Despite macroeconomic uncertainty, the industrial sector remained strong thanks to consistent demand. Also, innovations in technology have played an important role in increasing production and efficiency in the sector. Given the industry’s growth prospects, investors could consider buying fundamentally sound industrial stocks General Electric Company (GE), TE Connectivity Ltd. (TEL) and Gibraltar Industries, Inc. (ROCK) for solid returns.
The Industrial Production Index came in at 102.7 in the United States in October, and a value of over 100 shows positive production performance. This indicates that the industrial sector in the United States is experiencing growth and performing well.
AI in industrial machinery market is expected to expand at a 25% CAGR until 2032. The increasing amount of complex data and the development of Industry 4.0 are driving the expansion of AI in the industrial machinery market.
The smart manufacturing market in North America is predicted to grow at a 5.7% CAGR, reaching $80.4 billion by 2028. The growth can be attributed to the rising adoption of innovative technologies in the sector, such as artificial intelligence, the Internet of Things (IoT), and robotics.
Also, government initiatives fostering digital transformation and automation are fueling the growth of the North American smart manufacturing market.
Investors’ interest in industrial stocks is evident from the Vanguard Industrials ETF’s (VIS) 8.1% returns over the past six months.
Considering these conducive trends, let’s look at the fundamentals of the three industrial stocks.
General Electric Company (GE)
GE operates as a high-tech industrial company in Europe, China, Asia, the Americas, the Middle East, and Africa. It offers gas and steam turbines, full balance of plant, upgrade, and service solutions, as well as data-leveraging software for power generation, industrial, government, and other customers.
GE’s trailing-12-month EV/EBIT multiple of 14.74 is 8.4% lower than the industry average of 16.08. Its trailing-12-month EV/EBITDA multiple of 11.35% is 5.8% lower than the industry average of 12.04.
GE’s trailing-12-month EBIT margin of 11.05% is 13.6% higher than the 9.73% industry average. Its trailing-12-month ROCE of 35.22% is 188% higher than the 12.23% industry average.
For the fiscal third quarter that ended September 30, 2023, GE’s total revenues increased 19.9% year-over-year to $17.35 billion. The company’s non-GAAP free cash flow came in at $1.67 billion, up 139.9% year-over-year. Its non-GAAP profit came in at $1.62 billion up 349.9% year-over-year.
Also, its non-GAAP EPS stood at $0.82, compared to loss per share $0.17 for the same period.
The consensus revenue estimate of $70.82 billion for the year ending December 2024 represents a 8.7% increase year-over-year. Its EPS is expected to grow 72.6% year-over-year to $4.58 for the same period. It surpassed EPS estimates in all four trailing quarters. GE’s shares have gained 78.2% over the past year to close the last trading session at $118.85.
GE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
GE also has an A grade for Sentiment and a B for Momentum. It is ranked #11 out of 35 stocks in the A-rated Industrial - Manufacturing industry. Click here to see the additional POWR Ratings for Growth, Value, Stability and Quality for GE.
TE Connectivity Ltd. (TEL)
Based in Schaffhausen, Switzerland, TEL manufactures and sells connectivity and sensor solutions worldwide. The company operates through three segments: Transportation Solutions; Industrial Solutions; and Communications Solutions.
TEL’s forward non-GAAP P/E multiple of 17.59 is 21.9% lower than the industry average of 22.51. Its forward Price/Sales multiple of 2.48% is 6.1% lower than the industry average of 2.64.
TEL’s trailing-12-month ROCE of 17.04% is significantly higher than the 0.80% industry average. Its trailing-12-month ROTA of 8.80% is significantly higher than the 0.07% industry average.
TEL’s net sales came in at $4.04 billion for the fourth quarter that ended September 29, 2023. The company’s adjusted operating income came in at $699 million. Additionally, its adjusted EPS from continuing operations came in at $1.78. Also, its free cash flow increased 26.8% year-to-date to $945 million.
Street expects TEL’s revenue to increase marginally year-over-year to $16.31 billion for the year ending September 2024. Its EPS is expected to grow 9.8% year-over-year to $7.40 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 13.4% year-to-date to close the last trading session at $130.19.
TEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #7 in the same industry. It has a B grade for Value, Sentiment and Momentum. To see additional TEL’s ratings for Growth, Stability, and Quality, click here.
Gibraltar Industries, Inc. (ROCK)
ROCK manufactures and delivers products and services tailored for the renewable energy, residential, agtech, and infrastructure sectors. The company caters to solar developers, institutional and commercial growers, home improvement retailers, wholesalers, distributors, and contractors.
ROCK’s forward EV/Sales of 1.48x is 14.3% lower than the industry average of 1.73x. Its forward EV/EBIT of 12.31x is 19.7% lower than the industry average of 15.33x.
ROCK’s trailing-12-month ROTC of 10.64% is 54.2% higher than the 6.90% industry average. Its trailing-12-month levered FCF margin of 17.87% is 195.9% higher than the 6.04% industry average.
ROCK’s gross profit increased 11.5% year-over-year to $105.38 million for the third quarter that ended September 30, 2023. Its adjusted income from operations grew 18.9% from the year-ago value to $58.59 million.
Also, its adjusted net income and adjusted net income per share increased 19% and 23.2% from the prior year’s period to $42.48 million and $1.38, respectively.
Analysts expect ROCK’s revenue to increase 6.2% year-over-year to $1.46 billion for the year ending December 2024. Its EPS is expected to grow 14.4% year-over-year to $4.71 for the same period. It has surpassed EPS estimates in three of four trailing quarters. Shares of ROCK has gained 45.4% year-to-date to close the last trading session at $66.71.
It’s no surprise that ROCK has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It has an A grade for Growth and Momentum and a B for Sentiment and Quality. It is ranked first among 33 stocks in the Industrial – Metals industry.
Beyond what is stated above, we’ve also rated ROCK for Value and Stability. Get all ROCK ratings here.
What To Do Next?
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GE shares were trading at $119.06 per share on Wednesday morning, up $0.21 (+0.18%). Year-to-date, GE has gained 83.38%, versus a 20.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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