Industrial Stocks are Appealing in an Uncertain Market
Many of the top analysts on Wall Street are bullish on value sectors like the industrials, and it’s fairly easy to understand why. With interest rate hikes on the horizon and sharp moves to the downside in high valuation names, industrial stocks could be poised to outperform this year and are already showing signs of strength in an uncertain market environment. There’s also a lot to like about stocks in the industrial sector given the prospects of a recovering economy, as many of these businesses tend to thrive during periods of expansion.
While all signs point towards a strong year for this sector, investors still need to be highly selective when putting money to work at this time. That’s why we’ve put together the following list of 3 interesting industrial stocks to buy now to help you narrow your focus towards the best of the best.
Each one of these companies has a strong financial position, established business model, and appealing earnings that make them strong picks to consider at this time.
This major manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives is an interesting stock for a number of reasons. First, consider the role Caterpillar will play in rebuilding the country’s crumbling infrastructure over the next few years. The U.S. government is committed to spending big on improving roads, bridges, rails, electricity, and more, and Caterpillar’s heavy machinery is going to be vital in accomplishing that agenda. There’s also a lot to like about Caterpillar has exposure to mining and energy markets, which have been strong lately and could contribute to more earnings for the company in the short term.
Caterpillar is also an interesting industrial stock thanks to its dividend aristocrat status, which is a testament to how well-run and financially stable the company is. The stock currently offers investors a 2% dividend yield and the company has paid higher annual dividends to shareholders for 28 consecutive years at this time. Finally, the fact that the company posted Q3 sales and revenue of $12.4 billion, up 25% year-over-year, paints the picture of a company that is benefitting from several market factors including increased demand and favorable price realization.
Builders Firstsource (NYSE: BLDR)
Most investors are aware that there is a huge supply imbalance going on in the residential real estate market, which is a good reason to consider adding shares of Builders Firstsource. It’s a major supplier of building products, prefabricated components, and value-added services to the professional market segment for new residential construction and repair and remodeling. Homebuilders are trying to build as many new houses as possible, and this trend should continue for years to come, which bodes well for Builders Firstsource and its shareholders.
It’s a unique company in that it provides its customers with an integrated homebuilding solution, which essentially means it’s a one-stop shop for all manufacturing, supply, delivery, and installation needs. The stock also is trading at an attractive valuation even after a strong rally in 2021, with a forward P/E ratio of 8.96. In Q3, Builders Firstsource reported net sales of $5.5 billion, up 140% year-over-year, along with Adjusted EBITDA up 244.4% to $975.9 million. With plenty of tailwinds working in this company’s favor and impressive earnings growth, this is certainly an intriguing industrial stock to consider adding at this time.
If you’re looking for a deep value play and have a very long-term horizon, Delta Airlines is perhaps one of the most attractive stocks in the industrial sector to consider adding. The airline industry is still licking its wounds after a brutal few years due to the global pandemic, but it’s important for investors to remember that many of the industry’s issues are only going to be temporary. We are already seeing signs of a rebound in travel demand, and although the current wave of COVID-19 cases is certainly a factor to consider, international travel restrictions should once again ease up in the Spring as case counts are likely to decline.
To quote the company’s CEO, Ed Bastian, “Omicron is expected to temporarily delay the demand recovery 60 days, but as we look past the peak, we are confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel,” Delta is probably the most quality name in the airline industry thanks to a strong balance sheet and its ability to consistently attract business travelers over the years thanks to premium experiences and credit card partnerships. The company beat Q4 EPS estimates by over 50% and exceeded revenue estimates by around 2% and could be a bargain at current levels if you are a long-term investor, so keep an eye on the stock as it gets closer to reclaiming the 200-day moving average.