The industrial market is growing due to federal investments in infrastructure and onshoring initiatives, presenting opportunities in commercial aerospace, utility infrastructure, and residential construction. Therefore, investors could consider investing in top industrial stocks Franklin Electric Co., Inc. (FELE), Greif, Inc. (GEF), and Konica Minolta, Inc. (KNCAY).
Despite drops in the utilities and electronics sector, in December 2023, industrial production in the United States showed a 0.1% growth, indicating solid production activity, while capacity utilization was unchanged at 78.6%.
In addition, the global smart manufacturing market is thriving with government backing and a focus on automation, especially in the information technology and automotive sectors. As a result, the global smart manufacturing market is anticipated to grow at a CAGR of 14.9% from 2023 to 2030.
Moreover, the Industry 4.0 market is driven by the adoption of automated equipment and emerging digital technologies. Compliance with regulations, the potential of IIoT, and the synergy of robotics with IoT for enhanced efficiency contribute to market growth. The global Industry 4.0 market is expected to grow at a CAGR of 19.9% from 2023 to 2030.
Simultaneously, with the rising need for bulk transportation of products and import-export activity, the industrial packaging industry is booming. Furthermore, the market is estimated to be worth $66.27 billion in 2024 and is expected to grow at a CAGR of 4.7% to reach $83.45 billion by 2029.
Considering these conducive trends, let’s examine the fundamentals of the three industrial stock picks.
Franklin Electric Co., Inc. (FELE)
FELE designs, manufactures, and distributes water and fuel pumping systems worldwide, operating through Water Systems; Fueling Systems; and Distribution segments. Its products cater to residential, agricultural, municipal, industrial, and energy markets.
On January 2, 2024, FELE announced that its subsidiary, Headwater Companies, acquired all of the assets of LCA Pump, LLC, which operates Water Works Pump in Springfield, Missouri. Water Works will become part of Headwater Wholesale, marking the company's entry into the Missouri market. The move supports Headwater's goal of becoming a leading distributor of water systems solutions in the United States.
On December 4, 2023, the company announced that another one of its subsidiaries, Franklin Water Treatment, LLC, acquired the assets of Action Manufacturing & Supply, Inc., a manufacturer and wholesale distributor of residential water conditioning, filtration, and indoor/outdoor aeration systems, operating in Florida and North Carolina.
This is expected to expand FELE’s channel’s reach to more water treatment markets.
During the third quarter, which ended September 30, 2023, FELE reported net sales and gross profit of $538.43 million and $186.25 million, respectively. The company generated an EPS of $1.23. As of September 30, 2023, its total assets amounted to $1.73 billion, compared to its total assets of $1.69 billion as of December 31, 2022.
For the fiscal year 2023, the company expects its sales to be in the range of $2.05 billion to $2.15 billion and EPS to be in the range of $4.07 to $4.17.
Analysts expect FELE’s revenue and EPS to grow 2.1% and 5.6% year-over-year to $494.77 million and $0.84, respectively, for the first quarter ending March 2024.
The stock has gained 11.1% over the past year to close the last trading session at $94.57. It gained marginally intraday.
FELE’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a B grade for Stability and Quality. Within the B-rated Industrial - Manufacturing industry, it is ranked #4 of 35 stocks.
To see FELE’s additional POWR Ratings for Growth, Value, Momentum, and Sentiment, click here.
Greif, Inc. (GEF)
GEF is a global producer of industrial packaging, offering solutions like drums and containers. Also, the company is involved in paper packaging and land management, owning timber properties in the southeastern United States.
On January 12, 2024, GEF and IonKraft partnered for a pilot project to transform industrial packaging, specifically addressing recyclability and sustainability challenges in plastic jerrycans. IonKraft's plasma-based coating provides a recyclable barrier solution, aligning with GEF's commitment to innovative and eco-friendly packaging.
In the fourth quarter, which ended October 31, 2023, GEF’s net sales stood at $1.31 billion. The company generated operating profit and net income of $112.40 million and $73.30 million, respectively. Moreover, it reported adjusted EBITDA and free cash flow of $199.20 million and $136.20 million, respectively.
For the fiscal year 2024, the company expects its adjusted EBITDA and free cash flow to be around $585 million and $200 million, respectively.
GEF’s revenue is expected to grow 5.1% year-over-year to $5.62 billion for the fiscal year ending October 2025. Its EPS for the same year is expected to be $5.14, indicating a rise of 36.5% from the prior year. The company surpassed the EPS estimates in three of the trailing four quarters, which is impressive.
GEF’s shares have gained marginally over the past three months to close the last trading session at $63.37.
GEF’s positive fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
GEF has a B grade for Stability, Sentiment, and Quality. Within the B-rated Industrial - Packaging industry, it is ranked #4 among 20 stocks.
In addition to the POWR Ratings stated above, one can access GEF’s additional Growth, Value, and Momentum ratings here.
Konica Minolta, Inc. (KNCAY)
Based in Tokyo, Japan, KNCAY is a global company specializing in digital workplace solutions, professional printing, healthcare, and industrial products. Its offerings include multifunctional peripherals, diagnostic imaging systems, and various visual solutions for industrial applications.
On January 22, 2024, KNCAY announced that it would establish a joint venture company with FPT Japan Holdings Co., Ltd. (FPT) for MFP software development. The company aims to strengthen the profit base and ensure stable cash inflows through this partnership.
In the second quarter, which ended September 30, 2023, KNCAY’s revenue rose 1.2% year-over-year to ¥286.36 billion ($1.93 billion). The company's gross profit increased 3.4% from the previous-year quarter to ¥125.34 billion ($845.59 million). It reported an EPS of ¥2.17.
For the six months ended September 30, KNCAY’s net cash provided by operating activities came in at ¥32.03 billion ($216.06 million), up significantly year-over-year.
Street expects KNCAY’s revenue to grow 127.7% year-over-year to $7.82 billion for the fiscal year ending March 2024. The company surpassed the revenue estimates in three of the trailing four quarters.
KNCAY’s shares have declined 2.8% over the past month to close the last trading session at $5.54.
KNCAY’s POWR Ratings reflect an optimistic outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Momentum, Stability, and Quality. Within the Industrial - Equipment industry, it is ranked #11 among 92 stocks.
Click here for KNCAY’s additional Growth and Sentiment ratings.
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FELE shares were trading at $96.48 per share on Monday afternoon, up $1.91 (+2.02%). Year-to-date, FELE has declined -0.18%, versus a 1.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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