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4 Industrial Manufacturing Stocks to Gain From Improved Supply Chains
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The Zacks Manufacturing – General Industrial industry should benefit from an improvement in supply chains and easier availability of raw materials, despite a sluggish demand environment amid a slowdown in manufacturing activities. Focus on expanding network and product offerings through inorganic activities, and investments in product development and innovation bode well for industrial manufacturing companies. These factors make the industry’s near-term prospects appear rosy.
Gradual easing of supply chain issues and faster deliveries are expected to drive growth of Illinois Tool Works (ITW - Free Report) , Ingersoll Rand (IR - Free Report) , Helios Technologies (HLIO - Free Report) and Manitex International (MNTX - Free Report) .
About the Industry
The Zacks Manufacturing – General Industrial industry comprises companies engaged in the production of a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. In addition, industrial manufacturing companies reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing, and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation and utilities industries.
3 Trends Shaping the Future of the Manufacturing General Industrial Industry
Low Demand Environment: With the continued slowdown in manufacturing activities, industry participants are experiencing a low-demand environment. Per the latest Institute for Supply Management’s (ISM) report, manufacturing activities contracted for the fourth consecutive month in February. Last month’s Manufacturing PMI (Purchasing Manager’s Index) of 47.7% was 0.3 percentage point higher than the January figure. However, a figure less than 50% indicates a contraction in manufacturing activity. Although New Orders Index increased 4.5 percentage points from the January reading, it remained in contraction territory at 47%. Amid lingering fears of a recession and a slowdown in the economy, industrial demand is likely to remain weak in the near term.
Easing Supply Chain Disruptions: While supply chain disruptions persist, especially related to the availability of electronic components, the situation has improved as evident from the ISM report’s Supplier Deliveries Index, which reflected faster deliveries for the fifth straight month in February. Easing supply chain issues should support industrial manufacturing companies’ growth in 2023.
Acquisition-Based Growth Strategy: The industry participants focus on an acquisition-based growth strategy to expand network and product offerings. This helps them foray into new markets and solidify their competitive position. Exposure to various end-markets helps industrial manufacturing companies offset risks associated with a single market. Continuous investments in product development and innovation, automation and technological advancements augur well for the industry’s growth.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Manufacturing – General Industrial industry housed within the broader Zacks Industrial Products sector currently carries a Zacks Industry Rank #103. This rank places it in the top 41% 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 encouraging near-term prospects. 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 positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the group’s 2023 earnings per share has increased 1.1% since the end of November 2022.
Given the industry’s bright near-term prospects, we will present a few stocks, worth considering for your portfolio. But before that, it’s worth taking a look at the industry’s stock market performance and current valuation.
Industry Outperforms Both Sector & S&P
The Zacks Manufacturing – General Industrial industry has outperformed both the broader sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has increased 5.2% against the sector and the S&P 500 Index’s decline of 1.6% and 10.9%, respectively.
One-Year Price Performance
Industry's Current Valuation
On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 18.26X compared with the S&P 500’s 17.35X. It is also above the sector’s P/E ratio of 15.74X.
Over the past five years, the industry has traded as high as 26.76X, as low as 14.89X and at the median of 18.89X as the chart below shows.
Price-to-Earnings Ratio
Price-to-Earnings Ratio
4 Manufacturing-General Industrial Stocks Leading the Pack
Helios Technologies: Helios Technologies offers highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, marine and health and wellness. Product innovation is helping the company gain market share in the Hydraulics and Electronics industry, thus fortifying its competitive stance. The recent acquisition of Schultes Precision Manufacturing, which has added customers and capabilities across several new markets, should drive HLIO’s growth in 2023.
The Zacks Consensus Estimate for Helios Technologies’ 2023 earnings has been revised upward by 5.9% in the past 60 days. Shares of this Zacks Rank #1 (Strong Buy) company have rallied 28% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: HLIO
Manitex: Manitex provides mobile truck cranes, industrial lifting solutions, aerial work platforms, construction equipment and rental solutions for general construction, crane companies, and heavy industry. Focus on improving capacity utilization, supply chain optimization and fixed cost absorption should drive the company’s bottom line. Robust backlogs on strong customer demand in the North American and European markets augur well for MNTX’s growth. The company’s recently launched multi-year business transformation strategy, Elevating Excellence, designed to drive commercial expansion and sustained productivity improvements, provides a solid base for sustained growth in the future.
The Zacks Consensus Estimate for Manitex’s 2023 earnings has remained steady in the past 60 days. Shares of this Zacks Rank #1 company have gained 14% in the past six months.
Price and Consensus: MNTX
Illinois Tool: Headquartered in Glenview, IL, Illinois Tool Works is a worldwide manufacturer of highly engineered products and specialty systems. Growth across both North America and International operations, strength in the capital equipment and industrial businesses and continued momentum in the industrial applications and automotive aftermarket construction are key growth drivers for the company.
The Zacks Consensus Estimate for Illinois Tool’s 2023 earnings has been revised upward by 4.1% in the past 60 days. Shares of this Zacks Rank #2 (Buy) company have appreciated 18% in the past six months.
Price and Consensus: ITW
Ingersoll Rand: Headquartered in Davidson, NC, Ingersoll Rand is a global industrial company, with expertise in industrial and mission-critical flow creation technologies. The company is poised to benefit from its solid product portfolio, innovation capabilities and focus on boosting aftermarket businesses. Strength in the company’s food, life science, water and clean energy businesses is expected to drive performance.
The Zacks Consensus Estimate for Ingersoll Rand’s 2023 earnings has been revised upward by 1.7% in the past 60 days. Shares of this Zacks Rank #2 company have gained 11% in the past six months.
Price and Consensus: IR
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4 Industrial Manufacturing Stocks to Gain From Improved Supply Chains
The Zacks Manufacturing – General Industrial industry should benefit from an improvement in supply chains and easier availability of raw materials, despite a sluggish demand environment amid a slowdown in manufacturing activities. Focus on expanding network and product offerings through inorganic activities, and investments in product development and innovation bode well for industrial manufacturing companies. These factors make the industry’s near-term prospects appear rosy.
Gradual easing of supply chain issues and faster deliveries are expected to drive growth of Illinois Tool Works (ITW - Free Report) , Ingersoll Rand (IR - Free Report) , Helios Technologies (HLIO - Free Report) and Manitex International (MNTX - Free Report) .
About the Industry
The Zacks Manufacturing – General Industrial industry comprises companies engaged in the production of a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. In addition, industrial manufacturing companies reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing, and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation and utilities industries.
3 Trends Shaping the Future of the Manufacturing General Industrial Industry
Low Demand Environment: With the continued slowdown in manufacturing activities, industry participants are experiencing a low-demand environment. Per the latest Institute for Supply Management’s (ISM) report, manufacturing activities contracted for the fourth consecutive month in February. Last month’s Manufacturing PMI (Purchasing Manager’s Index) of 47.7% was 0.3 percentage point higher than the January figure. However, a figure less than 50% indicates a contraction in manufacturing activity. Although New Orders Index increased 4.5 percentage points from the January reading, it remained in contraction territory at 47%. Amid lingering fears of a recession and a slowdown in the economy, industrial demand is likely to remain weak in the near term.
Easing Supply Chain Disruptions: While supply chain disruptions persist, especially related to the availability of electronic components, the situation has improved as evident from the ISM report’s Supplier Deliveries Index, which reflected faster deliveries for the fifth straight month in February. Easing supply chain issues should support industrial manufacturing companies’ growth in 2023.
Acquisition-Based Growth Strategy: The industry participants focus on an acquisition-based growth strategy to expand network and product offerings. This helps them foray into new markets and solidify their competitive position. Exposure to various end-markets helps industrial manufacturing companies offset risks associated with a single market. Continuous investments in product development and innovation, automation and technological advancements augur well for the industry’s growth.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Manufacturing – General Industrial industry housed within the broader Zacks Industrial Products sector currently carries a Zacks Industry Rank #103. This rank places it in the top 41% 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 encouraging near-term prospects. 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 positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the group’s 2023 earnings per share has increased 1.1% since the end of November 2022.
Given the industry’s bright near-term prospects, we will present a few stocks, worth considering for your portfolio. But before that, it’s worth taking a look at the industry’s stock market performance and current valuation.
Industry Outperforms Both Sector & S&P
The Zacks Manufacturing – General Industrial industry has outperformed both the broader sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has increased 5.2% against the sector and the S&P 500 Index’s decline of 1.6% and 10.9%, respectively.
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 a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 18.26X compared with the S&P 500’s 17.35X. It is also above the sector’s P/E ratio of 15.74X.
Over the past five years, the industry has traded as high as 26.76X, as low as 14.89X and at the median of 18.89X as the chart below shows.
Price-to-Earnings Ratio
Price-to-Earnings Ratio
4 Manufacturing-General Industrial Stocks Leading the Pack
Helios Technologies: Helios Technologies offers highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, marine and health and wellness. Product innovation is helping the company gain market share in the Hydraulics and Electronics industry, thus fortifying its competitive stance. The recent acquisition of Schultes Precision Manufacturing, which has added customers and capabilities across several new markets, should drive HLIO’s growth in 2023.
The Zacks Consensus Estimate for Helios Technologies’ 2023 earnings has been revised upward by 5.9% in the past 60 days. Shares of this Zacks Rank #1 (Strong Buy) company have rallied 28% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: HLIO
Manitex: Manitex provides mobile truck cranes, industrial lifting solutions, aerial work platforms, construction equipment and rental solutions for general construction, crane companies, and heavy industry. Focus on improving capacity utilization, supply chain optimization and fixed cost absorption should drive the company’s bottom line. Robust backlogs on strong customer demand in the North American and European markets augur well for MNTX’s growth. The company’s recently launched multi-year business transformation strategy, Elevating Excellence, designed to drive commercial expansion and sustained productivity improvements, provides a solid base for sustained growth in the future.
The Zacks Consensus Estimate for Manitex’s 2023 earnings has remained steady in the past 60 days. Shares of this Zacks Rank #1 company have gained 14% in the past six months.
Price and Consensus: MNTX
Illinois Tool: Headquartered in Glenview, IL, Illinois Tool Works is a worldwide manufacturer of highly engineered products and specialty systems. Growth across both North America and International operations, strength in the capital equipment and industrial businesses and continued momentum in the industrial applications and automotive aftermarket construction are key growth drivers for the company.
The Zacks Consensus Estimate for Illinois Tool’s 2023 earnings has been revised upward by 4.1% in the past 60 days. Shares of this Zacks Rank #2 (Buy) company have appreciated 18% in the past six months.
Price and Consensus: ITW
Ingersoll Rand: Headquartered in Davidson, NC, Ingersoll Rand is a global industrial company, with expertise in industrial and mission-critical flow creation technologies. The company is poised to benefit from its solid product portfolio, innovation capabilities and focus on boosting aftermarket businesses. Strength in the company’s food, life science, water and clean energy businesses is expected to drive performance.
The Zacks Consensus Estimate for Ingersoll Rand’s 2023 earnings has been revised upward by 1.7% in the past 60 days. Shares of this Zacks Rank #2 company have gained 11% in the past six months.
Price and Consensus: IR