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4 Stocks to Gain as Industrial Automation is in Full Swing

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Industrial robots were first installed in 1961 in a General Motors factory and the automotive space has been a pioneer in using this technology for decades now.  The type of automation seen in the early years was specifically used in assembly lines. However, technological advancement has made science fiction, a reality. With developments in the fields of robotics, artificial intelligence (AI), and machine vision and learning, industrial automation across the factory floor is growing in leaps and bounds. In fact, as cost of these technologies decline and 5G rollout picks up, industrial automation will continue to grow. 

Robotics Process Automation Sees Quantum Leap

The first wave of automation in the manufacturing sector saw dramatic growth during 1980 and 2010, with mechanical muscles replacing labor work. The next generation is more about AI and what it does to make operations smoother. Hence, along with mechanical muscles turning slicker, more affordable, smaller, and capable of doing most repetitive work, we now have mechanical minds and smart bots that can carry out tasks that weren’t pre-programmed.

Robotics process automation (RPA) helps automate certain work processes and reduce time spent on costly manual tasks and increase efficiency to deliver mission-critical work. RPA uses software that automates manual tasks and thus, routine tasks across multiple applications can be performed without close supervision and it automatically sends reports to the administrator.

Additionally, the pandemic has accelerated the adoption of automation across various industries. In fact, a report by the Association for Advancing Automation (A3) states that companies in America purchased 9,098 units of industrial robots valued at $466 million in just the first quarter of 2021. It marks a 20% jump from the same period last year and a 28% year-over-year jump in robotics purchase in non-automotive companies. A3’s president, Jeff Burnstein, states that “worker shortages in manufacturing, warehousing, and other industries are a significant factor in the current expansion of robot.”  Hence, while ease of use and new applications remain key drivers in robot adoption across the factory floors, the virus scare certainly accelerated the trend several folds.

4 Top Choices

According to Fortune Business Insights, the global industrial automation market size, which was valued at $168.81 billion in 2019, is estimated to see a CAGR of 8.9% to reach $326.14 billion by 2027. The industrial automation market will be boosted by the advent of 5G technology along with development in augmented reality and industrial IoT. Robots are not only essential for gaining competitive advantage but are also a solution to labor shortage. 

Given such positives, we have shortlisted four stocks that engage in industrial automation and carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MKS Instruments, Inc. (MKSI - Free Report) provides instruments, systems, subsystems, and process control solutions that measure, monitor, deliver, analyze, power, and control critical parameters of manufacturing processes. This Zacks Rank #1 company's expected earnings growth rate for the current year is 51% compared with the Zacks Electronics - Manufacturing Machinery industry’s projected earnings growth of 41.2%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 27.5% upward over the past 60 days.

Teradyne, Inc. (TER - Free Report) designs, develops, manufactures, sells, and supports automatic test equipment. This Zacks Rank # 2 company that belongs to the Zacks Electronics - Testing Equipment industry has a projected earnings growth of 16.5% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 10% upward over the past 60 days.

Brooks Automation, Inc. (BRKS - Free Report) provides manufacturing automation solutions for the semiconductor industry. This Zacks Rank #2 company's expected earnings growth rate for the current year is 71% compared with the Zacks Electronics - Manufacturing Machinery industry’s projected earnings growth of 41.2%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 24% upward over the past 60 days.

AMETEK, Inc. (AME - Free Report) manufactures and sells electronic instruments and electromechanical devices. This Zacks Rank #2 company that belongs to the Zacks Electronics - Testing Equipment industry has a projected earnings growth of 15.4% for the current year. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 5.6% upward over the past 60 days.

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