The industrial sector encompasses various segments including industrial machinery, industrial construction material, industrial services, and industrial equipment catering to a wide variety of end-user industries and contributing to economic development.
Thus, against this backdrop, it could be wise to watch fundamentally sound industrial stocks Flowserve Corporation (FLS), Vontier Corporation (VNT), and Ryder System, Inc. (R), which are trading at a discount.
Fueled by the increasing adoption of automation and smart technologies significantly improving productivity and efficiency, the global industrial machinery market is flourishing. The market is expected to grow at a CAGR of 7.5%, resulting in a market value of $1.30 trillion by 2032.
Also, with digital transformation, the industrial services industry is evolving rapidly with the adoption of industry 4.0 technologies like IoT (Internet of Things), AI (Artificial Intelligence), and automation.
Moreover, activities like exploration and refining of oil and gas, together with massive industrialization and urbanization, have led to revolution in various industries, including automobile, pharmaceutical, telecommunication, and manufacturing, resulting in the development and demand of industrial static equipment market.
Given the industry's robust outlook, investing in quality industrial stocks such as FLS, VNT, and R could be wise for future gains.
Flowserve Corporation (FLS)
FLS designs, manufactures, distributes, and services industrial flow management equipment internationally. It operates in Flowserve Pump Division; and Flow Control Division segments. The company offers custom and pre-configured pumps and pump systems, mechanical seals, auxiliary systems, replacement parts, upgrades, and related aftermarket services.
In terms of forward Price/Sales, FLS is trading at 1.39x, 3% lower than the industry average of 1.43x. Similarly, the stock's forward EV/EBIT multiple of 13.98 is 9.2% lower than the industry average of 15.40. Also, its forward EV/Sales of 1.58x is 10.3% lower than the industry average of 1.76x.
On June 10, FLS and Heide Refinery, Germany's northernmost crude oil refinery and chemicals company, announced their partnership to incorporate Flowserve's Energy Advantage Program to accelerate Heide Refinery's momentum in energy efficiency.
The program's first phase estimates 2,000 MWh power consumption reduction potential, leading to 1,300 metric tons CO2 savings and aligns with their efforts to reduce carbon emissions.
On May 21, FLS' Board of Directors authorized a quarterly cash dividend of $0.21 per share on the company's outstanding shares of common stock.
FLS pays an annual dividend of $0.84, which translates to a yield of 1.74% at the current share price. Its four-year average dividend yield is 2.29%. Additionally, the company's dividend payouts have increased at a CAGR of 1.3% over the past five years.
FLS' sales increased 10.9% year-over-year to $1.09 billion during the first quarter that ended March 31, 2024, and its adjusted gross profit grew 15.6% from the year-ago value to $344.64 million. Its adjusted operating income of $118.25 million indicates growth of 45.5% from the prior year's quarter.
Furthermore, adjusted net earnings came in at $77.39 million and $0.58 per share, up 47% and 45% year-over-year, respectively.
Analysts expect FLS' revenue for the second quarter (ending June 2024) to increase 4.5% year-over-year to $1.13 billion and its EPS for the same quarter is expected to grow 21.7% year-over-year to $0.63. Furthermore, the company topped the consensus revenue and EPS estimates in all of the trailing four quarters.
Shares of FLS have surged 13.9% over the past six months and 33.5% over the past year to close the last trading session at $47.54.
FLS' POWR Ratings reflect this solid outlook. The stock has an overall rating of A which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
FLS has a B grade for Growth, Sentiment, and Value. It is ranked #8 out of 79 stocks in the A-rated Industrial - Machinery industry.
In addition to the POWR Ratings we've stated above, we also have other ratings of FLS for Momentum, Stability, and Quality. Get all FLS ratings here.
Vontier Corporation (VNT)
VNT provides mobility ecosystem solutions globally. The company operates through Mobility Technologies; Repair Solutions; and Environmental and Fueling Solutions segments.
In terms of forward EV/Sales, VNT is trading at 2.54x, 12.7% lower than the industry average of 2.91x. Similarly, the stock's forward EV/EBIT multiple of 11.64 is 42.3% lower than the industry average of 20.20. Further, its forward Price/Sales of 1.92x is 32.6% lower than the industry average of 2.86x.
On May 24, VNT's Board of Directors declared a regular quarterly cash dividend of $0.025 per share payable on June 27, 2024, to stockholders of record on June 6, 2024.
VNT pays an annual dividend of $0.10, which translates to a yield of 0.26% at the prevailing share price. Its four-year average dividend yield is 0.26%. Moreover, the company's dividend payouts have increased at a CAGR of 58.7% over the past three years.
During the first quarter that ended March 31, 2024, VNT posted sales of $755.80 million. Its adjusted operating profit grew 3.4% from the year-ago value to $142.10 million. The company's net earnings came in at $136.80 million and $0.88 per share, indicating growths of 65.2% and 66% from the year-ago value, respectively.
In addition, the company's adjusted free cash flow grew marginally from the year-ago value to $78.20 million.
Street expects VNT's EPS and revenue for the third quarter (ending September 2024) to increase 7.7% and marginally year-over-year to $0.79 and $767.82 million. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Over the past six months, VNT's stock has gained 10.3% and 25.2% over the past year to close the last trading session at $38.27.
VNT's sound 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.
The stock has a B grade for Stability, Value, and Quality. Within the Industrial - Equipment industry, VNT is ranked #5 of 86 stocks.
Click here to access additional ratings of VNT for Momentum, Sentiment, and Growth.
Ryder System, Inc. (R)
R operates as a logistics and transportation company internationally. The company operates through three segments: Fleet Management Solutions; Supply Chain Solutions; and Dedicated Transportation Solutions. It provides full-service leasing and leasing with flexible maintenance options, commercial vehicle rental services, and contract or transactional maintenance services.
In terms of forward non-GAAP P/E, R is trading at 10.34x, 43.9% lower than the industry average of 18.44x. Likewise, the stock's forward EV/Sales multiple of 1.06 is 39.9% lower than the industry average of 1.76. Also, its forward Price/Sales of 0.41x is 71% lower than the industry average of 1.43x.
On May 4, R's Board of Directors declared a regular quarterly cash dividend of $0.71 per share of common stock paid on June 21, 2024 to shareholders of record on May 20, 2024.
R pays an annual dividend of $2.84, which translates to a yield of 2.28% at the current share price. Its four-year average dividend yield is 3.06%. Moreover, the company's dividend payouts have increased at a CAGR of 11.9% over the past five years.
For the first quarter that ended March 31, 2024, R's total revenue increased 4.9% year-over-year to $3.10 billion and its operating income grew 6.3% from the year-ago value to $2.49 billion. Its net earnings came in at $85 million and $1.89 per share, respectively.
Also, the company's comparable EBITDA increased 1.3% from the prior year's quarter to $636 million.
As per the company's forecast, R expects EPS from continuing operations of $2.58 - $2.78 for the second quarter. Also, for the full year, the company expects EPS from continuing operations between $10.95 and $11.70.
Analysts expect R's EPS for the fourth quarter (ending December 2024) to increase 20% year-over-year to $3.54 and its revenue for the same period is expected to grow 14.5% year-over-year to $3.46 billion. Moreover, the company surpassed the consensus EPS estimates in all of the trailing four quarters.
R's stock has surged 5.2% over the past six months and 49.7% over the past year to close the last trading session at $124.60.
R's POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
R has an A grade for Growth and a B grade for Momentum, Sentiment, and Value. The stock is ranked #9 among 77 stocks in the B-rated Industrial - Services industry.
To access R's other ratings for Quality, and Stability, click here.
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FLS shares were trading at $47.41 per share on Wednesday afternoon, down $0.74 (-1.54%). Year-to-date, FLS has gained 15.55%, versus a 15.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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