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2 Office Equipment Stocks to Watch 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. Macro-economic slowdown, high rate of Inflation 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
Hybrid Working to Aid Demand: Increasing preference for the hybrid working model is driving demand for printers at homes and offices. Hybrid working essentially means increased office attendance as compared with full-fledged remote working. Industry participants expect print volume to recover, driven by economic re-opening and higher office attendance.
Supply-Chain Constraints Hurting Growth: Companies in the industry are suffering production and supply-chain constraints. Inflation and concerns about an economic downturn are major headwinds for industry participants. 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.
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 #97, which places it in the top 38% 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 Apr 30, 2021, the industry’s earnings estimates for the current year have moved 77% 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 is down 4.3% over this period against the Zacks Computer and Technology sector’s increase of 15.7% and the S&P 500’s decline of 1.9%.
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 10.05X compared with the S&P 500’s 17.76X and the sector’s 21.26X.
Over the past five years, the industry has traded as high as 23.94X and as low as 15.33X, recording a median of 18.81X, as the chart below shows.
Canon’s focus on expanding its new businesses – medical-industrial equipment and commercial printing – is expected to drive growth in the long haul.
However, fragile economic recovery, the negative impact of the Russia-Ukraine conflict and higher inflation levels are significant risks for Canon.
Tokyo, Japan-based Canon has lost 3% in the past year. The Zacks Consensus Estimate for its current-year earnings has declined 3% to $2 per share over the past 30 days.
Price and Consensus: CAJ
Seiko Epson: Suwa, Japan-based Seiko also has a Zacks Rank #3. The company is riding on strong demand for high-capacity ink tank printers, ink cartridge printers, projectors and robots.
The stock has lost 14.6% in the past year. The Zacks Consensus Estimate for Seiko’s current-year earnings has remained stable at 71 cents per share over the past 30 days.
Price and Consensus: SEKEY
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2 Office Equipment Stocks to Watch 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. Macro-economic slowdown, high rate of Inflation 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
Hybrid Working to Aid Demand: Increasing preference for the hybrid working model is driving demand for printers at homes and offices. Hybrid working essentially means increased office attendance as compared with full-fledged remote working. Industry participants expect print volume to recover, driven by economic re-opening and higher office attendance.
Supply-Chain Constraints Hurting Growth: Companies in the industry are suffering production and supply-chain constraints. Inflation and concerns about an economic downturn are major headwinds for industry participants. 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.
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 #97, which places it in the top 38% 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 Apr 30, 2021, the industry’s earnings estimates for the current year have moved 77% 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 is down 4.3% over this period against the Zacks Computer and Technology sector’s increase of 15.7% and the S&P 500’s decline of 1.9%.
One Year Price Performance
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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 10.05X compared with the S&P 500’s 17.76X and the sector’s 21.26X.
Over the past five years, the industry has traded as high as 23.94X and as low as 15.33X, recording a median of 18.81X, as the chart below shows.
Forward 12-Month Price-to-Earnings (P/E) Ratio
2 Stocks to Watch Right Now
Canon: This Zacks Rank #3 (Hold) expects printing volume to increase in the remainder of 2022, thanks to economic recovery and higher office attendance. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Canon’s focus on expanding its new businesses – medical-industrial equipment and commercial printing – is expected to drive growth in the long haul.
However, fragile economic recovery, the negative impact of the Russia-Ukraine conflict and higher inflation levels are significant risks for Canon.
Tokyo, Japan-based Canon has lost 3% in the past year. The Zacks Consensus Estimate for its current-year earnings has declined 3% to $2 per share over the past 30 days.
Price and Consensus: CAJ
Seiko Epson: Suwa, Japan-based Seiko also has a Zacks Rank #3. The company is riding on strong demand for high-capacity ink tank printers, ink cartridge printers, projectors and robots.
The stock has lost 14.6% in the past year. The Zacks Consensus Estimate for Seiko’s current-year earnings has remained stable at 71 cents per share over the past 30 days.
Price and Consensus: SEKEY
