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Zacks Industry Outlook Highlights: Emerson Electric, A. O. Smith, Franklin Electric and AZZ
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For Immediate Release
Chicago, IL – November 15, 2021 – Today, Zacks Equity Research discusses Electronics, including Emerson Electric Company (EMR - Free Report) , A. O. Smith Corporation (AOS - Free Report) , Franklin Electric Co., Inc. (FELE - Free Report) and AZZ Inc. (AZZ - Free Report) .
The Zacks Manufacturing - Electronics industry seems to be gaining from the consistent rise in domestic demand and export orders for electronics products and growth in the e-commerce business. With the widespread rollout of COVID-19 vaccines, the industry is expected to continue benefiting from the improvement in economic activities and investments in product innovation.
Emerson Electric, A. O. Smith, Franklin Electric and AZZ are some of the industry participants that are expected to capitalize on the prevalent opportunities. Also, the growing adoption of advanced manufacturing technologies and processes bodes well.
About the Industry
The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery charges, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls, and motive power devices. Some of the industry players also provide water-treatment products, engineered flow components, process equipment, and turn-key systems.
In addition, the firms offer state-of-the-art customer support and after-market services to the end users. Notably, these companies are increasing investments for developing innovative technologies, boosting customer and employee experience as well as supply-chain modernization programs. The manufacturing electronic companies sell products and services in various types of end markets including robotics, semiconductor, defense, aerospace, medical equipment, and satellite communications.
What's Shaping the Future of Manufacturing Electronics Industry
Healthy Demand for Products: The industry has been benefiting from the consistent improvement in manufacturing activities, supported by impressive growth in domestic and international orders for electronic products. Per the Institute for Supply Management’s (ISM) latest report published on Nov 1, the U.S. manufacturing activity expanded for the 17th straight month in October. The ISM’s manufacturing index was 60.8% last month. The PMI reading above 50 underlines the expansion of manufacturing activities.
In October, new orders registered 59.8%, marking the 17th consecutive month of increase. Also, new export orders rose to 54.6% from 53.4% in the previous month. ISM’s measure of production in the month was 59.3%, marking growth for the 17th successive month. This highlights the trend of healthy economic activities in the sector as companies are resorted to maintaining the production level with higher orders. A surge in the e-commerce business has also boosted the prospects of the industry participants.
Solid Demand in the Electronics Services Market: Higher adoption of the latest manufacturing technologies and processes by original equipment manufacturers has been supporting the electronics manufacturing services market. The industry players have been benefiting from the increased requirement for integrating advanced electronic components into electronic devices. Also, a few industry players with wide exposure to the booming medical and life science markets are witnessing a positive momentum across their businesses owing to solid demand for their products and solutions.
Technological Advancement Benefits: The manufacturing electronic companies have been focusing on digitizing their business operations with the advent of cutting-edge technologies and business models. With digitization, several manufacturers have been gaining detailed insight into their operational performance, demand cycles, supply-chain issues, and delivery status. This has been enhancing their competitiveness with enhanced operational productivity, product quality, and better cost management.
Persistent Woes: The industry participants have been witnessing supply-chain disruptions, logistic issues, and inflation, which have been weighing on their margins and profitability. Also, frequent investment to upgrade products and services for staying competitive in the market often hurts the margins and profitability of industry players. The shortage of skilled workers in the United States is a persistent concern as well.
Zacks Industry Rank Indicates Solid Prospects
The Manufacturing – Electronics industry belongs to a 17-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #79, which places it in the top 31% 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 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 improved earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. The industry’s earnings estimates for 2021 have increased 15.7% over the past year.
Before we present a few promising Manufacturing – Electronics stocks, it is worth taking a look at the industry’s performance and its valuation picture.
Industry Outperforms Sector & the S&P 500
The Zacks Manufacturing – Electronics industry has outperformed its sector as well as the S&P 500 in the past year. The stocks in the industry have collectively gained 31.8% compared with the Zacks Industrial Products sector’s growth of 20.2% and the S&P 500’s rally of 30.9%.
Manufacturing - Electronics Industry's Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing manufacturing stocks.
The industry’s forward 12-month P/E ratio is 24.10. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 21.88 and the sector’s 20.37.
Over the past five years, the industry has traded at the highest level of 26.61X forward 12-month earnings and the lowest level of 13.62X. The median level has been 19.12X over the same period.
4 Manufacturing - Electronics Stocks Leading the Pack
Emerson: Headquartered in St. Louis, MO, the company offers a wide range of products and services to customers in the consumer, commercial, and industrial markets. It is poised to benefit from strength across its medical, life science, food and beverage, and residential end markets. Emerson’s robust backlog level is also likely to aid its top-line performance in the quarters ahead. Moreover, it is likely to benefit from acquisitions it has made over time. Buyouts had a positive contribution of 1% to its sales growth in fiscal 2021 (ended September 2021).
Shares of Emerson have soared 31.1% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 10.69%. Also, the Zacks Rank #2 company’s earnings estimates have improved 6.2% for fiscal 2022 (ending September 2022) and 7.7% for fiscal 2023 (ending September 2023) in the past 30 days.
A. O. Smith: The Milwaukee, WI-based company is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. A. O. Smith stands to benefit from robust demand for water heaters, boilers, and water treatment products, supported by its strong retail and direct-to-consumer sales channel and pricing actions. Also, growth in demand across China and India along with the company’s focus on investments in product developments and production efficiency will likely be beneficial in the quarters ahead.
Shares of A. O. Smith have gained 47.3% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 16.82%. The Zacks Rank #1 company’s earnings estimates have been revised 6.6% upward for 2021 and 9.6% for 2022 in the past 30 days.
Franklin Electric: Headquartered in Fort Wayne, IN, the company is engaged in manufacturing and distributing water and fuel pumping systems, consisting primarily of submersible motors, electronic controls, pumps, and related parts and equipment. Franklin Electric is well-positioned to benefit from its strong product offerings, solid end-market demand across all regions and product categories, as well as acquired assets.
Shares of Franklin Electric have jumped 45.8% in the past year. It reported better-than-expected results thrice in the trailing four quarters, the average being 16.27%. In the past 30 days, the Zacks Rank #2 company’s earnings estimates have moved 1% north for 2021 and 1.5% for 2022.
AZZ: The Fort Worth, TX-based company provides metal coatings services, specialty electrical equipment, welding solutions, and highly engineered services to the power generation, transmission and distribution, and industrial markets. AZZ stands to benefit from increasing demands for infrastructure improvements throughout the world, solid product offerings, and shareholder-friendly policies. Its acquisition of Acme Galvanizing Inc. (January 2021) is also expected to expand its hot-dip galvanizing capability in the upper midwest region of the United States.
AZZ’s shares have gained 49.7% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 25.47%. The Zacks Rank #2 company’s earnings estimates have been revised 2% upward for fiscal 2022 (ending February 2022) and 5.1% for fiscal 2023 (ending February 2023) in 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: Emerson Electric, A. O. Smith, Franklin Electric and AZZ
For Immediate Release
Chicago, IL – November 15, 2021 – Today, Zacks Equity Research discusses Electronics, including Emerson Electric Company (EMR - Free Report) , A. O. Smith Corporation (AOS - Free Report) , Franklin Electric Co., Inc. (FELE - Free Report) and AZZ Inc. (AZZ - Free Report) .
Link: https://www.zacks.com/commentary/1827286/4-top-stocks-from-the-promising-manufacturing-electronics-industry
The Zacks Manufacturing - Electronics industry seems to be gaining from the consistent rise in domestic demand and export orders for electronics products and growth in the e-commerce business. With the widespread rollout of COVID-19 vaccines, the industry is expected to continue benefiting from the improvement in economic activities and investments in product innovation.
Emerson Electric, A. O. Smith, Franklin Electric and AZZ are some of the industry participants that are expected to capitalize on the prevalent opportunities. Also, the growing adoption of advanced manufacturing technologies and processes bodes well.
About the Industry
The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery charges, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls, and motive power devices. Some of the industry players also provide water-treatment products, engineered flow components, process equipment, and turn-key systems.
In addition, the firms offer state-of-the-art customer support and after-market services to the end users. Notably, these companies are increasing investments for developing innovative technologies, boosting customer and employee experience as well as supply-chain modernization programs. The manufacturing electronic companies sell products and services in various types of end markets including robotics, semiconductor, defense, aerospace, medical equipment, and satellite communications.
What's Shaping the Future of Manufacturing Electronics Industry
Healthy Demand for Products: The industry has been benefiting from the consistent improvement in manufacturing activities, supported by impressive growth in domestic and international orders for electronic products. Per the Institute for Supply Management’s (ISM) latest report published on Nov 1, the U.S. manufacturing activity expanded for the 17th straight month in October. The ISM’s manufacturing index was 60.8% last month. The PMI reading above 50 underlines the expansion of manufacturing activities.
In October, new orders registered 59.8%, marking the 17th consecutive month of increase. Also, new export orders rose to 54.6% from 53.4% in the previous month. ISM’s measure of production in the month was 59.3%, marking growth for the 17th successive month. This highlights the trend of healthy economic activities in the sector as companies are resorted to maintaining the production level with higher orders. A surge in the e-commerce business has also boosted the prospects of the industry participants.
Solid Demand in the Electronics Services Market: Higher adoption of the latest manufacturing technologies and processes by original equipment manufacturers has been supporting the electronics manufacturing services market. The industry players have been benefiting from the increased requirement for integrating advanced electronic components into electronic devices. Also, a few industry players with wide exposure to the booming medical and life science markets are witnessing a positive momentum across their businesses owing to solid demand for their products and solutions.
Technological Advancement Benefits: The manufacturing electronic companies have been focusing on digitizing their business operations with the advent of cutting-edge technologies and business models. With digitization, several manufacturers have been gaining detailed insight into their operational performance, demand cycles, supply-chain issues, and delivery status. This has been enhancing their competitiveness with enhanced operational productivity, product quality, and better cost management.
Persistent Woes: The industry participants have been witnessing supply-chain disruptions, logistic issues, and inflation, which have been weighing on their margins and profitability. Also, frequent investment to upgrade products and services for staying competitive in the market often hurts the margins and profitability of industry players. The shortage of skilled workers in the United States is a persistent concern as well.
Zacks Industry Rank Indicates Solid Prospects
The Manufacturing – Electronics industry belongs to a 17-stock group within the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #79, which places it in the top 31% 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 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 improved earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. The industry’s earnings estimates for 2021 have increased 15.7% over the past year.
Before we present a few promising Manufacturing – Electronics stocks, it is worth taking a look at the industry’s performance and its valuation picture.
Industry Outperforms Sector & the S&P 500
The Zacks Manufacturing – Electronics industry has outperformed its sector as well as the S&P 500 in the past year. The stocks in the industry have collectively gained 31.8% compared with the Zacks Industrial Products sector’s growth of 20.2% and the S&P 500’s rally of 30.9%.
Manufacturing - Electronics Industry's Valuation
The Price/Earnings (P/E) ratio is commonly used for valuing manufacturing stocks.
The industry’s forward 12-month P/E ratio is 24.10. This clearly shows that the industry is trading above the S&P 500’s forward 12-month P/E ratio of 21.88 and the sector’s 20.37.
Over the past five years, the industry has traded at the highest level of 26.61X forward 12-month earnings and the lowest level of 13.62X. The median level has been 19.12X over the same period.
4 Manufacturing - Electronics Stocks Leading the Pack
The stocks currently carry either a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Emerson: Headquartered in St. Louis, MO, the company offers a wide range of products and services to customers in the consumer, commercial, and industrial markets. It is poised to benefit from strength across its medical, life science, food and beverage, and residential end markets. Emerson’s robust backlog level is also likely to aid its top-line performance in the quarters ahead. Moreover, it is likely to benefit from acquisitions it has made over time. Buyouts had a positive contribution of 1% to its sales growth in fiscal 2021 (ended September 2021).
Shares of Emerson have soared 31.1% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 10.69%. Also, the Zacks Rank #2 company’s earnings estimates have improved 6.2% for fiscal 2022 (ending September 2022) and 7.7% for fiscal 2023 (ending September 2023) in the past 30 days.
A. O. Smith: The Milwaukee, WI-based company is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. A. O. Smith stands to benefit from robust demand for water heaters, boilers, and water treatment products, supported by its strong retail and direct-to-consumer sales channel and pricing actions. Also, growth in demand across China and India along with the company’s focus on investments in product developments and production efficiency will likely be beneficial in the quarters ahead.
Shares of A. O. Smith have gained 47.3% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 16.82%. The Zacks Rank #1 company’s earnings estimates have been revised 6.6% upward for 2021 and 9.6% for 2022 in the past 30 days.
Franklin Electric: Headquartered in Fort Wayne, IN, the company is engaged in manufacturing and distributing water and fuel pumping systems, consisting primarily of submersible motors, electronic controls, pumps, and related parts and equipment. Franklin Electric is well-positioned to benefit from its strong product offerings, solid end-market demand across all regions and product categories, as well as acquired assets.
Shares of Franklin Electric have jumped 45.8% in the past year. It reported better-than-expected results thrice in the trailing four quarters, the average being 16.27%. In the past 30 days, the Zacks Rank #2 company’s earnings estimates have moved 1% north for 2021 and 1.5% for 2022.
AZZ: The Fort Worth, TX-based company provides metal coatings services, specialty electrical equipment, welding solutions, and highly engineered services to the power generation, transmission and distribution, and industrial markets. AZZ stands to benefit from increasing demands for infrastructure improvements throughout the world, solid product offerings, and shareholder-friendly policies. Its acquisition of Acme Galvanizing Inc. (January 2021) is also expected to expand its hot-dip galvanizing capability in the upper midwest region of the United States.
AZZ’s shares have gained 49.7% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 25.47%. The Zacks Rank #2 company’s earnings estimates have been revised 2% upward for fiscal 2022 (ending February 2022) and 5.1% for fiscal 2023 (ending February 2023) in 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.