Reshoring has a profound impact on local economies, driving growth and revitalizing communities that have been affected by deindustrialization. By bringing manufacturing back to the United States, companies are not just cutting costs but also contributing to broader economic objectives.
Given this backdrop, it could be wise to consider fundamentally strong U.S.-based industrial stocks, Southern Copper Corporation (SCCO), Illinois Tool Works Inc. (ITW), and Cummins Inc. (CMI), that will benefit from reshoring trends.
The trend of bringing manufacturing back to the United States is boosting key industrial sectors by creating jobs, improving supply chain reliability, and fostering innovation through advanced technologies like automation. It also enhances cost control, national security, and sustainability efforts while reducing dependency on foreign production.
Government incentives further drive growth. The global industrial machinery market is projected to grow at a CAGR of 5.3% by 2032. Moreover, U.S. industrial production rose 0.8% in August. Manufacturing output posted a similar gain of 0.9% after declining in the previous month.
Given these favorable industry trends, let’s look at the fundamentals of the top 3 industrial stocks.
Southern Copper Corporation (SCCO)
SCCO is an integrated producer of copper and valuable by-products. It operates the mining, exploring, smelting, and refining facilities in Peru, Mexico, Argentina, Chile, and Ecuador. Its operating segments include Peruvian operations; Mexican open-pit operations; and Mexican underground mining operations.
The stock’s trailing-12-month EBITDA margin of 52.99% is 220% higher than the industry average of 16.56%. Similarly, its 26.15% trailing-12-month net income margin is 422.32% above the industry average of 5.01%. Also, its trailing-12-month ROTA of 15.47% compares favorably to the industry average of 2.36%.
SCCO’s sales for the second quarter (ended June 30, 2024) increased 35.5% year-over-year to $3.12 billion. The company reported an operating income of $1.61 billion, indicating a 78.5% growth from the prior year’s quarter. SCCO’s adjusted EBITDA came in at $1.80 billion, up 61.1% year-over-year, while its net income per share grew 73.2% from the prior-year quarter to $1.23.
The consensus revenue estimate of $2.98 billion for the fiscal third quarter (ending September 2024) represents a 19% increase year-over-year. The consensus EPS estimate of $1.16 for the current quarter indicates a 47% improvement year-over-year. The company has an impressive surprise history; it surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
Over the past year, the stock has gained 51.3% to close the last trading session at $111.60.
SCCO’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates 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.
SCCO has an A grade for Quality and a B for Stability. The stock is ranked #8 out of 28 stocks in the Industrial - Metals industry.
To see the other ratings of SCCO for Sentiment, Value, Growth, and Momentum, click here.
Illinois Tool Works Inc. (ITW)
ITW manufactures and sells industrial products and equipment internationally. The company operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.
The stock’s trailing-12-month EBITDA margin of 29.12% is 108.3% higher than the industry average of 13.98%. Similarly, its 19.15% trailing-12-month net income margin is 215.2% above the industry average of 6.08%.
ITW reported operating revenue of $4.03 billion for the second quarter that ended June 30, 2024. Its operating income grew 4% from the year-ago value to $1.05 billion. The company’s net income came in at $759 million and $2.54 per share, up marginally and 2.4% from the prior year’s quarter, respectively.
Street expects ITW’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase marginally and 5.1% year-over-year to $4.03 billion and $2.54, respectively. Moreover, it beat the EPS estimates in each of the trailing four quarters, which is promising.
Shares of ITW have gained 4.9% over the past month and 10.6% over the past year to close the last trading session at $256.83.
ITW’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
ITW has an A grade for Stability and a B for Quality. It is ranked #26 out of 78 stocks in the Industrial - Machinery industry.
In addition to the POWR Ratings we’ve stated above, we also have ITW ratings for Growth, Value, Sentiment, and Momentum. Get all ITW ratings here.
Cummins Inc. (CMI)
CMI designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine; Distribution; Components; Power Systems; and Accelera.
The stock’s trailing-12-month levered FCF margin of 8.08% is 24.8% higher than the industry average of 6.48%. Similarly, its 11.10% trailing-12-month ROTC is 53.9% above the industry average of 7.21%.
For the second quarter of 2024, which ended on June 30, CMI’s net sales increased 1.5% year-over-year to $8.80 billion. Its operating income for the quarter amounted to $1.05 billion, representing an increase of 4.8% from the same period last year, while its net income stood at $726 million, up marginally year-over-year. Also, the company’s earnings per common share grew 4.2% from the year-ago value to $5.26.
The consensus revenue estimate of $34.72 billion for the year (ending December 2025) represents a 3.3% increase year-over-year. The consensus EPS estimate of $21.88 for the same year indicates an 11% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has surged 40.6%, closing the last trading session at $329.97.
CMI’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CMI has a B grade for Stability, Quality, and Sentiment. It is ranked #13 out of 78 stocks in the Industrial - Machinery industry. Click here to see the additional ratings for CMI (Growth, Value, and Momentum).
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SCCO shares were trading at $117.80 per share on Monday afternoon, down $0.15 (-0.13%). Year-to-date, SCCO has gained 39.09%, versus a 20.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
3 Industrial Stocks That Will Benefit From Reshoring Trends StockNews.com
