Despite macroeconomic challenges, the industrial sector remained stable as a result of consistent demand. Therefore, it could be wise to own fundamentally strong industrial stocks Thermon Group Holdings, Inc. (THR), The Weir Group PLC (WEGRY) and ITT Inc. (ITT).
Industrial production increased by 0.3% in September 2023. Moreover, the Industrial Production Index came in at 103.6 in the United States, and a value of over 100 shows positive production performance.
In addition, AI in industrial machinery is expected to grow at a 29.6% CAGR until 2027. This growth is driven by the increasing demand for automation and efficiency in manufacturing processes. AI technologies are being integrated into industrial machinery to optimize production, reduce downtime, and improve overall operational performance.
The industrial machinery market is expected to reach $1.04 trillion by 2032, increasing at a CAGR of 5.3%. Rapid technological improvements in manufacturing industrial machinery stimulate innovation, leading to increased productivity, cheaper costs, and higher profits during this period.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Industrial - Machinery stocks, starting with number 3.
Stock #3: Thermon Group Holdings, Inc. (THR)
THR provides engineered industrial process heating solutions for process industries in the United States and Latin America, Canada, Europe, the Middle East, Africa, and the Asia-Pacific.
THR’s trailing-12-month non-GAAP P/E of 15.30x is 6.6% lower than the industry average of 16.38x. Its trailing-12-month EV/EBIT of 12.95x is 10.3% lower than the industry average of 14.44x.
THR’s trailing-12-month EBIT margin of 16.05% is 65.9% higher than the 9.68% industry average. Its trailing-12-month levered FCF margin of 9.74% is 71.9% higher than the 5.67% industry average.
THR’s sales increased 23% year-over-year to $123.66 million in the fiscal second quarter that ended September 30, 2023. Its adjusted EBITDA came in at $27.72 million, up 26.5% year-over-year. Its non-GAAP net income increased 31.4% year-over-year to $16.89 million. The company’s non-GAAP EPS increased 28.9% year-over-year to $0.49.
Analysts expect THR’s revenue to increase 7.6% year-over-year to $473.98 million for the year ending March 2024. Its EPS is expected to grow at 13.8% year-over-year to $1.78 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of THR have gained 49.3% over the past year to close the last trading session at $27.16.
THR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
THR also has an A grade for Sentiment and a B for Momentum. It is ranked #22 out of 78 stocks in the A-rated Industrial - Machinery industry. Click here for the additional POWR Ratings for Growth, Value, Stability, and Quality for THR.
Stock #2: The Weir Group PLC (WEGRY)
Headquartered in Glasgow, the United Kingdom, WEGRY produces and sells highly engineered original equipment worldwide. It operates in two segments, Minerals and ESCO. The Minerals segment offers engineering, manufacturing, and service processing technology. The ESCO segment provides ground-engaging tools, attachments, AI, and 3D rugged machine vision technologies.
WEGRY’s trailing-12-month EV/EBITDA of 9.71x is 6.6% lower than the industry average of 10.39x. Its trailing-12-month EV/EBIT of 11.56x is 19.9% lower than the industry average of 14.44x.
WEGRY’s trailing-12-month net income margin of 9.24% is 51.1% higher than the 6.12% industry average. Its trailing-12-month levered FCF margin of 10.36% is 82.7%% higher than the 5.67% industry average.
During the first half 2023, which ended on June 30, 2023, WEGRY’s revenues increased 18.6% year-over-year to £1.30 billion ($1.59 billion). Its operating profit rose 9.1% from its year-ago value to £211.60 million ($258.51 million). The company’s profit for the year increased 9.6% year-over-year to £138.40 million ($169.08 million), while its EPS stood at 53.10p, up 9.5% from the prior-year value.
Street expects WEGRY’s revenue to increase 10.3% year-over-year to $3.28 billion for the year ending December 2023. The stock gained 11.4% over the past year to close the last trading session at $10.36.
It’s no surprise that WEGRY has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Stability and a B grade for Growth and Momentum. It is ranked #14 in the same industry.
Beyond what is stated above, we’ve also rated WEGRY for Value, Sentiment and Quality. Get all WEGRY ratings here.
Stock #1: ITT Inc. (ITT)
ITT manufactures and sells engineered critical components and customized technology solutions for the transportation, industrial, and energy markets worldwide. The company operates in three segments: Motion Technologies; Industrial Process; and Connect & Control Technologies.
ITT’s forward non-GAAP PEG multiple of 1.49 is 2.4% lower than the industry average of 1.53. Its forward EV/EBIT multiple of 14.14% is 2.1% lower than the industry average of 14.44.
ITT’s trailing-12-month ROTA of 10.96% is 117% higher than the industry average of 5.05%. Its trailing-12-month ROCE of 19.56% is 51.1% higher than the industry average of 12.94%.
For the fiscal third quarter that ended September 30, 2023, ITT’s revenue increased 9.1% year-over-year to $822.10 million and gross profit increased 19.7% year-over-year to $279.40 million. Its net income increased by 8.1% year-over-year to $110.80 million. Also, its EPS came in at $1.34, representing a 8.9% increase over the prior-year quarter.
The consensus revenue estimate of $3.26 billion for the year ending December 2023 represents a 9.2% increase year-over-year. Its EPS is expected to grow at 14.8% year-over-year to $5.10 for the same period. It surpassed EPS estimates in all four trailing quarters. ITT’s shares have gained 25.1% over the past year to close the last trading session at $95.92.
ITT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #10 in the same industry. It has a B grade for Stability, Sentiment, Momentum and Quality. To see additional ITT’s ratings for Growth and Value, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ITT shares were trading at $99.37 per share on Thursday morning, up $5.40 (+5.75%). Year-to-date, ITT has gained 23.68%, versus a 13.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
3 High-Potential Industrial Stocks to Secure Now StockNews.com
