The industrial sector is poised for success as resilient demand persists for both commercial and public infrastructure. So, quality industrial stocks Gibraltar Industries, Inc. (ROCK), Global Industrial Company (GIC), Apogee Enterprises, Inc. (APOG), and Clearwater Paper Corporation (CLW) could be solid buys for this year.
The Industrial Production Index for November in the United States reached 102.7, where a value exceeding 100 signifies positive production performance. During the month, industrial production saw a 0.2% increase, while manufacturing output rose by 0.3%. These figures indicate a robust and growing industrial sector in the United States, showcasing positive performance and expansion.
Moreover, positive government measures, including the enactment of the Infrastructure Investment and Jobs Act resulting from the $1.20 trillion Bipartisan Infrastructure Bill, are geared towards injecting $550 billion in new federal spending into America's infrastructure. This legislation is poised to stimulate demand for metals, machinery, and essential industrial products.
Additionally, the industrial landscape is undergoing a transformation marked by a surge in demand for automation and the modernization of production processes. Technological advancements, including the integration of IoT, AI, and robotics, are at the forefront of this evolution, enhancing efficiency and capabilities.
Besides, AI in the industrial machinery market is expected to expand at a 25% CAGR until 2032. On top of it, spurred by the surge in online shopping, there has been a substantial increase in the demand for packaging paper and board. The global market for containerboard is expected to reach an impressive 226 million tons by 2032.
Furthermore, the global construction industry has witnessed significant growth in recent years due to increased infrastructure spending, rising demand for residential properties, and the adoption of new technologies and sustainable building practices. The global construction materials market is expected to expand from $1.32 trillion in 2023 to $1.73 trillion by 2030, exhibiting a CAGR of 3.9%.
Projections indicate that the global industrial machinery market is expected to achieve a CAGR of 5.3%, reaching a substantial value of $1.04 trillion by 2032.
Given these favorable trends, let's delve into the foundational aspects of the four industrial stocks.
Gibraltar Industries, Inc. (ROCK)
ROCK manufactures and distributes building products for various markets, including renewable energy, residential, agtech, and infrastructure in North America and Asia. It operates through four segments: Renewables (solar racking and electrical systems); Residential (ventilation products, mail and package solutions, roofing products); Agtech (greenhouse solutions, indoor growing operations); and Infrastructure (expansion joints, structural bearings, sealants for bridges). The company serves a range of customers, including solar developers, growers, retailers, wholesalers, distributors, and contractors.
ROCK’s trailing-12-month ROTC of 10.64% is 50% higher than the 7.09% industry average. Its trailing-12-month levered FCF margin of 17.87% is 197.3% higher than the 6.01% industry average.
During the fiscal third quarter, which ended September 2023, ROCK generated adjusted net sales of $390.00 million, up marginally year-over-year. Its gross profit rose 11.5% year-over-year to $105.38 million, and income from operations improved 12.2% from the previous-year quarter to $53.19 million. Adjusted net income and adjusted EPS increased 19% and 23.2% year-over-year to $42.48 million and 1.38.
ROCK seems optimistic about its financial performance, adjusting its outlook for the fiscal year 2023. It anticipates an increase in adjusted EPS to range between $4.05 and $4.15, compared to $3.40 in 2022. The outlook for consolidated net sales is narrowed to between $1.37 billion and $1.40 billion, showing confidence in improved profitability and cash flow for the year.
Analysts expect ROCK’s revenue to increase 5.6% year-over-year to $331.33 million for the fiscal fourth quarter, which ended December 2024. Its EPS is expected to grow 18.1% year-over-year to $0.85 for the same quarter. It has surpassed the consensus EPS estimates in three of four trailing quarters, which is notable.
Shares of ROCK have gained 67.7% over the past nine months and 55% over the past year to close the last trading session at $79.77.
ROCK’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.
It has an A grade for Growth, Momentum, and Sentiment and a B for Quality. It is ranked first in the 34-stock Industrial – Metals industry.
Beyond what is stated above, we’ve also rated ROCK for Value and Stability. Get all ROCK ratings here.
Global Industrial Company (GIC)
GIC operates as a value-added industrial distributor of industrial and maintenance, repair, and operation (MRO) products in North America. Targeting businesses, educational organizations, and government entities, the company distributes its products through relationship marketers, e-commerce platforms, and catalogs. It provides a wide range of products under various trademarks, including storage, safety, HVAC, furniture, janitorial, tools, plumbing, lighting, medical, and more.
GIC’s trailing-12-month asset turnover ratio of 2.42x is 199.2% higher than the industry average of 0.81x. Its trailing-12-month ROCE of 30.61% is 148.9% higher than the industry average of 12.30%.
On November 7, GIC announced that it had secured a Vizient contract for floor cleaning equipment, aiming to offer Vizient provider customers increased savings on its proven line of cost-effective floor care equipment. The agreement covers floor care equipment, supplies, and parts, supporting environmental services departments in improving cleaning and disinfection protocols.
Vizient, the largest healthcare performance improvement company in the U.S., serves a diverse customer base, including medical centers, pediatric facilities, community hospitals, and non-acute healthcare providers.
The company pays $0.80 annually as dividends, which yields 2.11% on the prevailing price level. Its four-year average dividend yield is 5.53%. The company has consistently raised its dividend payouts for the past seven years.
GIC’s net sales rose 18.8% year-over-year to $354.6 million in the third quarter ending September 30, 2023. Gross profit rose 9.1% from the prior-year quarter to $116.3 million, and operating income increased 2.6% year-over-year to $28.20 million. Its net income improved 2% year-over-year to $20.70 million.
The consensus EPS estimate of $2.06 for the fiscal year 2024 represents an 11.4% year-over-year rise. The consensus revenue estimate of 1.33 billion for the same year represents an 8.8% year-over-year growth. The company has exceeded the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has returned 46.5% over the past year and 11.4% over the past three months, closing the last trading session at $37.93.
It’s no surprise that GIC has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
The stock also has an A grade for Momentum and Quality and a B for Stability. It is ranked #2 in the 91-stock Industrial - Equipment industry.
In addition to the POWR Ratings stated above, one can access GIC’s Growth, Value, and Sentiment ratings here.
Apogee Enterprises, Inc. (APOG)
APOG designs and develops glass and metal products and services in the United States, Canada, and Brazil. The company operates through four segments: Architectural Framing Systems; Architectural Glass; Architectural Services; and Large-Scale Optical Technologies (LSO).
On January 11, APOG declared a quarterly cash dividend of $0.25 per share, a 4% increase from its previous quarterly dividend rate of $0.24 per share. The dividend will be payable on February 14, 2024. This marks APOG’s 11th consecutive year with a dividend increase, during which time the quarterly dividend has grown by 178%, from $0.09 per share to $0.25 per share.
Its annual dividend of $1 yields 1.89% on the current price level. Its dividend payouts have increased at CAGRs of 8.6% over the past three years.
During the fiscal third quarter, which ended November 25, 2023, APOG’s net sales amounted to $339.71 million. Its operating income rose 8.3% year-over-year to $37.65 million. The company’s adjusted EBITDA increased 5.8% from the prior-year period to $47.28 million. Its adjusted EPS came in at $1.23, representing an increase of 15% year-over-year.
Street expects APOG EPS for the fiscal fourth quarter ending February 2024 to rise 17.4% year-over-year to $1.01. Its revenue is likely to amount to $338.85 million in the same quarter. It surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 14.8% over the past year to close the last trading session at $53.15. It has also gained 26% over the past nine months.
APOG’s POWR Ratings are consistent with its positive outlook. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Quality. Among the 56 stocks in the A-rated Industrial – Building Materials industry, APOG is ranked #4.
To see APOG’s Growth, Stability, and Sentiment ratings, click here.
Clearwater Paper Corporation (CLW)
CLW is a manufacturer and supplier of bleached paperboard and consumer and parent roll tissue operating through two segments: Pulp and Paperboard and Consumer Products.
CLW’s trailing-12-month ROCE of 13.83% is 81.6% higher than the industry average of 7.61%. Kits trailing-12-month asset turnover ratio of 1.22x is 73.4% higher than the 0.70x industry average.
In November, CLW announced a collaboration with Charter Next Generation (CNG) to integrate advanced recycled polyethylene into its private label tissue packaging. This initiative involves utilizing difficult-to-recycle waste plastics to create new plastics with performance similar to virgin materials.
The move is part of CLW's commitment to sustainability, with CNG playing a key role in transforming waste plastics into valuable products. The collaboration aligns with consumers' environmental concerns, and both companies hold International Sustainability and Carbon Certification (ISCC) Plus certifications for proper material tracking through a mass balance approach.
CLW’s net sales for the third quarter ended September 30, 2023, came in at $519.90 million. The company’s adjusted income increased 18.6% year-over-year to $37 million. Its adjusted income per share came in at $2.19, representing an increase of 19.7% year-over-year. Additionally, its free cash flow rose significantly year-over-year to $74 million and adjusted EBITDA rose 4.3% over the prior-year quarter to $80.60 million.
CLW’s EPS is expected to increase 88.2% year-over-year to $6.83 in the fiscal year ended December 2023.
Over the past six months, the stock has gained 5.6% to close the last trading session at $33.59.
CLW’s sound fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked first out of 10 stocks in the B-rated Industrial – Paper industry. It has a B grade for Growth, Value, Stability, and Quality.
Click here to see CLW’s rating for Momentum and Sentiment.
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ROCK shares were trading at $79.04 per share on Wednesday morning, down $0.73 (-0.92%). Year-to-date, ROCK has gained 0.08%, versus a -0.56% 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.
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