Despite the persistent inflationary pressures and the Fed’s aggressive money-tightening policies, the S&P Global US Composite PMI was revised slightly higher to 45.0 in December 2022, up from a preliminary estimate of 44.6.
However, it is down compared with November’s 46.4, indicating declining business activity as high material prices and supply chain issues continue to impact the manufacturing industry.
On the other hand, government initiatives like the Bipartisan Infrastructure Law, which allocated over $185 billion in funding for over 6,900 specific projects across all 50 states, are expected to be a significant tailwind for the manufacturing companies.
Additionally, the growing use of big data analytics in the manufacturing sector is expected to be a significant factor driving growth in the coming years. According to MarketDigits, big data analytics in the manufacturing industry market is estimated to reach $7.34 billion by 2027, growing at a CAGR of 30%.
So, investors could buy fundamentally sound manufacturing stocks, Watts Water Technologies, Inc. (WTS), Hillenbrand, Inc. (HI), and Vishay Precision Group, Inc. (VPG). These companies look well-positioned to generate big returns in the coming months.
Watts Water Technologies, Inc. (WTS)
WTS designs, manufactures, and sells products and solutions that manage and conserve the flow of fluids and energy into, through, and out of commercial and residential buildings. The company operates primarily in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa.
On November 1, 2022, WTS declared a quarterly dividend of $0.30 per share on each outstanding share of the common stocks, which was payable on December 15, 2022. The company pays a $1.20 dividend annually, which translates to a yield of 0.78% at the current price. Its 4-year average dividend yield is 0.84%. Also, the company has raised its dividends at a CAGR of 9.1% over the past five years.
In the fiscal third quarter that ended September 25, 2022, WTS’ net sales increased 7.2% year-over-year to $487.80 million. Its gross profit grew 12.3% year-over-year to $217.90 million. The company’s adjusted net income and net income per share came in at $60 million and $1.79, respectively, registering an increase of 27.4% and 28.8% from the prior-year quarter.
The consensus revenue estimate of 1.97 billion for the fiscal year ended December 2022 represents 8.7% growth from the prior year. The $7.05 consensus EPS estimate for the to-be-reported year indicates a 27.7% year-over-year rise. Moreover, WTS has an impressive earnings surprise history as it has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
Shares of WTS have gained 25.8% over the past six months, closing the last trading session at $154.55.
WTS’s POWR Ratings reflect its promising 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.
WTS has an A grade for Quality. Within the A-rated Industrial – Manufacturing industry, it is ranked #9 out of 36 stocks. To see additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for WTS, click here.
Hillenbrand, Inc. (HI)
HI operates as a diversified industrial company in the United States and internationally. It operates through three segments: Advanced Process Solutions; Molding Technology Solutions; and Batesville.
In December 2022, HI completed the acquisition of the Peerless Food Equipment division of Illinois Tool Works Inc. for a purchase price of approximately $59 million. This acquisition is expected to complement HI’s products under its LINXIS Group brands and help the company offer better services to customers.
On December 12, 2022, HI declared a regular quarterly cash dividend of $0.22 per share on the company’s common stock, representing an increase of $0.01 per share to a total rate of $0.88 per share in fiscal 2023 on an annualized basis. The dividend was payable on December 30, 2022.
The company’s annual dividend translates to a 1.91% yield on the current market price, while its four-years average dividend yield is 2.35%. Moreover, the company has raised its dividend at a CAGR of 1.2% over the last three years and has 14 years of consecutive dividend growth history.
HI reported net revenue of $749.90 million in the fiscal fourth quarter ended September 30, 2022. Its gross profit rose marginally year-over-year to $242.70 million, while its adjusted EPS grew 5% year-over-year to $1.05.
HI’s revenue is expected to increase 5.5% year-over-year to $3.10 billion in the current fiscal year ending September 2023. Its EPS is likely to come in at $3.84 in the current year. It has surpassed EPS and revenue estimates in all four trailing quarters, which is impressive.
The stock has gained 15.8% over the past six months to close the last trading session at $44.88.
It is no surprise that HI has an overall A rating, equating to a Strong Buy in our proprietary rating system. It also has a B grade for Value, Sentiment, and Quality. HI is ranked #5 in the same industry.
Get additional POWR Ratings for HI for Growth, Momentum, and Stability here.
Vishay Precision Group, Inc. (VPG)
VPG designs, manufactures, and markets specialized sensors, weighing solutions, and measurement systems. It operates through three segments: Sensors; Weighing Solutions; and Measurement Systems. The company offers its products under the Alpha Electronics, Powertron, Celtron, and Revere brands.
For the fiscal second quarter ended October 1, 2022, VPG’s net revenue increased 9.9% year-over-year to $90.06 million. Its non-GAAP gross profit rose 9.7% from the year-ago value to $37.58 million. The company’s non-GAAP net earnings increased 34% year-over-year to $9.48 million, while its non-GAAP EPS grew 32.7% from the prior-year quarter to $0.69.
Analysts expect VPG’s EPS and revenue for the fiscal year ended December 2022 to increase 76.4% and 12.7% year-over-year to $2.61 and $358.43 million, respectively.
Over the past six months, the stock has gained 46.8% to close the last trading session at $41.87.
VPG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Growth, Value, Stability, and Quality. It is ranked first in the same industry. Click here to see VPG’s rating for Momentum.
WTS shares were unchanged in premarket trading Thursday. Year-to-date, WTS has gained 5.69%, versus a 1.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
3 Manufacturing Stocks You Should Be Focused on in 2023 StockNews.com
