The industrial machinery sector is experiencing substantial growth, driven by increased infrastructure spending, significant public and private investments, and the reshoring of manufacturing jobs. Legislative acts are injecting billions into infrastructure, fostering development, strengthening domestic manufacturing, and creating new opportunities for the machinery sector across industries.
Given this favorable environment, considering investments in key industrial machinery stocks like Deere & Company (DE), Caterpillar Inc. (CAT), and Honeywell International Inc. (HON) could be a smart move to tap into the ongoing expansion.
The industry’s growth is driven by rising global demand for goods and services, fueling the need for manufacturing facilities and equipment. Government policies have catalyzed over $1 trillion in private sector investments, particularly in clean energy, semiconductors, EVs, and manufacturing. This growth increases demand for industrial machinery, strengthens supply chains, and enhances global competitiveness.
Moreover, the investments in Industry 4.0 and plans for 5.0, along with trends like AI, IoT, advanced machinery, robotics, and smart manufacturing, are driving productivity, reducing costs, and boosting efficiency. These advancements fuel economic growth and attract investment. As a result, the industrial machinery market is expected to reach $589.34 billion this year, growing at a 7.8% CAGR.
Let’s analyze the fundamental aspects of the three Industrial - Machinery stocks mentioned above, starting with number three.
Stock #3: Deere & Company (DE)
DE manufactures and distributes various types of equipment worldwide. The company operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services.
On October 29, 2024, DE announced the Auto Pickup feature for its skidder lineup, enhancing efficiency by automating production data collection through TimberMatic Maps. This hands-free technology updates job progress in real-time, reducing operator engagement and providing remote monitoring via TimberManager.
On October 23, 2024, DE announced the next generation of SmartGrade technology, now available on small dozers, offering improved flexibility, ease of use, and enhanced performance with seamless upgrade options for Leica and Topcon solutions.
This innovation includes a G5 touchscreen, wireless troubleshooting, and a customizable grade management tool to boost productivity and operator efficiency.
In terms of the trailing-12-month EBITDA margin, DE’s 22.43% is 58.3% higher than the 14.16% industry average. Likewise, its 13.74% trailing-12-month net income margin is 113.9% higher than the 6.43% industry average. Furthermore, its 31.82% trailing-12-month Return on Common Equity is 134.9% higher than the 13.55% industry average.
DE’s total revenue for the fourth quarter, which ended on October 27, 2024, amounted to $11.14 billion. Likewise, the company’s attributable net income and EPS were $1.25 billion and $4.55, respectively. Moreover, as of October 27, 2024, DE’s total assets stood at $107.32 billion, compared to $104.09 billion as of October 29, 2023.
For fiscal 2026 DE’s EPS and revenue are expected to increase 15.8% and 7.5% year-over-year to $22.83 and $42.01 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 29.2% to close the last trading session at $466.
DE’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Momentum. Within the A-rated Industrial – Machinery industry, it is ranked #67 out of 79 stocks. To see DE’s Growth, Value, Stability, Sentiment, and Quality ratings, click here.
Stock #2: Caterpillar Inc. (CAT)
CAT manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through Construction Industries, Resource Industries, Energy & Transportation, Financial Products, and All Other Operating segments.
On November 7, 2024, CAT announced the successful autonomous operation of its Cat 777 off-highway truck at Luck Stone’s Bull Run plant, marking its first deployment in the aggregates industry. This milestone advances autonomous hauling solutions for quarries, improving safety, productivity, and scalability.
On September 24, 2024, CAT unveiled cutting-edge technologies and energy transition advancements at MINExpo 2024, highlighting innovations like autonomous mining trucks, battery-electric loaders, and energy systems.
The exhibit reinforces its leadership in mining technology, focusing on efficiency, safety, and sustainability while showcasing a holistic approach to customer solutions.
In terms of the trailing-12-month EBIT margin, CAT’s 20.94% is 100.8% higher than the 10.43% industry average. Its 4.62% Capex / Sales is 62% higher than the 2.85% industry average. Also, its 10.64% trailing-12-month levered FCF margin is 56.5% higher than the 6.80% industry average.
CAT’s total sales and revenues for the third quarter ended on September 30, 2024, amounted to $16.11 billion. Its revenue from financial products was $875 million, reflecting a 6.4% increase over the prior-year quarter. Also, the company’s adjusted profit and adjusted profit per share were $2.52 billion and $5.17, respectively.
Analysts expect CAT’s EPS for fiscal 2024 to increase 3.1% year-over-year to $21.86. Its revenue for fiscal 2025 is expected to grow 1.2% year-over-year to $65.21 billion. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, CAT’s stock has gained 63.2% to close the last trading session at $403.70.
CAT’s POWR Ratings reflect robust prospects. It has a B grade for Momentum, Stability, and Quality. Within the same industry, it is ranked #48. Beyond what we stated above, we also have given CAT grades for Growth, Value, and Sentiment. Get all CAT ratings here.
Stock #1: Honeywell International Inc. (HON)
HON operates internationally in aerospace technologies, building automation, energy and sustainable solutions, and industrial automation businesses.
In terms of the trailing-12-month gross profit margin, HON’s 37.60% is 17.5% higher than the 32.01% industry average. Similarly, its 15.01% trailing-12-month net income margin is 133.6% higher than the 6.43% industry average. Also, its 7.73% trailing-12-month Return on Total Assets is 45.8% higher than the 5.31% industry average.
During the third quarter ending September 30, 2024, HON’s sales increased 5.6% year-over-year to $9.73 billion. The company’s free cash flow amounted to $1.72 billion, representing a 10.1% increase from last year. For the same period, its net income attributable to HON was $1.41 billion, while its adjusted EPS for the quarter rose 8.4% year-over-year to $2.58.
Street expects HON’s EPS and revenue for the quarter ending December 31, 2024, to increase 6.9% and 8.5% year-over-year to $2.78 and $10.24 billion, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, HON’s stock has gained 19% to close the last trading session at $229.64.
HON’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, and Stability. It is ranked #27 in the Industrial – Machinery industry. To access HON’s rating for Value, Sentiment, and Quality, click here.
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CAT shares were trading at $406.41 per share on Friday afternoon, up $2.71 (+0.67%). Year-to-date, CAT has gained 39.66%, versus a 27.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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