While concerns of an impending recession continue to linger amid restrictive monetary policies and a strong labor market, investors could capitalize on stocks that have gained significant momentum. To that end, investors could look to buy fundamentally strong industrial stocks Holcim Ltd (HCMLY), GMS Inc. (GMS), and Apogee Enterprises, Inc. (APOG).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s affecting investor sentiment.
Fed Chairman Jerome Powell expects multiple interest rate increases in the near term and possibly at an aggressive pace, given the unrelenting labor market. Given this restrictive stance, economists fear that the rate increases could push the economy into at least a shallow recession.
However, thanks to growing demand as well as increased government investments, the industrial-building sector is well-poised for growth in the long term. The Biden administration’s Bipartisan Infrastructure Law has awarded funding to nearly 35,000 projects.
Moreover, the U.S. Commercial Construction Market is anticipated to register a CAGR of over 3.3% by 2028. Investors’ interest in the industrial sector is evident from the SPDR Select Sector Fund Industrial (XLI) 8.3% returns over the past three months.
Given these factors, investors could consider the featured industrial stocks. Let’s take a closer look at their fundamentals.
Holcim Ltd (HCMLY)
Headquartered in Zug, Switzerland, HCMLY operates as a building materials and solutions company worldwide. It offers cement, clinker, and other cementitious materials, aggregates, ready-mix concrete, precast and concrete products, and contracting and services
In terms of forward non-GAAP P/E, HCMLY’s 3.67x is 58% lower than the 8.74x industry average. Its 0.49x forward EV/EBITDA is 95.5% lower than the 10.72x industry average. Likewise, its 0.11x forward EV/Sales is 96.4% lower than the 2.99x industry average.
HCMLY’s net sales for the fiscal first quarter came in at CHF5.73 billion ($6.38 billion). Its recurring EBIT came in at CHF493 million ($549.66 million).
HCMLY’s EPS for fiscal 2023 is expected to increase 59.9% year-over-year to $1.25. Its revenue for fiscal 2024 is expected to increase by 3.5% year-over-year to $32.10 billion. Over the past nine months, the stock has gained 62.4% to close the last trading session at $13.43.
HCMLY’s stock is trading above its 50-day and 200-day moving averages of $13.02 and $11.29, respectively.
HCMLY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the A-rated Industrial - Building Materials industry, it is ranked #2 out of 47 stocks. It has an A grade for Momentum and Stability and a B for Value and Quality. To see the additional ratings of HCMLY for Growth and Sentiment, click here.
GMS Inc. (GMS)
GMS distributes wallboard, ceilings, steel framing, and complementary construction products in the United States and Canada. The company offers ceilings products, including suspended mineral fibers, soft fibers, and metal ceiling systems.
In terms of forward non-GAAP P/E, GMS’ 8.82x is 49.5% lower than the 17.46x industry average. Its 0.76x forward EV/Sales is 56.3% lower than the 1.73x industry average. Likewise, its 0.54x forward Price/Sales is 60.7% lower than the 1.38x industry average.
GMS’ net sales for the fiscal fourth quarter ended April 30, 2023, increased 1.2% year-over-year to $1.30 billion. The company’s adjusted EBITDA increased marginally year-over-year to $154.34 million. Its adjusted net EPS came in at $2.11, representing a 1% increase over the prior-year quarter.
GMS’ revenue for July 31, 2023, is expected to increase 1.4% year-over-year to $1.38 billion. Over the past nine months, the stock has gained 67.6% to close the last trading session at $69.79.
GMS’ stock is trading above its 50-day and 200-day moving averages of $63.62 and $54.64, respectively.
It is no surprise that GMS has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It is ranked first in the same industry. The stock has an A grade for Momentum and a B for Value, Sentiment, and Quality. Click here to see the additional ratings of GMS for Growth and Stability.
Apogee Enterprises, Inc. (APOG)
APOG designs and develops glass and metal products and services in the United States, Canada, and Brazil. The company operates in four segments: Architectural Framing Systems; Architectural Glass; Architectural Services; and Large-Scale Optical Technologies (LSO).
In terms of forward non-GAAP P/E, APOG’s 11.24x is 35.6% lower than the 17.46x industry average. Its 0.86x forward EV/Sales is 50.2% lower than the 1.73x industry average. Likewise, its 0.73x forward Price/Sales is 47% lower than the 1.38x industry average.
For the fiscal first quarter that ended May 27, 2023, APOG’s net earnings increased 3.7% from the prior-year quarter to $23.58 million. The company’s adjusted EBITDA increased 2.4% from the prior-year quarter to $43.76 million. In addition, its adjusted EPS came in at $1.05, representing a 5% increase from the year-ago quarter.
Analysts expect APOG’s EPS for the quarter ending August 31, 2023, is expected to increase 5.9% year-over-year to $1.12. It surpassed the consensus estimates in each of the trailing four quarters. Over the past year, the stock has gained 19.8% to close the last trading session at $47.56.
APOG’s stock is trading above its 50-day and 200-day moving averages of $41.55 and $43.65, respectively.
APOG’s POWR ratings reflect this promising outlook. APOG has an overall rating of A, which translates to a Strong Buy. It is ranked #3 in the Industrial - Building Materials industry. It has an A grade for Value and Momentum and a B for Quality. For additional ratings of APOG for Growth, Stability, and Sentiment, click here.
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HCMLY shares were trading at $13.02 per share on Wednesday morning, down $0.41 (-3.06%). Year-to-date, HCMLY has gained 26.53%, versus a 16.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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