Despite a series of Fed interest rate hikes and recessionary concerns creating chaos in the market, the industrial sector remained resilient. The total industrial production grew 3.3% year-over-year in October, while manufacturing output edged up 0.1%.
One year into implementing the Bipartisan Infrastructure Law, the Biden administration announced more than $185 billion in funding and more than 6,900 specific projects across all 50 states. The industrial equipment industry is set to benefit from projects for industrial and infrastructural developments across the country.
According to Fortune Business Insights, the global construction equipment market is expected to grow at a CAGR of 6.6% to reach $222.14 billion by 2028.
Therefore, quality industrial stock Keysight Technologies, Inc. (KEYS), Titan Machinery Inc. (TITN), and LSI Industries Inc. (LYTS) could be wise investments to capitalize on the industry tailwinds. However, AEye, Inc. (LIDR) could be best avoided now, given its weak financials.
Stocks to Buy:
Keysight Technologies, Inc. (KEYS)
KEYS provides electronic design and test solutions to companies in the Americas, Europe, and the Asia Pacific. The company also offers customization, consulting, and optimization services throughout the product development lifecycle. It operates through two segments: Communications Solutions Group (CSG); and Electronics Industrial Solutions Group (EISG).
On December 1, 2022, KEYS announced the new MP4300A Series Modular Solar Array Simulator (SAS) to emulate the behavior of photovoltaic (PV) segments. The SAS solution emulates the behavior of satellite photovoltaic arrays with high fidelity across all conditions encountered in space.
Greg Patschke, General Manager of KEYS’ Aerospace Defense and Government Solutions group, said, "Analyzing power generation is an important part of the satellite design and validation process. With the MP4300 series, Keysight gives engineers the solution they need to accurately emulate conditions in space and accelerate the testing of new PV array designs, speeding time-to-market and reducing the risk of failure after deployment."
On November 30, 2022, KEYS announced that MediaTek recently used KEYS’ 5G Network Emulation Solutions to establish connectivity to its 5G chips using the 3GPP 5G Release 17 (Rel-17) and the 5G reduced capability (RedCap) specifications. Both companies are partnering to accelerate the latest 5G technology deployment. This should help KEYS grow.
KEYS’ revenues increased 11.5% year-over-year to $1.44 billion in the fourth quarter ended October 31, 2022. The company’s non-GAAP net income increased 14.2% from the year-ago value to $386 million, while its income from operations grew 8.6% year-over-year to $379 million. KEYS’ non-GAAP EPS rose 17.6% from the prior-year quarter to $2.14.
Analysts expect KEYS’ revenues to increase 9.9% year-over-year to $1.37 billion in the fiscal first quarter (ending January 31, 2023). Its EPS is expected to increase 12.4% to $1.86 in the current quarter. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
KEYS shares have gained 21% over the nine months to close the last trading session at $177.70.
KEYS’ POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to 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 an A grade for Quality and a B grade for Sentiment. Among the 89 stocks in the B-rated Industrial - Equipment industry, it is ranked #22. Click here to see the additional POWR Ratings of KEYS for Growth, Value, Momentum, and Stability.
Titan Machinery Inc. (TITN)
TITN owns and operates a network of full-service agricultural and construction equipment stores in the United States and Europe. It operates through three segments: Agriculture, Construction, and International. The company sells new and used equipment, including agricultural and construction equipment manufactured under the CNH Industrial family of brands, as well as equipment from various other manufacturers.
For the third quarter that ended October 31, 2022, TITN’s total revenue increased 47.3% year-over-year to $668.77 million. Its income from operations rose 85.3% from the prior-year quarter to $54.72 million.
The company’s adjusted net income grew 91.2% from its year-ago value to $41.49 million, while its adjusted EPS rose 90.6% year-over-year to $1.83. Also, its adjusted EBITDA increased 79.8% from the prior-year value to $63.45 million.
For the fourth quarter ending January 31, 2023, TITN’s revenue represents a 35% increase from the same period last year to $685.30 million. Its EPS for the current quarter is expected to increase 15.9% year-over-year to $1.15. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 54.4% to close the last trading session at $39.96.
TITN’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. It has an A grade for Sentiment and a B for Growth, Value, and Momentum. Out of 89 stocks in the same industry, it is ranked #32.
In addition to the POWR Ratings I’ve just highlighted, you can see TITN’s ratings for Stability and Quality here.
LSI Industries Inc. (LYTS)
LYTS produces non-residential lighting and retail display solutions in the United States, Canada, Mexico, Australia, and Latin America. It operates in two segments, Lighting and Display Solutions.
On October 18, 2022, LYTS announced the launch of REDiMount, a new lighting solution with a never-seen-before mounting and installation system for refueling station canopies. The new product addition is expected to amplify LYTS’ existing portfolio.
LYTS’ net sales increased 19.4% year-over-year to $127.07 million for the fiscal 2023 first quarter that ended September 30, 2022. Its adjusted operating income increased 117.7% year-over-year to $10.89 million, while its adjusted net income grew 99.9% from the prior-year value to $7.08 million.
The company’s adjusted EPS came in at $0.25, representing a 92.3% year-over-year increase. In addition, its adjusted EBITDA increased 76% year-over-year to $13.31 million.
Analysts expect LYTS’ revenue and EPS for the second quarter ending December 31, 2022, to increase 6.6% and 54.5% year-over-year to $118.44 million and $0.17, respectively. The company has surpassed the consensus EPS estimates in each of its trailing four quarters.
The stock has gained 87.3% over the past nine months and 77.7% year-to-date to close the last trading session at $12.19.
LYTS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Growth, Value, and Quality. Again, within the same industry, it is ranked first out of 89 stocks. To see the other ratings of LYTS for Momentum and Stability, click here.
Stock to Avoid:
AEye, Inc. (LIDR)
LIDR provides lidar systems for vehicle autonomy, advanced driver-assistance systems, and robotic vision applications in the United States, Europe, and Asia. It offers 4Sight A, a software-configurable lidar solution for automotive markets, and 4Sight M, a software-configurable lidar solution for the mobility and industrial markets.
For the fiscal third quarter ended September 30, 2022, LIDR’s loss from operations widened 37.8% year-over-year to $23.27 million. Its total operating expenses increased 28.9% from the prior-year value to $21.33 million. The company’s net loss widened 35.8% year-over-year to $23.62 million. Also, its loss per share remained flat at $0.15 for the same period.
Analysts expect LIDR’s EPS for fiscal 2022 to remain negative. Its revenue for the quarter ending December 31, 2022, is expected to decrease 43.2% year-over-year to $1.03 million. The stock has missed the consensus EPS estimates in three of the trailing four quarters.
It has lost 81.1% year-to-date to close the last trading session at $0.91.
LIDR’s POWR Ratings reflect this bleak outlook. It has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
It has a D grade for Value, Stability, and Quality. It is ranked #79 of 89 stocks in the Industrial - Equipment industry. Click here to see LIDR’s Growth, Momentum, and Sentiment rating.
KEYS shares were trading at $180.13 per share on Thursday afternoon, up $2.43 (+1.37%). Year-to-date, KEYS has declined -12.77%, versus a -15.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Industrial Stocks to Buy This December and 1 to Avoid StockNews.com
