefing, announced its five-year plans that include initiatives to expand market share in the printing business. Canon plans to tap demand for distributed printing and enhance product competitiveness. The company also intends to create a new optical business.
Tokyo, Japan-based Canon has returned 29.7% in the past year. The Zacks Consensus Estimate for its current-year earnings has been steady at $1.76 per share over the past 30 days.
Price and Consensus: CAJ
Seiko Epson: Suwa, Japan-based Seiko has a Zacks Rank #2. The company is riding on strong demand for high-capacity ink tank printers, ink cartridge printers, projectors and robots.
The stock has returned 18.4% in the past year. The Zacks Consensus Estimate for the company’s current-year earnings has remained stable at 74 cents per share over the past 30 days.
Price and Consensus: SEKEY
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2 Office Equipment Stocks to Buy in a Prospering Industry
The Zacks Office Automation and Equipment Industry participants like Canon and Seiko Epson (SEKEY - Free Report) are gaining from growing demand for coronavirus-led medical equipment systems and a low-mid class of printers, thanks to the ongoing spike in demand for work-from-home and online learning. Strong capital spending on lithography equipment for memory devices and sensors has been benefiting industry participants. The rapid adoption of Internet of Things and 5G technologies has driven sales of CMOS sensors and communication devices, which bodes well for these companies.
Nevertheless, the industry is facing supply-chain disruption due to the coronavirus pandemic. Further, coronavirus-led remote working is hurting demand for office products. Macro-economic slowdown, increasing forex risk in emerging markets and heightened price competition are hurting industry participants.
Industry Description
The Zacks Office Automation and Equipment Industry comprises companies that provide products and services related to e-commerce, shipping, digital delivery, printing, digital cameras, healthcare and industrial businesses. The industry participants are located primarily in Japan and the United States. The industry has been witnessing rapid evolution with the advancement in Internet and printing technology. Change in customer preference from monochrome to color products and from hardware to services and solution has been noteworthy. Companies like Canon are launching new full-frame mirrorless products amid declining demand for SLR cameras. Industry participants cater to a broad market from Small Office Home Office (SOHO) and Small and Midsize Business (SMB) to large enterprises. The work and learn-from-home trend has been beneficial to industry participants.
3 Trends Shaping the Future of the Office Automation and Equipment Industry
Supply-Chain Constraints Hurting Growth: Companies in the industry are suffering production and supply-chain constraints. Additionally, increased product offerings from local manufacturers along with their low-cost alternatives are forcing industry participants to slash prices. This is eating into the industry participants’ bottom line.
Sluggish Demand for Office Equipment Mars Prospects: Soft demand for copiers and office equipment due to increasing adoption of smartphones and portable devices has been detrimental to the industry’s growth. Heavy investments in technology to innovate and customize products specific to client requirements is dragging down margins. Additionally, with product life cycles being short, investments in research and development are increasing.
Remote Working Lowering Demand: The increasing adoption of bring-your-own-device (BYOD) in offices is boosting demand for automated software solutions, thereby lowering the need for office equipment and printers. Moreover, accelerating digital exchange of information, particularly aided by the coronavirus outbreak, has lowered print volume. Markedly, the coronavirus-induced work-from-home wave has boosted demand for video communication and remote working solutions. This is expected to mar industry participants’ prospects.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Office Automation and Equipment industry is housed within the broader Zacks Computer And Technology sector. It carries a Zacks Industry Rank #72, which places it in the top 28% 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 positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Dec 31, 2020, the industry’s earnings estimates for the current year have moved 109.3% north.
But before we present the top industry picks, it is worth taking a look at the industry’s shareholder returns and current valuation first.
Industry Outperforms Sector, Lags S&P 500
The Zacks Office Automation and Equipment industry has underperformed the Zacks S&P 500 composite but outperformed its own sector in the past year.
The industry has returned 26.8% over this period against the Zacks Computer and Technology sector’s increase of 24.7% and the S&P 500’s rally of 27.1%.
One Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing Office Automation and Equipment stocks, the industry is currently trading at 11.44X compared with the S&P 500’s 21.77X and the sector’s 29.01X.
Over the past five years, the industry has traded as high as 24.13X and as low as 10.55X, recording a median of 16.62X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
2 Stocks to Buy Right Now
Canon: This Zacks Rank #2 (Buy) is benefiting from strong demand for inkjet printers, particularly in the Asia-Pacific market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Further, strong demand for medical equipment is anticipated to boost Canon’s Medical System division’s top-line growth.
Canon, in its business policy briefing, announced its five-year plans that include initiatives to expand market share in the printing business. Canon plans to tap demand for distributed printing and enhance product competitiveness. The company also intends to create a new optical business.
Tokyo, Japan-based Canon has returned 29.7% in the past year. The Zacks Consensus Estimate for its current-year earnings has been steady at $1.76 per share over the past 30 days.
Price and Consensus: CAJ
Seiko Epson: Suwa, Japan-based Seiko has a Zacks Rank #2. The company is riding on strong demand for high-capacity ink tank printers, ink cartridge printers, projectors and robots.
The stock has returned 18.4% in the past year. The Zacks Consensus Estimate for the company’s current-year earnings has remained stable at 74 cents per share over the past 30 days.
Price and Consensus: SEKEY
