The industrial sector is flourishing owing to favorable legislation, rising construction expenditures, and innovation-promoting technical advancements. Thus, it seems wise to invest in Siemens Aktiengesellschaft (SIEGY), Installed Building Products, Inc. (IBP), and Konica Minolta, Inc. (KNCAY), which are poised for robust growth.
Let's understand this in more detail.
With the broad adoption of smart factories and advanced technology, the industrial sector is positioned for significant breakthroughs. Shop floors and operations are being revolutionized by these revolutionary facilities while predictive maintenance and digital twin technology are enabling better decision-making among manufacturers.
Industrial productivity is also being increased by other technical innovations such as Artificial Intelligence (AI), machine learning, and advanced analytics. Various domains use AI-driven decision-making, including inventory management, manufacturing line evaluations, supply chain management, and quality inspection.
Concerns about economies of scale have also given way to a new era of personalization, which has been ushered in by the inventive trend of 3D printing. This technology enables the manufacturing of customized items and stimulates innovation by enabling quick prototyping.
Furthermore, the Infrastructure Investment and Jobs Act (IIJA), the CHIPS and Science Act, and the Inflation Reduction Act (IRA) have all been major drivers of this year's notable progress in the U.S. manufacturing sector. Adopted in 2021 and 2022, these legislations have significantly accelerated industry advancement.
Construction spending has increased significantly in the manufacturing sector since these measures were put into effect. Spending on factory building increased to $201 billion annually as of July 2023, a 70% increase from the previous year. This spike lays a solid basis for the industry's further expansion in 2024.
That said, the AIA Consensus Construction Forecast Panel projects that non-residential building investment would increase by around 20% in 2023, reaching levels not seen since the Great Recession. Notably, spending on commercial buildings is expected to rise by 10%, while industrial construction is expected to rise by 50%.
In light of these encouraging trends, let us dive into the fundamentals of these three industrial stocks.
Siemens Aktiengesellschaft (SIEGY)
Headquartered in Munich, Germany, SIEGY is a technology powerhouse that concentrates on automation and digitalization. The company is organized into five segments: Digital Industries; Smart Infrastructure; Mobility; Siemens Healthineers; and Siemens Financial Services.
On November 30, Siemens Mobility and European Locomotive Leasing Group (ELL) based in Vienna and Munich, forged an alliance by signing a framework agreement to deliver up to 200 additional Vectron locomotives. This fourth agreement cements the enduring and formidable partnership between ELL and Siemens Mobility.
Furthermore, with the potential to expand the Vectron fleet to over 400 locomotives in the medium term, this accord not only solidifies Siemens Mobility's market presence but also showcases its pivotal role in shaping Europe's rail infrastructure landscape.
On November 27, Siemens Smart Infrastructure announced a collaboration with Copperleaf, a Canadian provider of asset investment planning software. The partnership, integrated into the Siemens Xcelerator platform, aims to optimize investment and technical grid planning for customers.
The collaboration would position Siemens Smart Infrastructure to leverage enhanced capabilities to meet customer needs effectively. It would aid SIEGY in driving financial success through innovative solutions in the realm of smart infrastructure and digital business platforms.
For the fourth quarter that ended September 30, 2023, SIEGY’s revenue increased 4% year-over-year to €$21.39 billion ($23.38 billion). Its gross profit grew 7.3% from the year-ago value to €$8.24 billion ($9 billion).
Also, the company’s cash inflow from operating activities from continuing operations rose 32.7% from the prior year’s quarter to $5.47 billion ($5.97 billion). As of September 30, 2023, the company’s current assets amounted to €$60.64 billion ($66.27 billion), compared to €$58.83 billion ($64.29 billion) as of September 30, 2022.
The consensus revenue estimate of $89.08 billion for the fiscal year ending September 2024 reflects a 5.6% year-over-year improvement. Likewise, the consensus EPS estimate of $7.68 for the ongoing year exhibits a 35.6% rise from the prior year. Also, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of SIEGY have gained 27.9% over the past month to close the last trading session at $84.00.
SIEGY’s strong fundamentals are reflected in its POWR Ratings. 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 to an optimal degree.
SIEGY has a B grade for Value and Stability. It has ranked #2 out of 35 stocks within the A-rated Industrial - Manufacturing industry.
In addition to the POWR Ratings I’ve just highlighted, you can see SIEGY’s ratings for Growth, Momentum, Quality, and Sentiment here.
Installed Building Products, Inc. (IBP)
IBP specializes in installing insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving, mirrors, and related products. It caters to homebuilders, multi-family and commercial construction firms, individual homeowners, and repair and remodeling contractors.
On August 28, IBP unveiled its acquisition of Interior 2000 Products, LLC, a company specializing in installing shower, shelving, mirror products, and fireplaces in residential and commercial construction projects in the greater Richmond, Virginia market.
This move would help IBP expand its presence in the lucrative Richmond market. Also, with Interior 2000 contributing nearly $6 million in annual revenue, the acquisition should broaden IBP's service offerings and reinforce its position as a key player in the construction industry.
On August 6, IBP successfully finalized the acquisition of R-Pro Select, LLC. R-Pro specializes in installing fiberglass, spray foam, cellulose insulation, and fireplaces for residential customers in Asheville, Hendersonville, and surrounding western North Carolina communities.
The acquisition significantly strengthens IBP's footprint in western North Carolina, aligning with its growth strategy. With over $55 million in annual revenue from acquisitions, IBP continues to expand, maintaining a robust pipeline of opportunities across various geographies, products, and end markets.
For the third quarter that ended September 30, 2023, IBP’s adjusted gross profit increased 9.4% year-over-year to $242.35 million. Its adjusted EBITDA rose 8.6% from the year-ago value to $130.50 million.
In addition, the company’s adjusted net income and adjusted net income per share grew 10% and 11.2% from the prior year’s period to $78.87 million and $2.79, respectively.
Analysts expect IBP’s revenue to grow 2.6% year-over-year to $2.74 billion for the fiscal year ending December 2023. Similarly, the company’s EPS for the current year is estimated to come in at $9.94, indicating an 11.1% year-over-year improvement. Moreover, IBP topped the consensus EPS estimates in all four trailing quarters.
The stock has gained 36.8% over the past month and 78.7% over the past year, closing the last trading session at $150.51.
IBP’s positive prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
IBP has an A grade for Quality and a B for Momentum. It has ranked #16 out of 48 stocks in the A-rated Industrial - Building Materials industry.
Click here to access the additional IBP ratings (Growth, Value, Stability, and Sentiment).
Konica Minolta, Inc. (KNCAY)
Based in Tokyo, Japan, KNCAY engages in the digital workplace, professional print, healthcare, and industrial sectors. It develops, manufactures, and sells multifunctional peripherals, digital printing systems, and associated consumables. Additionally, the company provides comprehensive IT and printing solutions and services.
On October 26, KNCAY reported a significant development in its optical components business, announcing an agreement to transfer 80% of the shares of two Chinese manufacturing subsidiaries to Guangzhou Luxvisions Innovation Technology Limited. These subsidiaries possess both development and sales functions.
The alliance would optimize KNCAY's unit business structure in the growing mobility field and facilitate the provision of new value tailored to evolving customer needs. This strategic move aligns with KNCAY's business plan, which focuses on transforming itself into a highly profitable business and ensuring sustained financial benefits.
On October 17, KNCAY and Dentsu Inc. revealed a joint research agreement to provide consulting services to customer companies, fostering innovation in the "Bio × IT" domain. The partnership aims to develop businesses, services, and technologies in health, medical care, and the environment globally.
The focus on "Bio manufacturing," utilizing biological materials, signifies a significant leap in medical technologies, integrating Information Technology (IT) and communication means. This could allow KNCAY to position itself at the forefront of driving transformative innovation and addressing critical challenges in the realms of health, medical care, and environmental sustainability.
KNCAY’s revenue increased 4.1% year-over-year to ¥552.76 billion ($3.74 billion) for the six months that ended September 30, 2023. Its gross profit grew 5% from the year-ago value to ¥237.24 billion ($1.61 billion).
Additionally, the company’s cash inflow from operating activities came in at ¥32.03 billion ($216.96 billion), compared to ¥7.82 billion ($53 million) in the previous year’s period.
The consensus revenue estimate of $7.78 billion for the fiscal year ending March 2024 reflects a 126.4% year-over-year improvement. Similarly, the consensus revenue estimate of $7.88 billion for the next fiscal year (ending March 2025) indicates a 1.3% growth from the previous year. Also, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
KNCAY has gained 11.7% over the past month, closing the last trading session at $6.11.
KNCAY’s sound outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
KNCAY has an A grade for Value and a B for Momentum, Quality, and Stability. It has ranked #13 out of 91 stocks within the B-rated Industrial - Equipment industry.
Click here to access additional KNCAY ratings for Growth and Sentiment.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
SIEGY shares were trading at $85.00 per share on Friday afternoon, up $1.00 (+1.19%). Year-to-date, SIEGY has gained 26.24%, versus a 21.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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