The industrial sector is benefiting from significant tailwinds derived from the continuing dominance of e-commerce and shifts in inventory models, according to Green Street analysts. The Green Street report also noted that ‘risks impeding fundamentals appear low at first glance.’
Investors monitored the volatile trading environment yesterday, which was driven by the worsening Russia-Ukraine conflict. The Dow Jones Industrial Average slipped approximately 0.49% to close at 33,892.60. The S&P 500 closed down 0.24% at 4,373.94, while the Nasdaq gained late in the session to close at 13,751.40.
Given this backdrop, ‘Dividend Aristocrats’ in the industrial sector with more than 25 years of dividend growth, namely Emerson Electric Co. (EMR), Dover Corporation (DOV), Expeditors International of Washington, Inc. (EXPD), and A. O. Smith Corporation (AOS) might be solid bets on their share-price dip.
Emerson Electric Co. (EMR)
EMR in Ferguson, Mo., operates as a manufacturer and technology service provider for the industrial, customer, and commercial markets globally. The company operates through two segments–Automation Solutions, and Commercial and Residential Solutions.
On January 20, EMR announced that it had introduced a non-contacting radar device designed specifically for the food and beverage industry. This addition to its portfolio of measurement devices designed for hygienic applications requirements should add to its revenue stream.
On December 16, EMR announced that it had acquired a control automation business for wind power generation Mita-Teknik in an all-cash transaction. The acquisition is expected to complement the company’s portfolio of existing control systems and is expected to bolster its operative ability.
On February 2, EMR declared a quarterly dividend of $0.515 per share of common stock, payable to shareholders on March 10. Its annual dividend of $2.06 yields 2.22% at its current share price. The company’s dividend payouts have increased at a 1.5% CAGR over the past three years and 1.3% over the past five years.
For its fiscal first quarter, ended December 31, EMR’s net sales increased 7.5% year-over-year to $4.47 billion. Its adjusted EBITA rose 16% from the prior-year quarter to $878 million, while its adjusted EPS came in at $1.05, registering a 12.9% improvement from the same period the prior year.
The $5.02 consensus EPS estimate for its fiscal year 2022 indicates a 22.4% year-over-year increase. And the $19.58 billion consensus revenue estimate for the same year reflects a rise of 7.4% from the prior year. Also, EMR has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.2% in price over the past year but declined marginally year-to-date to close yesterday’s trading session at $92.92. It is currently trading 12.3% lower than its 52-week high of $105.99
EMR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, 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.
EMR has a Stability, Sentiment, and Quality grade of B. In the 92-stock Industrial – Equipment industry, it is ranked #19. Click here to see the additional POWR Ratings for EMR (Growth, Value, and Momentum).
Dover Corporation (DOV)
DOV is an equipment and components, consumable supplies, aftermarket parts, and support services provider globally. The Downers Grove, Ill.-based concern operates through Engineered Products; Clean Energy & Fueling; Imaging and Identification; Pumps and Process Solutions; and Climate & Sustainability Technologies segments.
On February 22, Caldera, which is part of Dover Digital Printing and DOV, announced a strategic partnership with G-TEC Global for the delivery of eco-friendly PVC material solutions for brands and print service providers. The partnership should be beneficial for the company.
On February 3, Hillphoenix, which is part of Dover Food Retail and DOV, announced the addition of the CO2One™ single-condensing unit, available in two configurations, to its comprehensive portfolio of all-natural, eco-friendly products. Subodh Sharma, Director of Systems Product Management at Hillphoenix, said, “Additionally, this product can be used as a direct replacement for HFC single-condensing units, which allows for compliance with the new regulations that are being put in place.”
DOV declared a quarterly dividend of $0.50 per share, payable on March 15. This contributes to an annual dividend of $2.00, which yields 1.28% at its prevailing share price. The company’s dividend payouts have increased at a 1.5% CAGR over the past three years and a 7.3% CAGR over the past five years.
DOV’s revenue has increased 11.7% year-over-year to $1.99 billion in its fiscal fourth quarter, ended December 31. Its adjusted net earnings and adjusted net EPS stood at $258.70 million and $1.78, respectively, up 15% and 14.8% from the prior-year period.
Analysts expect DOV’s EPS to increase 1.7% year-over-year to $1.84 for the quarter ending March 2022, while the Street expects revenue for the same period to rise 8.9% from the prior-year period to $2.03 billion. In addition, DOV has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 27.3% in price to close yesterday’s trading session at $156.86. However, it has declined 7.7% over the past month. And it is currently trading 14.8% lower than the 52-week high of $184.05.
It’s no surprise that DOV has an overall B rating, which translates to Buy in our POWR Rating system. DOV has a B grade for Stability, Sentiment, and Quality. It is ranked #19 of the 79 stocks in the B-rated Industrial – Machinery industry.
To see the additional POWR Ratings for Growth, Value, and Momentum for DOV, click here.
Expeditors International of Washington, Inc. (EXPD)
EXPD operates as a logistics services provider in the Americas, South Asia, Europe, Middle east, Africa, and India. The Seattle, Wash.-based company’s offerings include air-freight services, ocean freight, and ocean services, customs brokerage, and intra-continental ground transportation and services.
On November 2, EXPD announced a semi-annual dividend of $0.58 per share, which was payable on December 15. Its $1.16 annual dividend yields 1.12% at the prevailing share price. The company’s dividend payouts have increased at an 8.8% CAGR over the past three years and 7.7% over the past five years.
For its fiscal fourth quarter, ended December 31, EXPD’s revenues increased 81% year-over-year to $5.40 billion. Its operating income rose 121.3% from the prior-year quarter to $623.53 million. And its net earnings and EPS attributable to shareholders improved 128% and 129.3%, respectively, from the same period the prior year to $452.83 million and $2.66.
The $1.88 consensus EPS estimate for the quarter ending March 2022 reflects a 12.6% year-over-year rise. And the $4.12 billion consensus revenue estimate for the same quarter indicates a 22.7% increase from the prior-year quarter. In addition, EXPD has beaten consensus EPS estimates in each of the trailing four quarters.
EXPD’s shares have gained 12.5% in price over the past year but declined 9.7% over the past month to close yesterday’s trading session at $103.36. The stock is currently trading 25% lower than its 52-week high of $137.80.
This promising outlook is reflected in EXPD’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. EXPD has a Quality grade of B. In the 16-stock Air Freight & Shipping Services industry, it is ranked #9. The industry is rated A.
Click here to see the additional POWR Ratings for EXPD (Growth, Value, Momentum, Stability, and Sentiment).
- O. Smith Corporation (AOS)
Milwaukee, Wisc.-based AOS manufactures and markets residential and commercial gas, heat pumps, electric water heaters, and water treatment products in North America, China, Europe, and India. The company operates through the two broad segments of North America and Rest of World.
On October 19, AOS announced the acquisition of Giant Factories, Inc., a Canadian residential and commercial water heater manufacturer. Kevin J. Wheeler, chairman, and the chief executive officer, said, “The addition of Giant strengthens our leadership position as a global supplier of residential and commercial water heaters. The acquisition also supports our corporate strategy by increasing our North America market penetration, creating additional capacity, and enhancing our distribution capabilities.”
On January 18, AOS declared a $0.28 per share quarterly dividend on the company’s Common Stock and Class A Common Stock, which was payable on February 15. The payment contributes to a total $1.12 annual dividend and yields 1.63% at the prevailing share price. Its dividend payouts have increased at a 10.5% CAGR over the past three years and a 16.7% CAGR over the past five years.
AOS’s net sales increased 19.3% year-over-year to $995.50 million in its fiscal fourth quarter, ended December 31. Its gross profit improved 11.3% from the prior-year period to $360.60 million. And its net earnings and EPS came in at $139.60 million and $0.87, respectively, up 16.3% and 17.6% from the same period the prior year.
The Street’s $0.74 EPS estimate for the quarter ending March 2022 indicates a rise of 23.3% from the prior-year quarter. The Street’s $967.99 million revenue estimate for the same quarter reflects a 26% year-over-year improvement. AOS has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 15.5% in price over the past year but has declined 10.3% over the past month to close yesterday’s trading session at $68.58. It is currently trading 20.9% lower than its 52-week high of $86.74.
AOS has an overall rating of B, which translates to Buy in our POWR Rating system. The stock has an A grade for Quality. It is ranked #25 in the Industrial – Machinery industry.
In addition to the POWR Rating grade we’ve stated above, one can see AOS ratings for Growth, Value, Momentum, Stability, and Sentiment here.
EMR shares were trading at $89.51 per share on Tuesday afternoon, down $3.41 (-3.67%). Year-to-date, EMR has declined -3.22%, versus a -9.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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