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Zacks Industry Outlook Highlights: Canon, Seiko Epson and Pitney Bowes
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For Immediate Release
Chicago, IL – August 18, 2021 – Today, Zacks Equity Research discusses Office Equipment, including Canon Inc. , Seiko Epson Corporation (SEKEY - Free Report) and Pitney Bowes Inc. (PBI - Free Report) .
The Zacks Office Automation and Equipment Industry participants like Canon, Seiko Epson and Pitney Bowes are gaining from growing demand for coronavirus-led medical equipment systems and 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. 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. Changes in customer preference from monochrome to color products and from hardware to services and solutions have 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.
The coronavirus-induced work-from-home wave has boosted demand for video communication and remote working solutions provided by the likes of Zoom, Microsoft and others. 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 #33, which places it in the top 13% 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 Aug 31, 2020, the industry’s earnings estimates for the current year have moved 90% 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 S&P 500, Lags Sector
The Zacks Office Automation and Equipment industry has outperformed the Zacks S&P 500 composite but lagged its own sector in the past year.
The industry has returned 38.2% over this period against the Zacks Computer and Technology sector’s increase of 39.9% and the S&P 500’s rally of 33.4%.
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 14.03X compared with the S&P 500’s 21.68X and the sector’s 27.73X.
Over the past five years, the industry has traded as high as 24.13X and as low as 12.32X, recording a median of 16.68X.
Further, strong demand for medical equipment is anticipated to boost Medical System’s top-line growth.
The company, in its business policy briefing, announced its five-year plans that include initiatives to expand market share in 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 34.9% in the past year. The Zacks Consensus Estimate for its current-year earnings has moved 19.6% up to $1.71 per share over the past 30 days.
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 60.4% in the past year. The Zacks Consensus Estimate for the company’s current-year earnings has remained stable at 55 cents per share over the past 30 days.
Pitney Bowes: This Zacks Rank #3 is gaining from growth in Global Ecommerce segment revenues amid coronavirus crisis-led e-commerce boom. The company has been undergoing a steady transformation process over the past three years, designed to create long-term flexibility for investment toward growth. Pitney Bowes aims to stabilize its SMB business, enhance operational excellence and leverage digital commerce business to maximize growth over the long term.
This Stamford, CT-based stock has gained 30.9% in the past year. The consensus mark for its current-year earnings has stayed flat at 35 cents per share over the past 30 days.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Canon, Seiko Epson and Pitney Bowes
For Immediate Release
Chicago, IL – August 18, 2021 – Today, Zacks Equity Research discusses Office Equipment, including Canon Inc. , Seiko Epson Corporation (SEKEY - Free Report) and Pitney Bowes Inc. (PBI - Free Report) .
Link: https://www.zacks.com/commentary/1782776/3-office-equipment-stocks-to-watch-in-a-prospering-industry
The Zacks Office Automation and Equipment Industry participants like Canon, Seiko Epson and Pitney Bowes are gaining from growing demand for coronavirus-led medical equipment systems and 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. 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. Changes in customer preference from monochrome to color products and from hardware to services and solutions have 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.
The coronavirus-induced work-from-home wave has boosted demand for video communication and remote working solutions provided by the likes of Zoom, Microsoft and others. 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 #33, which places it in the top 13% 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 Aug 31, 2020, the industry’s earnings estimates for the current year have moved 90% 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 S&P 500, Lags Sector
The Zacks Office Automation and Equipment industry has outperformed the Zacks S&P 500 composite but lagged its own sector in the past year.
The industry has returned 38.2% over this period against the Zacks Computer and Technology sector’s increase of 39.9% and the S&P 500’s rally of 33.4%.
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 14.03X compared with the S&P 500’s 21.68X and the sector’s 27.73X.
Over the past five years, the industry has traded as high as 24.13X and as low as 12.32X, recording a median of 16.68X.
3 Stocks to Watch
Canon: This Zacks Rank #1 (Strong 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 stocks here.
Further, strong demand for medical equipment is anticipated to boost Medical System’s top-line growth.
The company, in its business policy briefing, announced its five-year plans that include initiatives to expand market share in 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 34.9% in the past year. The Zacks Consensus Estimate for its current-year earnings has moved 19.6% up to $1.71 per share over the past 30 days.
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 60.4% in the past year. The Zacks Consensus Estimate for the company’s current-year earnings has remained stable at 55 cents per share over the past 30 days.
Pitney Bowes: This Zacks Rank #3 is gaining from growth in Global Ecommerce segment revenues amid coronavirus crisis-led e-commerce boom. The company has been undergoing a steady transformation process over the past three years, designed to create long-term flexibility for investment toward growth. Pitney Bowes aims to stabilize its SMB business, enhance operational excellence and leverage digital commerce business to maximize growth over the long term.
This Stamford, CT-based stock has gained 30.9% in the past year. The consensus mark for its current-year earnings has stayed flat at 35 cents per share over the past 30 days.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.