We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Top Industrial Manufacturing Stocks to Beat Demand Softness
Read MoreHide Full Article
Improving supply chains and easier availability of raw materials augur well for the Zacks Manufacturing – General Industrial industry. Investments in product development and technological advancements and, focus on expanding operations through strategic acquisitions are expected to foster growth of these companies. However, persistent weakness in the manufacturing sector and a low-demand environment are likely to weigh on the industry’s near-term prospects.
Nevertheless, improving supply chains are expected to aid Flowserve Corporation (FLS - Free Report) , Graham Corporation (GHM - 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. Industrial manufacturing companies also 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
Persistent Weakness in the Manufacturing Sector: Continued weakness in the manufacturing sector has been weighing on demand in the industry. Per the Institute for Supply Management (ISM) report, in October, the Manufacturing PMI (Purchasing Manager’s Index) touched 46.7%, contracting for the 12th consecutive month. A figure less than 50% indicates a contraction in manufacturing activity. The New Orders Index has remained in contraction territory for the past several quarters, registering 45.5% in August. The weakness in the manufacturing sector can be attributed to the slowdown in the economy. Given the weakness in the manufacturing sector, industrial demand is likely to remain suppressed.
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 13th straight month in October. Easing supply chain issues should support industrial manufacturing companies’ growth in 2023 and beyond.
Acquisition-Based Growth Strategy: The industry participants focus on an acquisition-based growth strategy to expand their 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 Bleak Prospects
The Zacks Manufacturing – General Industrial industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #134. This rank places it in the bottom 46% 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 dull 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.
Despite the industry’s bleak near-term prospects, we will present a few stocks, which you may consider for your portfolio. But before that, it’s worth taking a look at the industry’s stock market performance and current valuation.
Industry Outperforms Sector, Lags S&P
While the Zacks Manufacturing – General Industrial industry outperformed the broader sector over the past year, it lagged the Zacks S&P 500 composite index.
Over this period, the industry has appreciated 7.9% compared with the sector’s decrease of 2.6% and the S&P 500 Index’s increase of 14.1%.
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 18.43X compared with the S&P 500’s 19.09X. It is above the sector’s P/E ratio of 15.65X.
Over the past five years, the industry has traded as high as 26.96X, as low as 14.92X and at the median of 19.39X as the chart below shows.
Price-to-Earnings Ratio
Price-to-Earnings Ratio
3 Manufacturing-General Industrial Stocks Leading the Pack
Flowserve: Headquartered in Irving, TX, Flowserve is a leading manufacturer and aftermarket service provider of comprehensive flow control systems globally. The company is thriving on the back of strong maintenance, repair and operations and aftermarket activity. It logged bookings of more than $1 billion for seven consecutive quarters. The uptrend in bookings is expected to continue through 2024, thus driving FLS’ growth. Solid operational execution, pricing actions, improving supply chains and cost-control actions are expected to drive the company’s margin performance.
The Zacks Consensus Estimate for Flowserve’s 2023 and 2024 earnings has been revised upward by 3% and 5.4% in the past 60 days. Shares of the company have appreciated 20.1% in a year.
Price and Consensus: FLS
Graham: Headquartered in Batavia, NY, Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. Strength in the defense market and recovery in the commercial aftermarket are driving the company’s growth. The recent acquisition of P3 Technologies, LLC bolsters GHM’s growth. The buyout has expanded GHM’s custom turbomachinery solutions, engineering and development team and advanced manufacturing capabilities.
The Zacks Consensus Estimate for Graham’s fiscal 2024 earnings has been revised upward by more than 100% in the past 60 days. Shares of the company have surged 73.6% in a year.
Price and Consensus: GHM
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. Improvement in manufacturing throughput, strong project activity from energy and infrastructure markets and strength from mining activity in South America augur well for the company. MNTX’s multi-year business transformation strategy, Elevating Excellence, designed to drive commercial expansion and sustained productivity improvements, positions the company well for sustained growth in the future.
The Zacks Consensus Estimate for Manitex’s 2023 and 2024 earnings has been revised upward by 63.6% and 30% in the past 60 days, respectively. Shares of the company have rallied 40% in a year.
Price and Consensus: MNTX
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Top Industrial Manufacturing Stocks to Beat Demand Softness
Improving supply chains and easier availability of raw materials augur well for the Zacks Manufacturing – General Industrial industry. Investments in product development and technological advancements and, focus on expanding operations through strategic acquisitions are expected to foster growth of these companies. However, persistent weakness in the manufacturing sector and a low-demand environment are likely to weigh on the industry’s near-term prospects.
Nevertheless, improving supply chains are expected to aid Flowserve Corporation (FLS - Free Report) , Graham Corporation (GHM - 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. Industrial manufacturing companies also 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
Persistent Weakness in the Manufacturing Sector: Continued weakness in the manufacturing sector has been weighing on demand in the industry. Per the Institute for Supply Management (ISM) report, in October, the Manufacturing PMI (Purchasing Manager’s Index) touched 46.7%, contracting for the 12th consecutive month. A figure less than 50% indicates a contraction in manufacturing activity. The New Orders Index has remained in contraction territory for the past several quarters, registering 45.5% in August. The weakness in the manufacturing sector can be attributed to the slowdown in the economy. Given the weakness in the manufacturing sector, industrial demand is likely to remain suppressed.
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 13th straight month in October. Easing supply chain issues should support industrial manufacturing companies’ growth in 2023 and beyond.
Acquisition-Based Growth Strategy: The industry participants focus on an acquisition-based growth strategy to expand their 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 Bleak Prospects
The Zacks Manufacturing – General Industrial industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #134. This rank places it in the bottom 46% 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 dull 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.
Despite the industry’s bleak near-term prospects, we will present a few stocks, which you may consider for your portfolio. But before that, it’s worth taking a look at the industry’s stock market performance and current valuation.
Industry Outperforms Sector, Lags S&P
While the Zacks Manufacturing – General Industrial industry outperformed the broader sector over the past year, it lagged the Zacks S&P 500 composite index.
Over this period, the industry has appreciated 7.9% compared with the sector’s decrease of 2.6% and the S&P 500 Index’s increase of 14.1%.
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 18.43X compared with the S&P 500’s 19.09X. It is above the sector’s P/E ratio of 15.65X.
Over the past five years, the industry has traded as high as 26.96X, as low as 14.92X and at the median of 19.39X as the chart below shows.
Price-to-Earnings Ratio
Price-to-Earnings Ratio
3 Manufacturing-General Industrial Stocks Leading the Pack
Each of the stocks mentioned below sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowserve: Headquartered in Irving, TX, Flowserve is a leading manufacturer and aftermarket service provider of comprehensive flow control systems globally. The company is thriving on the back of strong maintenance, repair and operations and aftermarket activity. It logged bookings of more than $1 billion for seven consecutive quarters. The uptrend in bookings is expected to continue through 2024, thus driving FLS’ growth. Solid operational execution, pricing actions, improving supply chains and cost-control actions are expected to drive the company’s margin performance.
The Zacks Consensus Estimate for Flowserve’s 2023 and 2024 earnings has been revised upward by 3% and 5.4% in the past 60 days. Shares of the company have appreciated 20.1% in a year.
Price and Consensus: FLS
Graham: Headquartered in Batavia, NY, Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. Strength in the defense market and recovery in the commercial aftermarket are driving the company’s growth. The recent acquisition of P3 Technologies, LLC bolsters GHM’s growth. The buyout has expanded GHM’s custom turbomachinery solutions, engineering and development team and advanced manufacturing capabilities.
The Zacks Consensus Estimate for Graham’s fiscal 2024 earnings has been revised upward by more than 100% in the past 60 days. Shares of the company have surged 73.6% in a year.
Price and Consensus: GHM
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. Improvement in manufacturing throughput, strong project activity from energy and infrastructure markets and strength from mining activity in South America augur well for the company. MNTX’s multi-year business transformation strategy, Elevating Excellence, designed to drive commercial expansion and sustained productivity improvements, positions the company well for sustained growth in the future.
The Zacks Consensus Estimate for Manitex’s 2023 and 2024 earnings has been revised upward by 63.6% and 30% in the past 60 days, respectively. Shares of the company have rallied 40% in a year.
Price and Consensus: MNTX