Rising demand for advanced machinery and solutions is anticipated to keep the construction equipment industry on a positive growth trajectory. Against this backdrop, let us take a closer look at some of the industrial equipment stocks Mitsubishi Electric Corporation (MIELY), Prysmian S.p.A. (PRYMY), and Preformed Line Products Company (PLPC).
Nearly three years post the onset of the global COVID-19 pandemic, the equipment manufacturing industry is still recovering. In addition, macroeconomic challenges, such as rising interest rates, labor shortages, and sky-high material prices, have plagued the construction industry. Despite such headwinds, the industry is anticipated to showcase resilience amid rising investment in infrastructure.
Industrial production rose 0.4% in March and changed slightly in the first quarter, increasing at an annual rate of 0.2%. Moreover, the global construction equipment market was valued at $122.07 billion in 2022 and is anticipated to reach $133.77 billion by 2029, witnessing a CAGR of 1.3% between 2023 and 2029.
The industry’s growth could be attributable to the easing supply chain issues. Furthermore, over the past year, Industrial Select Sector SPDR Fund (XLI) has gained 2.2%, outpacing S&P 500, which plunged 3.3%. This substantiates investors’ interest in industrial stocks.
Given this backdrop, quality industrial stocks MIELY, PRYMY, and PLPC might be wise portfolio additions in 2023.
Mitsubishi Electric Corporation (MIELY)
Headquartered in Tokyo, Japan, MIELY develops, manufactures, distributes, and sells electrical and electronic equipment worldwide.
On April 18, MIELY announced that it had developed a technology to detect serious physical conditions experienced by people driving automobiles, such as loss of consciousness, by estimating pulse rate, changes in blood pressure, and other biometric data collected with a contactless Driver Monitoring System (DMS) camera, which the company has already launched to detect driver distractions and drowsiness.
In terms of trailing-12-month CAPEX/Sales, MIELY’s 3% is 4.1% higher than the industry average of 2.88%. In addition, the stock’s trailing-12-month asset turnover ratio of 0.97x is 20.7% higher than the industry average of 0.80x.
MIELY plans to pay a year-end dividend of ¥26 per share and an interim dividend of ¥14 per share, which are expected to be declared by the company’s board of directors in May. This reflects its shareholder return ability.
For the fiscal third quarter that ended December 31, 2022, MIELY’s revenues stood at ¥1.23 trillion ($9.14 billion), up 17.5% year-over-year. Its total operating profit increased 58% year-over-year to ¥82.72 billion ($616.71 million). MIELY’s net profit rose 46.3% year-over-year to ¥66.82 billion ($498.18 million).
Analysts expect MIELY’s revenue for the fiscal first quarter (ending June 2023) to increase 7.2% year-over-year to $8.52 billion.
Over the past year, the stock has gained 15% to close the last trading session at $24.22. Moreover, it had gained 26.5% over the past six months.
MIELY’s POWR Ratings reflect this positive outlook. MIELY has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Momentum, Stability, and Sentiment. MIELY is ranked #5 in the 89-stock Industrial – Equipment industry.
Beyond what we have stated above, one can see additional MIELY ratings for Growth and Quality here.
Prysmian S.p.A. (PRYMY)
Headquartered in Milan, Italy, PRYMY produces, distributes, and sells cables and systems, and related accessories for the energy and telecommunications industries worldwide. It operates through three segments: Projects; Energy; and Telecom.
In terms of the trailing-12-month gross profit margin, PRYMY’s 33.17% is 10.93% higher than the industry average of 29.90%. In addition, the stock’s trailing-12-month ROCE and ROTC of 15.51% and 7.54% are 12.1% and 6.9% higher than the industry averages of 13.84% and 7.05%, respectively.
PRYMY’s board approved the distribution of a gross dividend of €0.60 per share for a total pay-out of about €158 million. The dividend is payable from 26 April 2023. Its annual dividend translates to a 1.59% yield on the current share price. Its four-year dividend yield is 2.52%. The company’s dividend payout has grown at a CAGR of 4.3% over the past five years.
For the fiscal year that ended December 31, 2022, PRYMY’s sales increased 26.2% year-over-year to €16.07 billion ($17.66 billion). Its adjusted operating income and adjusted EBITDA came in at €1.12 billion ($1.23 billion) and €1.49 billion ($1.64 billion), up 73% and 52.5% year-over-year, respectively.
PRYMY’s net income attributable to the group increased 63.6% year-over-year to €504 million ($553.83 million) for the same year. Also, its earnings per share of common stock came in at €1.90, up 62.4% year-over-year.
For the fiscal second quarter ending June 2023, the consensus revenue estimate of $4.41 billion indicates a 1.3% year-over-year growth. For the fiscal year ending December 2023, Street expects its revenue to increase 2.4% from the prior-year quarter to $17.40 billion. In addition, PRYMY topped consensus revenue estimates in each of the four trailing quarters.
Over the past year, the stock has gained 28.4% to close the last trading session at $20.82. Moreover, it had gained 29.6% over the past six months.
PRYMY’s POWR Ratings reflect its solid fundamentals. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has a B for Value, Stability, and Quality. It is ranked #7 in the same industry.
One can see additional PRYMY ratings for Growth, Momentum, and Sentiment here.
Preformed Line Products Company (PLPC)
PLPC designs and manufactures products and systems used in the building and maintenance of overhead, ground-mounted, and underground networks for energy, telecommunications, cable operator, information, and other industries, along with its subsidiaries.
On February 2, PLPC announced that it had acquired substantially all of the assets of Pilot Plastics, Inc. With multiple state-of-the-art presses and a highly experienced production team, the Pilot acquisition should expand PLPC's injection molding capabilities and further enhance the company's extensive manufacturing footprint.
On March 22, PLPC’s board of directors declared a regular quarterly dividend of $0.20 per share on the company's common shares, which was payable to shareholders on April 20, 2023. PLPC’s four-year average dividend yield is 1.28%. Its annual dividend of $0.80 yields 0.63% at the current price level.
PLPC’s trailing-12-month gross profit and EBITDA margins of 33.78% and 14.64% are 13% and 10.3% higher than the industry averages of 29.90% and 13.27%, respectively.
For the fiscal fourth quarter that ended December 31, 2022, PLPC’s net sales increased 29.3% year-over-year to $169.92 million. Its operating income came in at $24.59 million, up 124.2% year-over-year. Also, net income attributable to PLPC shareholders increased 84% year-over-year to $16.51 million. Its earnings per share of common stock came in at $3.28, up 83.2% year-over-year.
Over the past year, the stock has gained 109% to close the last trading session at $127.06. Moreover, it has gained 64.4% over the past six months.
PLPC’s solid prospects 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 a B grade for Growth, Value, and Sentiment. It is ranked #6 in the same industry.
Click here to see additional PLPC ratings for Momentum, Stability, and Quality.
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MIELY shares were unchanged in premarket trading Monday. Year-to-date, MIELY has gained 22.26%, versus a 8.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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