Although supply chain issues and labor shortages have been significant challenges for the industrial sector, the reopening of economic activities aided industrial companies' performance last year. Also, expanded e-commerce facilities, fulfillment centers, bulk warehouses, and the demand for industrial real estate further indicate the sector’s growth this year.
The U.S. industrial market generated sales volume that was 47% higher than the previous year. In addition, the sector’s long-term production and warehousing investment and strong consumer demand should further fuel its growth. Investors' interest in industrial stocks is evidenced by the Vanguard Industrials Index Fund ETF’s (VIS) 13.7% gains over the past year.
Given this backdrop, we think it could be wise to bet on quality industrial stocks CNH Industrial N.V. (CNHI), ManpowerGroup Inc. (MAN), and Hillenbrand, Inc. (HI), which look undervalued at their current price levels.
CNH Industrial N.V. (CNHI)
Based in London, CNHI is a global equipment and services company that provides strategic direction, R&D capabilities, and investments. The company operates through Agriculture; Construction; Commercial and Specialty Vehicles; Powertrain; and Financial segments. CNHI also designs and markets agricultural and construction equipment, trucks, commercial vehicles, buses, and specialty vehicles in North America, Europe, South America, and internationally.
CNHI's net revenues increased 23.2% year-over-year to $7.99 billion for the third quarter, ended Sept. 30, 2021. The company's profit for the period came in at $450 million. Also, its EPS grew 175% from the year-ago value to $0.33.
CNHI's consensus revenue is estimated to increase 5.1% year-over-year to $7.85 billion for the fiscal period ending March 31, 2022. The company has an impressive surprise earnings history; it surpassed the consensus EPS in each of the trailing four quarters. Its EPS is expected to grow 23.8% next year. The stock has gained 17.5% in price over the past year.
In terms of forward EV/Sales, CNHI is currently trading at 1.18x, which is 37.1% lower than the 1.87x industry average. Also, in terms of its forward non-GAAP P/E, the stock is currently trading at 11.97x, which is 38.3% lower than the 19.4x industry average.
CNHI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
Also, the stock has an A grade for Value and a B for Sentiment. We have also graded CNHI for Growth, Stability, Momentum, and Quality. Click here to access all CNHI's ratings.
CNHI is ranked #25 of 79 stocks in the B-rated Industrial – Machinery industry.
ManpowerGroup Inc. (MAN)
Incorporated in 1948, MAN is a global provider of innovative workforce solutions that connects human potential to business. Manpower, Experis, and Talent solutions are the brands under which the company serves both large and small organizations across all industry sectors. Milwaukee, Wisc.-based MAN also offers recruitment services, including permanent, temporary, and contract recruitment of professionals and administrative and industrial positions.
During the fourth quarter, ended Dec. 31, 2021, MAN's revenues from services increased 6.5% year-over-year to $5.38 billion. The company's gross profit grew 15.9% from its year-ago value to $926.3 million. Its operating profit rose 20.5% from the prior-year quarter to $166.6 million. Also, the company's net earnings increased 45.8% year-over-year to $111.1 million.
Analysts expect MAN's revenue to increase 6.1% year-over-year to $19.59 billion in its fiscal 2022. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. The company's EPS is expected to increase 21.6% in the current year. The stock has soared 21.5% in price over the past year.
In terms of forward EV/EBITDA, MAN is currently trading at 7.2x, which is 39.8% lower than the 11.96x industry average. In addition, its 7.73x forward EV/EBIT is 54.2% lower than the 16.85x industry average.
MAN's POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has an A grade for Value
In addition to the POWR Rating grades I've just highlighted, one can see MAN's ratings for Stability, Momentum, Growth, Quality, and Sentiment here. The stock is ranked #10 of 20 stocks in the A-rated Outsourcing – Staffing Services industry.
Note that MAN is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Hillenbrand, Inc. (HI)
HI is a Batesville, Ind.-based global diversified industrial company that serves a wide variety of industries worldwide. The company operates through Advanced Process Solutions; Molding Technology Solutions; and Batesville. Its segments manufacture engineered industrial equipment, customized systems services in plastic processing, and provide other technology applications.
HI's net revenue increased 8.8% year-over-year to $754.9 million in its fiscal fourth quarter, ended Sept. 30, 2021. The company's gross profit grew marginally from the year-ago value to $241.3 million. Its net income came in at $55 million, compared to a $7.1 million net loss in the prior-year quarter. Also, the company's EPS amounted to $0.74, compared to a $0.09 loss per share in the year-ago quarter.
For its fiscal year 2023, analysts expect HI's revenue to be $2.99 billion, representing 4.3% year-over-year growth. The company has surpassed the consensus EPS estimates in each of the trailing four quarters. In addition, its EPS is expected to increase 10.2% next year. HI's stock price has surged 9.5% over the past year.
In terms of forward EV/Sales, HI is currently trading at 1.5x, which is 20.2% lower than the 1.88x industry average. Also, in terms of its forward Price/Sales, the stock is currently trading at 1.18x, which is 24.9% lower than the 1.57x industry average.
It is no surprise that HI has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has an A grade for Value and a B grade for Sentiment and Quality.
Click here to see the additional POWR Ratings for HI (Momentum, Stability, and Growth). The stock is ranked #4 of 39 stocks in the B-rated Industrial – Manufacturing industry.
What To Do Next?
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CNHI shares were trading at $15.42 per share on Wednesday afternoon, down $0.00 (0.00%). Year-to-date, CNHI has declined -20.64%, versus a -3.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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