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5 Industrial Stocks Poised to Continue Their Winning Streaks in 2022
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A number of factors influenced industrial stocks’ prospects in 2021. Business activities were healthy on the back of broader economic recovery and strengthening trade activities with the fading impacts of the COVID pandemic.
The sector’s growth momentum and that of the market at large suffered a setback when supply-chain restrictions and cost-inflation started impacting operations. Shortages of semiconductor chips slowed the operations of many players, forcing a gap between demand and supply. Labor problems, high logistics costs, freight charges and a hike in raw material prices dealt a blow to corporate margins and profitability.
Counter measures, including price hikes, cost-reduction efforts, and the diversification of supplier base, provided some relief to players. So far in 2021, industrial stocks’ prices have increased 10.4% as compared with the S&P 500’s growth of 26.1%. Talking about the sectors’ financial performance, revenues have increased 3.7% in the first nine months of 2021, whereas costs have expanded 2.3%.
Image Source: Zacks Investment Research
Earnings and revenues of the industrial stocks — grouped under the Zacks Industrial Products sector — are predicted to increase 38.4% and 12.3%, respectively. The growth rates for 2022 are projected to be 15.6% for earnings and 9.8% for revenues.
Supply-chain and cost woes as well as new variants of COVID-19 are likely to continue impacting the industrial performance in 2022. Leading indicators, as discussed in the section below, are likely to keep the confidence high for industrial stocks.
What’s Driving Confidence in Industrial Stocks?
One of the leading indicators supporting the industrial sector’s prospects is the country’s industrial production data. In third-quarter 2021, the U.S. industrial production increased 4.3% year over year, while the same in October and November has advanced 5.1% and 5.3%, respectively. Notably, manufacturing grew 4.8% year over year in third-quarter 2021. The same rose 4.5% in October and 4.6% in November.
On the broader aspect, annual increases were noticed in the U.S. gross domestic product in the first three quarters of 2021. However, the pace of growth slowed due to prevalent headwinds. In third-quarter 2021, the U.S. GDP expanded 2.3% from the year-ago quarter, while the same increased 6.7% in the second quarter and advanced 6.4% in the first quarter. The International Monetary Fund anticipates 6% growth in the United States’ output in 2021 against a 3.4% decline reported in 2020. The country’s growth is projected to be 5.2% in 2022.
Also, unemployment rate reduction is indicative of healthy economic activities. In November, the country’s unemployment rate was at 4.2%, down from 4.6% in October and 6.7% in November 2020. Job gains occurred in construction, manufacturing, warehousing, transportation and other industries.
Housing starts (privately owned) in the country increased 11.8% in November from the previous month. Single-family-related housing starts expanded 11.3% from the previous month.
Investments by governmental agencies for the development of transportation, water resources and systems, and broadband expansion are anticipated to boost growth opportunities for industrial stocks. President Biden’s $1-trillion bipartisan infrastructure bill covers all these areas.
5 Winner Industrial Stocks for 2022
We have chosen five potential winners from the industrial space that are likely to continue flourishing in 2022. The selected companies currently sport a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). The stocks also have a market capitalization greater than $1 billion and year-to-date price changes of more than 20%.
Rockwell Automation, Inc. (ROK - Free Report) : The company provides industrial automation and information solutions across the globe. It serves multiple end markets, including personal care, food and beverage, household, life sciences, oil & gas, chemical, and metals. ROK is based in Milwaukee, WI, and presently has a market capitalization of $39.3 billion.
Growth in connected services, core automation, and information solutions is anticipated to benefit ROK in the quarters ahead. Its solid order backlog, buyouts and end-market strength place it well for the near future.
The company presently carries a Zacks Rank #2. Rockwell’s shares have gained 35.6% compared with the Zacks Industrial Automation and Robotics industry’s growth of 30.5%. In the past 60 days, ROK’s earnings estimates have increased 5.2% for fiscal 2022 (ending September 2022) and 6.5% for fiscal 2023 (ending September 2023).
Ingersoll Rand Inc. (IR - Free Report) : The Davidson, NC-based company is a specialist in providing industrial and mission-critical flow creation technologies. Its solutions are widely used in industrial, medical, life sciences, transportation, and other markets. Its market capitalization is $23.9 billion. IR currently carries a Zacks Rank #2.
In the quarters ahead, the company’s investments in e-commerce, digital, and IoT space as well as its diversified product offerings and healthy end-market demand will likely be beneficial. Inorganic actions, including divestments and buyouts, and cost-reduction efforts raise its attractiveness.
Shares of Ingersoll have gained 31.1% compared with the Zacks Manufacturing - General Industrial industry’s growth of 5.8%. In the past 60 days, IR’s earnings estimates have been raised 11.7% for 2021 and 7.9% for 2022.
A. O. Smith Corporation (AOS - Free Report) : Based in Milwaukee, WI, the company makes and distributes water heating equipment for commercial and residential markets. It also supplies water treatment products for its customers. Its market capitalization is currently $13 billion. AOS presently sports a Zacks Rank #1.
Solid demand for water heating and water treatment products as well as strength in the replacement business is beneficial for AOS. Also, investments in product development, effective pricing actions, healthy international demand and buyout activities are boons.
Year to date, A. O. Smith’s shares have gained 51% compared with the Zacks Manufacturing - Electronics industry’s growth of 21.6%. In the past 60 days, the company’s earnings estimates have increased 6.6% for 2021 and 8.6% for 2022.
SiteOne Landscape Supply, Inc. (SITE - Free Report) : The Roswell, GA-based company is a renowned distributor of landscape supplies for use in outdoor spaces, golf courses, gardens and lawns. Demand primarily comes from landscape professionals in residential and commercial markets. Its market capitalization is presently $10.1 billion. SITE sports a Zacks Rank #1 at present.
SITE is well-placed to benefit from strengthening demand for landscaping services and products, a wide customer base in the United States and Canada, a solid backlog, and acquired assets in the quarters ahead. High costs and supply-chain woes might be hurdles.
Year to date, shares of SiteOne Landscape have gained 45.3% against the Zacks Industrial Services industry’s decline of 40.2%. Its earnings estimates have been raised 13.8% for 2021, while the same for 2022 has improved 13.4% in the past 60 days.
SiteOne Landscape Supply, Inc. Price and Consensus
Berry Global Group, Inc. (BERY - Free Report) : The company manufactures engineered materials, non-woven specialty materials and consumer packaging products. Its products are widely used in healthcare, food and beverage, and personal care markets. The company is based in Evansville, IN and presently has a market capitalization of $9.5 billion. BERY presently sports a Zacks Rank #1.
Solid demand in the food and beverage market, improvements in the construction space, and rising demand for car liner products and protective films are beneficial for Berry Global. Also, the growing e-commerce business, investments in technological development and innovation, and strengthening manufacturing capabilities are boons.
Year to date, Berry Global’s shares have gained 25.1% compared with the Zacks Containers - Paper and Packaging industry’s growth of 5%. In the past 60 days, the company’s earnings estimates increased 18% for fiscal 2022 (ending September 2022) and 15.4% for fiscal 2023 (ending September 2023).
Image: Bigstock
5 Industrial Stocks Poised to Continue Their Winning Streaks in 2022
A number of factors influenced industrial stocks’ prospects in 2021. Business activities were healthy on the back of broader economic recovery and strengthening trade activities with the fading impacts of the COVID pandemic.
The sector’s growth momentum and that of the market at large suffered a setback when supply-chain restrictions and cost-inflation started impacting operations. Shortages of semiconductor chips slowed the operations of many players, forcing a gap between demand and supply. Labor problems, high logistics costs, freight charges and a hike in raw material prices dealt a blow to corporate margins and profitability.
Counter measures, including price hikes, cost-reduction efforts, and the diversification of supplier base, provided some relief to players. So far in 2021, industrial stocks’ prices have increased 10.4% as compared with the S&P 500’s growth of 26.1%. Talking about the sectors’ financial performance, revenues have increased 3.7% in the first nine months of 2021, whereas costs have expanded 2.3%.
Earnings and revenues of the industrial stocks — grouped under the Zacks Industrial Products sector — are predicted to increase 38.4% and 12.3%, respectively. The growth rates for 2022 are projected to be 15.6% for earnings and 9.8% for revenues.
Supply-chain and cost woes as well as new variants of COVID-19 are likely to continue impacting the industrial performance in 2022. Leading indicators, as discussed in the section below, are likely to keep the confidence high for industrial stocks.
What’s Driving Confidence in Industrial Stocks?
One of the leading indicators supporting the industrial sector’s prospects is the country’s industrial production data. In third-quarter 2021, the U.S. industrial production increased 4.3% year over year, while the same in October and November has advanced 5.1% and 5.3%, respectively. Notably, manufacturing grew 4.8% year over year in third-quarter 2021. The same rose 4.5% in October and 4.6% in November.
On the broader aspect, annual increases were noticed in the U.S. gross domestic product in the first three quarters of 2021. However, the pace of growth slowed due to prevalent headwinds. In third-quarter 2021, the U.S. GDP expanded 2.3% from the year-ago quarter, while the same increased 6.7% in the second quarter and advanced 6.4% in the first quarter. The International Monetary Fund anticipates 6% growth in the United States’ output in 2021 against a 3.4% decline reported in 2020. The country’s growth is projected to be 5.2% in 2022.
Also, unemployment rate reduction is indicative of healthy economic activities. In November, the country’s unemployment rate was at 4.2%, down from 4.6% in October and 6.7% in November 2020. Job gains occurred in construction, manufacturing, warehousing, transportation and other industries.
Housing starts (privately owned) in the country increased 11.8% in November from the previous month. Single-family-related housing starts expanded 11.3% from the previous month.
Investments by governmental agencies for the development of transportation, water resources and systems, and broadband expansion are anticipated to boost growth opportunities for industrial stocks. President Biden’s $1-trillion bipartisan infrastructure bill covers all these areas.
5 Winner Industrial Stocks for 2022
We have chosen five potential winners from the industrial space that are likely to continue flourishing in 2022. The selected companies currently sport a Zacks Rank #1 (Strong Buy) or Zacks Rank #2 (Buy). The stocks also have a market capitalization greater than $1 billion and year-to-date price changes of more than 20%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Rockwell Automation, Inc. (ROK - Free Report) : The company provides industrial automation and information solutions across the globe. It serves multiple end markets, including personal care, food and beverage, household, life sciences, oil & gas, chemical, and metals. ROK is based in Milwaukee, WI, and presently has a market capitalization of $39.3 billion.
Growth in connected services, core automation, and information solutions is anticipated to benefit ROK in the quarters ahead. Its solid order backlog, buyouts and end-market strength place it well for the near future.
The company presently carries a Zacks Rank #2. Rockwell’s shares have gained 35.6% compared with the Zacks Industrial Automation and Robotics industry’s growth of 30.5%. In the past 60 days, ROK’s earnings estimates have increased 5.2% for fiscal 2022 (ending September 2022) and 6.5% for fiscal 2023 (ending September 2023).
Rockwell Automation, Inc. Price and Consensus
Rockwell Automation, Inc. price-consensus-chart | Rockwell Automation, Inc. Quote
Ingersoll Rand Inc. (IR - Free Report) : The Davidson, NC-based company is a specialist in providing industrial and mission-critical flow creation technologies. Its solutions are widely used in industrial, medical, life sciences, transportation, and other markets. Its market capitalization is $23.9 billion. IR currently carries a Zacks Rank #2.
In the quarters ahead, the company’s investments in e-commerce, digital, and IoT space as well as its diversified product offerings and healthy end-market demand will likely be beneficial. Inorganic actions, including divestments and buyouts, and cost-reduction efforts raise its attractiveness.
Shares of Ingersoll have gained 31.1% compared with the Zacks Manufacturing - General Industrial industry’s growth of 5.8%. In the past 60 days, IR’s earnings estimates have been raised 11.7% for 2021 and 7.9% for 2022.
Ingersoll Rand Inc. Price and Consensus
Ingersoll Rand Inc. price-consensus-chart | Ingersoll Rand Inc. Quote
A. O. Smith Corporation (AOS - Free Report) : Based in Milwaukee, WI, the company makes and distributes water heating equipment for commercial and residential markets. It also supplies water treatment products for its customers. Its market capitalization is currently $13 billion. AOS presently sports a Zacks Rank #1.
Solid demand for water heating and water treatment products as well as strength in the replacement business is beneficial for AOS. Also, investments in product development, effective pricing actions, healthy international demand and buyout activities are boons.
Year to date, A. O. Smith’s shares have gained 51% compared with the Zacks Manufacturing - Electronics industry’s growth of 21.6%. In the past 60 days, the company’s earnings estimates have increased 6.6% for 2021 and 8.6% for 2022.
A. O. Smith Corporation Price and Consensus
A. O. Smith Corporation price-consensus-chart | A. O. Smith Corporation Quote
SiteOne Landscape Supply, Inc. (SITE - Free Report) : The Roswell, GA-based company is a renowned distributor of landscape supplies for use in outdoor spaces, golf courses, gardens and lawns. Demand primarily comes from landscape professionals in residential and commercial markets. Its market capitalization is presently $10.1 billion. SITE sports a Zacks Rank #1 at present.
SITE is well-placed to benefit from strengthening demand for landscaping services and products, a wide customer base in the United States and Canada, a solid backlog, and acquired assets in the quarters ahead. High costs and supply-chain woes might be hurdles.
Year to date, shares of SiteOne Landscape have gained 45.3% against the Zacks Industrial Services industry’s decline of 40.2%. Its earnings estimates have been raised 13.8% for 2021, while the same for 2022 has improved 13.4% in the past 60 days.
SiteOne Landscape Supply, Inc. Price and Consensus
SiteOne Landscape Supply, Inc. price-consensus-chart | SiteOne Landscape Supply, Inc. Quote
Berry Global Group, Inc. (BERY - Free Report) : The company manufactures engineered materials, non-woven specialty materials and consumer packaging products. Its products are widely used in healthcare, food and beverage, and personal care markets. The company is based in Evansville, IN and presently has a market capitalization of $9.5 billion. BERY presently sports a Zacks Rank #1.
Solid demand in the food and beverage market, improvements in the construction space, and rising demand for car liner products and protective films are beneficial for Berry Global. Also, the growing e-commerce business, investments in technological development and innovation, and strengthening manufacturing capabilities are boons.
Year to date, Berry Global’s shares have gained 25.1% compared with the Zacks Containers - Paper and Packaging industry’s growth of 5%. In the past 60 days, the company’s earnings estimates increased 18% for fiscal 2022 (ending September 2022) and 15.4% for fiscal 2023 (ending September 2023).
Berry Global Group, Inc. Price and Consensus
Berry Global Group, Inc. price-consensus-chart | Berry Global Group, Inc. Quote