Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
>>> Moog (NYSE:MOG.A) Q1 Earnings: Leading The Aerospace Pack
StockStory
by Anthony Lee
September 12, 2024
https://finance.yahoo.com/news/moog-nyse-mog-q1-earnings-083619682.html
As the Q1 earnings season comes to a close, it’s time to take stock of this quarter’s best and worst performers in the aerospace industry, including Moog (NYSE:MOG.A) and its peers.
Aerospace companies often possess technical expertise and have made significant capital investments to produce complex products. It is an industry where innovation is important, and lately, emissions and automation are in focus, so companies that boast advances in these areas can take market share. On the other hand, demand for aerospace products can ebb and flow with economic cycles and geopolitical tensions, which can be particularly painful for companies with high fixed costs.
The 15 aerospace stocks we track reported a satisfactory Q1. As a group, revenues beat analysts’ consensus estimates by 1.4% while next quarter’s revenue guidance was in line.
Stocks--especially those trading at higher multiples--had a strong end of 2023, but this year has seen periods of volatility. Mixed signals about inflation have led to uncertainty around rate cuts. However, aerospace stocks have held steady amidst all this with share prices up 2.8% on average since the latest earnings results.
Best Q1: Moog (NYSE:MOG.A)
Responsible for the flight control actuation system integrated in the B-2 stealth bomber, Moog (NYSE:MOG.A) provides precision motion control solutions used in aerospace and defense applications
Moog reported revenues of $930.3 million, up 11.2% year on year. This print exceeded analysts’ expectations by 6.5%. Overall, it was an incredible quarter for the company, with revenue and operating margin exceeding analysts' estimates.
Interestingly, the stock is up 19.4% since reporting and currently trades at $187.75.
Is now the time to buy Moog? Access our full analysis of the earnings results here, it’s free.
Ducommun (NYSE:DCO)
California’s oldest company, Ducommun (NYSE:DCO) is a provider of engineering and manufacturing services for high-performance products primarily within the aerospace and defense industries.
Ducommun reported revenues of $197 million, up 5.2% year on year, outperforming analysts’ expectations by 1.1%. The business had an exceptional quarter with an impressive beat of analysts’ earnings and operating margin estimates.
The market seems happy with the results as the stock is up 6% since reporting. It currently trades at $62.89.
Is now the time to buy Ducommun? Access our full analysis of the earnings results here, it’s free.
Weakest Q1: AerSale (NASDAQ:ASLE)
Providing a one-stop shop that integrates multiple services and product offerings, AerSale (NASDAQ:ASLE) delivers full-service support to mid-life commercial aircraft.
AerSale reported revenues of $77.1 million, up 11.2% year on year, falling short of analysts’ expectations by 12.7%. It was a disappointing quarter as it posted a miss of analysts’ operating margin and earnings estimates.
AerSale delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 7.9% since the results and currently trades at $5.13.
Read our full analysis of AerSale’s results here.
TransDigm (NYSE:TDG)
Supplying parts for nearly all aircraft currently in service, TransDigm (NYSE:TDG) develops and manufactures components and systems for military and commercial aviation.
TransDigm reported revenues of $2.05 billion, up 17.3% year on year. This print topped analysts’ expectations by 1.9%. Overall, it was a very strong quarter as it also put up an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ organic revenue estimates.
The stock is up 9.8% since reporting and currently trades at $1,328.
Read our full, actionable report on TransDigm here, it’s free.
Hexcel (NYSE:HXL)
Founded shortly after World War II by a group of engineers from UC Berkley, Hexcel (NYSE:HXL) manufactures lightweight composite materials primarily for the aerospace and defense sectors.
Hexcel reported revenues of $500.4 million, up 10.1% year on year. This print surpassed analysts’ expectations by 3%. More broadly, it was a mixed quarter as it also logged an impressive beat of analysts’ operating margin estimates but underwhelming earnings guidance for the full year.
The stock is down 10.3% since reporting and currently trades at $60.95.
<<<
---
>>> Moog Inc. (MOG-A) designs, manufactures, and integrates precision motion and fluid controls and controls systems for original equipment manufacturers and end users in the aerospace, defense, and industrial markets in the United States and internationally.
The company's Aircraft Controls segment offers primary and secondary flight controls, and avionics for military and commercial aircraft; and aftermarket support services.
Its Space and Defense Controls segment provides controls for space vehicles, launch vehicles, military vehicles, tactical and strategic missiles, hypersonic missiles, and other defense applications; and gun aiming, stabilization, and automatic ammunition loading. This segment also offers controls for steering tactical and strategic missiles; launcher thrust vector; naval vessels including surface ships, unmanned undersea vehicles, and submarines; and weapons stores management systems for light attack aerial reconnaissance, ground, and sea platforms, as well as positioning controls and components.
The company's Industrial Systems segment provides components and systems for applications in injection and blow molding machinery, metal forming presses, and heavy industry customers in steel and aluminum production; supplies electromechanical motion simulation bases for the flight simulation and training applications; and supplies solutions for power generation applications, as well as custom test systems and controls for automotive, structural, and fatigue testing. This segment also offers systems and components for applications in oil and gas exploration and production; components and systems for diagnostic imaging CT scan medical equipment, sleep apnea equipment, oxygen concentrators, infusion therapy, and enteral clinical nutrition; and hydraulics, slip rings, rotary unions and fiber optic rotary joints, motors, and infusion and enteral pumps.
Moog Inc. was incorporated in 1951 and is headquartered in East Aurora, New York.
<<<
https://finance.yahoo.com/quote/MOG-A/profile/
---
>>> Arcosa, Inc. (ACA) -- Share Price Upside: 16%
Number of Hedge Fund Investors In Q2 2024: 25
Average Analyst Share Price Target: $105.8
https://finance.yahoo.com/news/arcosa-inc-aca-one-oppenheimer-232721199.html
Arcosa, Inc. (NYSE:ACA) is a mid sized engineering and construction firm based in Dallas, Texas. It is a diversified construction materials and products company that sells items such as aggregates, tower structures, and steel components for vehicles.
Arcosa, Inc. (NYSE:ACA)'s business, which is geared solely towards construction products makes the firm sensitive to high interest rates as they depress construction activity and real estate performance. Consequently, the fact that its shares have risen 22% over the past twelve months is unsurprising. Equally unsurprising is the fact that Arcosa's stock soared by 4.6% the day Fed Chairman Jerome Powell confirmed that interest rate cuts would start soon. This suggests pent up momentum for the stock, and Arcosa, Inc. (NYSE:ACA) could benefit if construction activity picks up.
Additionally, since it is an American company, the firm could also see tailwinds from government spending through the Bipartisan Infrastructure Act. Oppenheimer believes that Arcosa, Inc. has "well-established positions in attractive markets with favorable long-term demand drivers, which should provide it with compelling organic and acquisition opportunities."
Arcosa's management touted the benefits of a recent acquisition during the Q2 2024 earnings call:
"It’s a very, very stable market. When you look at the financials over a long period of time, are very stable, with high margins, a very good market. This company has done a great job expanding over the last several years. And there are opportunities to consolidate not only in the main market of the New York, New Jersey area, but they also have other quarries around it. So there are opportunities. One thing that’s very interesting when you look at the competitors in the region, you have many of the big guys around it, which is something we like. We like to compete against some of the larger peers. But there are also some smaller bolt-on opportunities for the future. As I said before, our priority right now is deleveraging, and that’s going to be our focus.
And there are opportunities to grow organically, and implement some other actions to improve efficiency, et cetera. But also to learn from this company. This company has done a fantastic job and there are things we can bring to them, but there are also things we can learn from them. So very excited about it."
Overall ACA ranks 16th on our list of Oppenheimer's favorite stocks for the next 12 months.
<<<
---
>>> MSA Safety Incorporated (MSA) develops, manufactures, and supplies safety products and technology solutions that protect people and facility infrastructures in the fire service, energy, utility, construction, and industrial manufacturing applications, as well as heating, ventilation, air conditioning, and refrigeration industries worldwide.
The company's core product offerings include fixed gas and flame detection systems, such as gas detection monitoring systems, and flame detectors and open-path infrared gas detectors; breathing apparatus products, including self-contained breathing apparatus; hand-held portable gas detection instruments to detect the presence or absence of various gases in the air; industrial head protection products; firefighter helmets and protective apparel; and fall protection equipment, such as confined space equipment, harnesses, lanyards, and self-retracting lifelines, as well as engineered systems. In addition, the company offers air-purifying respirators, eye and face protection products, ballistic helmets, and gas masks.
It serves distributors and end-users through indirect and direct sales channels. The company offers its products under the V-Gard, Cairns, and Gallet brand names. MSA Safety Incorporated was founded in 1914 and is based in Cranberry Township, Pennsylvania.
<<<
https://finance.yahoo.com/quote/MSA/profile/
---
BMI, TRNS, WTS - >>> Zacks Industry Outlook Watts Water Technologies, Badger Meter and Transcat
Zacks Equity Research
August 8, 2024
https://finance.yahoo.com/news/zacks-industry-outlook-watts-water-083000714.html
3 Instruments Stocks Set to Ride on Digitized Technology Demand
The Zacks Instruments – Control industry is likely to benefit from the diligent focus on energy-efficient production processes and integrated software systems. Rising demand for state-of-the-art technology for replacing legacy industrial control systems with automated products is expected to aid growth.
However, elevated customer inventory levels amid a challenging geopolitical environment might hurt the process automation and instrumentation market. Nevertheless, Watts Water Technologies, Inc., Badger Meter, Inc. and Transcat, Inc. are likely to gain from high digitized technology demand, greater emphasis on energy efficiency, focus on cost-reduction initiatives and broad-based endorsement of industrial automation and optimum resource utilization.
Industry Description
The Zacks Instruments – Control industry comprises manufacturers of precision and specialty motion-control components and systems used in a wide range of industries. These companies deliver sophisticated flow measurement, control and communication solutions for air, water and other forms of gas and liquid used for commercial and residential purposes. The companies offer an array of products for fuel, combustion, fluid, actuation, electronic applications, energy control and optimization, particularly for the process industry. Some industry players offer heating, ventilation and air conditioning products. These include water heaters and electric heating systems for under-floor radiant applications for boiler manufacturers and alternative energy control packages. Few firms provide water reuse products, consisting of drainage and rainwater harvesting solutions.
What's Shaping the Future of Instruments - Control Industry
Thrust on Industrial Automation: Greater focus on increased adoption of automation across all industry verticals and higher investments in new technologies are expected to drive growth over the next few years. North America is expected to continue dominating the market in terms of adopting automation. Rising infrastructural investments in the energy and power sector, increasing demand for organic food and nutritional beverages, and favorable government policies are aiding growth. The pharmaceutical industry's process automation and instrumentation market is also growing due to low-cost factors and an evolving regulatory environment. Focus on high-quality equipment indicates progressive buyer maturity and willingness to partner with process control industry players.
Solid Traction From Green Fuels: The industry participants are increasingly gaining traction from solid demand for power generation, especially in Asia, and continued requirement for backup power for data centers. Higher demand across transportation and power generation markets, especially on-highway natural gas truck business in China, has led to healthy growth momentum. In addition, higher demand for alternative fuels across the marine industry and solid impetus in the global marine market brought on by higher utilization and rising shipbuilding rates are likely to be long-term growth drivers.
Margin Woes Persist: Material cost inflation, resulting from constant inflationary pressures, has been affecting industry players’ margins. Transportation costs are also on the rise. Moreover, high raw material prices due to inflation, escalating Middle East tensions, the prolonged Russia-Ukraine war and the consequent economic sanctions against the Putin regime have affected the production schedules of various firms. While the companies are focused on improving their operating performances, the inability to obtain adequate supplies of raw materials and product parts at favorable prices is likely to hurt their businesses. With firms being unable to pass on the entire increase in raw material prices to customers due to stiff competition, profitability is mostly on the wane. The companies primarily operate in markets that are susceptible to high competitive pressures and are under constant threat from low-cost suppliers, primarily based in China. Due to an international footprint, these firms are further exposed to foreign exchange fluctuations that affect their cash flows. Changes in competitive conditions, including the availability of the latest products and services, the introduction of distribution channels and changes in OEM and aftermarket pricing, are likely to hamper operations and affect sales for industry participants.
Digitized Technologies at the Core: The industry’s growth is driven mainly by the emphasis on digitized technologies in manufacturing activities, such as the Industrial Internet of Things. The demand for process automation, instrumentation products, safety automation systems and multivariable pressure transmitters for the fast-track manufacturing process is likely to fuel long-term growth opportunities. The use of process instrumentation equipment offers a host of benefits, including improvement in the quality of the product and emission reduction. Therefore, the rapid adoption of technology across various industries and growing regulation and compliance requirements will continue to be major growth drivers. In addition, field instruments play a significant role in process control by measuring the key elements, such as temperature, pressure, flow and level, in process industries such as chemicals, mining and pharmaceuticals. These include transmitters that primarily measure the pressure, flow, temperature, level and humidity of liquids and gases, which are essential for achieving optimum productivity. A differentiated product offering gives greater opportunities for companies to strengthen their market positions.
3 Instruments Control Stocks to Keep an Eye on
Watts Water (WTS) : Headquartered in North Andover, MA, the company designs, manufactures and sells various water safety and flow control products to promote safety, energy efficiency and water conservation for commercial and residential buildings. It is benefiting from aggressive cost-reduction actions, along with a strong balance sheet. It is focused on enhancing organic growth, driving margin expansion and reinvesting in productivity initiatives. Watts Water aims to launch smart and connected products, which are likely to provide it with further differentiation in the marketplace. This Zacks Rank #3 (Hold) stock has a VGM Score of B. It has a long-term earnings growth expectation of 8% and delivered an earnings surprise of 11.7%, on average, in the trailing four quarters. The Zacks Consensus Estimate for current and next-year earnings has been revised 10.3% and 6.6% upward, respectively, over the past year.
Badger Meter (BMI) : Headquartered in Milwaukee, WI, the company provides flow measurement, control and communications solutions, serving water and gas utilities, municipalities and industrial customers worldwide. Its products measure water, oil, chemicals and other fluids, and are known for accuracy, long-lasting durability and providing valuable and timely measurement data. With its industry-leading ORION Cellular endpoints, along with communication and software technologies, Badger Meter is focused on creating robust digital solutions to operationalize real-time data into actionable insights. Its BEACON software-as-a-service offering facilitates the collection and analysis of data within the distribution network to improve operational awareness. The Zacks Consensus Estimate for current and next-year earnings for the stock has been revised 31% and 36.1% upward, respectively, over the past year. The stock has gained 14.5% in the past year. It has a long-term earnings growth expectation of 17.9% and delivered an earnings surprise of 12.9%, on average, in the trailing four quarters. Badger Meter sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Transcat (TRNS): Headquartered in Rochester, NY, Transcat is a leading provider of accredited calibration, repair, inspection and laboratory instrument services. It is focused on providing best-in-class services and products to pharmaceutical, biotechnology, medical device and other FDA-regulated businesses, aerospace and defense, and energy and utilities. The buyouts of Complete Calibrations provide Transcat with a local calibration presence to support the robust and growing life science market in Ireland, while the acquisition of Cleveland, OH-based e2b Calibration will likely help it strengthen its presence across the United States and Canada. The stock has gained 21.8% over the past year. It delivered an earnings surprise of 33.3%, on average, in the trailing four quarters and currently carries a Zacks Rank #2 (Buy).
<<<
---
>>> Why Transcat Stock Is Up Big Today
by Lou Whiteman
Motley Fool
May 21, 2024
https://finance.yahoo.com/news/why-transcat-stock-big-today-160021347.html
Testing and calibration equipment company Transcat (NASDAQ: TRNS) easily beat quarterly expectations and forecast continued strength into its new fiscal year. Investors are taking notice, sending Transcat shares up as much as 13% at the open and up 8% as of 10:45 a.m. ET.
Strong earnings and margin growth
Transcat provides calibration and testing services primarily to the life sciences industry, as well as to the aerospace, defense, energy, and utilities sector. The company earned $0.66 per share in its fiscal fourth quarter ending March 30 on revenue of $70.9 million, surpassing Wall Street's $0.53 per share on sales of $68 million estimate.
Consolidated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 29.8% in the quarter, and EBITDA margin expanded by 200 basis points, fueled by a combination of strong organic growth and the benefit of acquisitions.
"Adjusted EBITDA growth of 30% for the fourth quarter reflects our ability to leverage organic service revenue growth and the successful integration of acquired companies," CEO Lee D. Rudow said in a statement. "Fourth-quarter consolidated revenue was up 14%, with gross margin expansion of 300 basis points year over year driven by our widened breadth of service offerings, excellent performance in the higher-margin rental business, and execution of automation and process improvement initiatives."
Is Transcat a buy following its strong earnings report?
Rudow is forecasting further gains in fiscal 2025 thanks to predictable, recurring revenue streams from highly regulated markets including life sciences. The rental business is a good hedge against potential economic headwinds, as it tends to hold up better through the cycle.
This is an under-the-radar stock serving an important role to a number of massive and growing industries. If Transcat can continue to execute as it did in the most recent quarter, the stock can go higher from here.
<<<
---
>>> Why Sterling Infrastructure Rallied on Tuesday
by Billy Duberstein
Motley Fool
Aug 6, 2024
https://finance.yahoo.com/news/why-sterling-infrastructure-rallied-tuesday-202608080.html
Shares of Sterling Infrastructure (NASDAQ: STRL) rallied as much as 11.1% Tuesday, before settling into a mere 4% gain as of 3:47 p.m. ET.
Sterling reported second-quarter earnings last night that handily surpassed expectations, and raised guidance, quelling some recent fears over the state of the economy generally and the construction industry specifically. But by pivoting to the hottest parts of the market, Sterling was able to fly by profit forecasts.
A beneficiary of the infrastructure bill and AI boom
In the first quarter, Sterling delivered 11.6% revenue growth to $582.8 million, along with 31% earnings-per-share (EPS) growth to $1.67 per share, with both figures handily beating analyst estimates. Management also raised full-year guidance to a range of $2.15 billion to $2.225 billion in revenue and $5.60 to $5.75 in diluted earnings per share. That was up from prior guidance of $2.125 billion to $2.215 billion and $5 to $5.30, respectively, on the first-quarter release.
Some analysts may not have been expecting results like these because a fair amount of the U.S. construction industry and consumer spending is hitting a slowdown. But Sterling was able to lean into the fastest-growing and higher-margin segments of its business, specifically riding the wave of infrastructure and AI spending.
Sterling has three main segments:
E-infrastructure solutions, which serves the data center and next-gen manufacturing sectors, as well as e-commerce warehouses and other commercial buildings
Transportation solutions, which executes projects for highways, roads, bridges, airports, ports, light rail, water systems, and others
Building solutions, which serves residential and commercial construction
Sterling has been able to capitalize on growing in the best parts of its end markets. For instance, e-infrastructure revenue declined 7%, but that segment's operating income grew 20%, as Sterling was able to achieve 100% growth in the higher-margin data center segment, even as other segments lagged. While the building solutions segment declined 2%, operating income in that segment was up 2%. Meanwhile, the transportation segment surged 54% and operating profits grew 57%, likely on the back of very strong public-private infrastructure investments resulting from the Bipartisan Infrastructure Act of 2021.
A top operator still looks like a good buy
Sterling Infrastructure is showing solid growth even as some parts of its business are challenged, along with impressive profit expansion, showing off management's execution and the ability to target the most attractive markets.
Trading at just 18.8 times this year's recently raised guidance for EPS and sporting a solid net cash position on the balance sheet, Sterling looks like a good buy, assuming the U.S. is able to avoid a recession.
<<<
---
>>> Why Booz Allen Hamilton Stock Is Sinking Today
by Lou Whiteman
Motley Fool
Jul 26, 2024
https://finance.yahoo.com/news/why-booz-allen-hamilton-stock-170740049.html
Government contractor Booz Allen Hamilton (NYSE: BAH) missed Wall Street's profit expectations for the quarter and set full-year profit guidance that underwhelmed expectations. Investors are looking elsewhere, sending Booz shares down 10% as of 12:30 p.m. ET.
Costs creep higher
Booz Allen Hamilton provides information technology and consulting services for civilian and military government customers. The company has outperformed the market over the past five years, and investors had big hopes coming into earnings season.
But Booz failed to deliver. The company earned $1.38 per share in its fiscal first quarter ended June 30, well short of the $1.52 per share Wall Street had expected. Revenue, at $2.94 billion, came in close to expectations.
The issue was costs. Headcount grew 7.7% year over year, but management said during the earnings call there was a gap between when the new hires came on and when they became billable under new contracts.
For the full fiscal year, Booz Allen sees earnings coming in at between $5.80 and $6.05 per share. That suggests some potential downside compared to Wall Street's $6.05-per-share expectation.
Is Booz Allen Hamilton a buy?
There is a lot to like in this report. Headcount tends to be a good indicator of future revenue, and Booz Allen said it booked $1.80 of new business in the quarter for every $1 it billed out. Overall, the company expects revenue to grow between 8% and 11% in its new fiscal year.
But the expenses are something to watch and the full-year guidance is not nearly as impressive as the numbers that Wall Street had hoped for.
Booz Allen Hamilton is a solid operator with strong connections inside some of the most important areas of the U.S. government and is set up well to be a long-term winner. But investors need to be on the lookout for further volatility until the market has more clarity about how fiscal 2025 is playing out.
<<<
---
>>> Why Watsco Stock Is Falling Today
by Lou Whiteman
Motley Fool
Jul 30, 2024
https://finance.yahoo.com/news/why-watsco-stock-falling-today-175712682.html
Watsco (NYSE: WSO) reported record sales, improving cash flow, and an improving balance sheet in its most recent quarter. But the results weren't quite what Wall Street had expected.
After the earnings release, shares of the industrial equipment distributor were trading down about 5% as of noon ET.
Growth, but short of expectations
Watsco is a distributor of parts and supplies for the heating, air conditioning, and refrigeration (HVAC) industry. The company earned $4.49 per share in the quarter on revenue of $2.14 billion, generating 7% year-over-year sales growth.
The company saw strong 8% growth in its HVAC equipment segment, which accounts for 71% of total sales. Operating cash flow also turned positive and improved by $100 million, with $58 million in reported cash flow in the quarter.
But Wall Street had expected $4.68 per share in earnings on sales of $2.2 billion, and gross margin in the quarter fell 100 basis points to 27.1%.
Is Watsco a buy?
Watsco has been an impressive performer over the years thanks to the company's ability to roll up small distributors and drive efficiency and scale gains. The stock was up more than 20% for the year heading into earnings and perhaps got ahead of itself.
On the post-earnings call, management said quarter-to-quarter margin fluctuations are to be expected as manufacturers adjust pricing and as inventories are replenished, but it sees business as usual up ahead. For long-term-focused investors, business as usual has generated market-beating returns, and there is nothing in this earnings report to suggest Watsco can't continue to deliver in the years to come.
<<<
---
>>> Eaton Corporation (NYSE:ETN) is a multinational power management company headquartered in Dublin, Ireland. With a diversified portfolio spanning electrical, hydraulic, vehicle transmissions, and industrial control systems, Eaton is able to cater to a wide range of industries.
https://finance.yahoo.com/news/3-best-dividend-stocks-buy-114500212.html
Eaton’s relatively low payout ratio and growing cash flow display positive signs for future dividend raises. The company has raised its dividend for 15 consecutive years and has maintained a payout ratio of around 40-50%. This is a testament to its diversified business model, providing stable revenue and cash flow from operations. Furthermore, its business has never looked stronger after emerging from its pandemic slump in 2020. Management’s strong execution has translated to significant revenue and earnings per share growth over the last 3 years.
Additionally, its growth is accelerating in the 2024 fiscal year. In Q1 FY24, revenue increased 8% year over year to $5.94 billion. It saw record segment margins of 23.1%, up 340 basis points from the year prior. For investors seeking the best dividend stocks to buy in 2024, ETN stock should certainly be kept on your radar.
<<<
---
>>> Rockwell Automation, Inc. (ROK) provides industrial automation and digital transformation solutions in North America, Europe, the Middle East, Africa, the Asia Pacific, and Latin America. The company operates through three segments, Intelligent Devices, Software & Control, and Lifecycle Services. Its solutions include hardware and software products and services.
The Intelligent Devices segment offers drives, motion, safety, sensing, industrial components, and configured-to-order products.
The Software & Control segment provides control and visualization software and hardware, information software, and network and security infrastructure solutions.
The Lifecycle Services segment provides consulting, professional services and solutions, and connected and maintenance services.
The company sells its solutions primarily through independent distributors in relation with its direct sales force. It serves discrete end markets, including automotive, semiconductor, and warehousing and logistics, as well as general industries comprising printing and publishing, marine, glass, fiber and textiles, airports, and aerospace; hybrid end markets, such as food and beverage, life sciences, household and personal care, and tire, as well as eco industrial, including water/wastewater, waste management, mass transit, and renewable energy; and process end markets comprising oil and gas, mining, metals, chemicals, pulp and paper, and others. Rockwell Automation, Inc. was founded in 1903 and is headquartered in Milwaukee, Wisconsin.
<<<
https://finance.yahoo.com/quote/ROK/profile/
---
>>> Sterling Infrastructure (NASDAQ:STRL) is a leading infrastructure services company that specializes in heavy civil construction, transportation, and e-infrastructure solutions. With the rise of infrastructure investment, Sterling stands as one of the top undervalued growth stocks with substantial upside potential.
https://finance.yahoo.com/news/3-undervalued-stocks-track-double-152307233.html
One of the key factors driving Sterling Infrastructure’s growth is the significant investment in infrastructure by the U.S. government and private sector. The recently passed infrastructure bill, which allocates billions of dollars for transportation, broadband, water, and energy projects, provides a strong tailwind for the company. Sterling’s expertise in executing complex projects positions it well to benefit from this increase in spending.
Furthermore, the company has a diverse project portfolio and a steadily growing backlog. In the first quarter of 2024, net earnings increased 58% YOY to $31 million. Additionally, its backlog hit a record high of $2.42 billion, with gross margins up 220 basis points to 17.5%. These positive developments make STRL stock an attractive option for long-term investors who are bullish on infrastructure modernization in the United States.
<<<
---
>>> Comfort Systems USA (NYSE:FIX) primarily provides mechanical services, specializing in heating, ventilation, and air conditioning (HVAC) installation, maintenance, and repairs for commercial and industrial buildings. The company operates in a highly fragmented market, offering a significant growth opportunity for discerning investors.
https://finance.yahoo.com/news/3-undervalued-stocks-track-double-152307233.html
Comfort Systems has been on a tear over the last few years, with the stock significantly outperforming the broader market. FIX stock has risen 502% in the last five years compared to the S&P 500, rising just 85%. This insane growth stems from expanding its revenue, earnings, and free cash flow.
Furthermore, management has remained committed to returning value to shareholders through its recent dividend increases and share buybacks. FIX stock will be a major beneficiary, with construction activity picking up on lower interest rates going into 2025. In the Q1 FY24, revenue increased 31% YOY to $1.54 billion. Net earnings swelled 68% YOY to $96.3 billion while generating $140 million in cash flow from operations. With a record backlog of $5.91 billion, FIX stock is among the top undervalued stocks to buy now.
<<<
---
>>> Sterling Infrastructure (NASDAQ:STRL) is another stock that stands out for its promising growth prospects in 2024. Specializing in heavy civil construction and infrastructure solutions, Sterling is well positioned from the ongoing tailwinds in infrastructure development.
https://finance.yahoo.com/news/3-most-promising-stocks-worth-192205838.html
Sterling’s key strengths lie in its ability to secure and execute on large-scale infrastructure projects. The company consistently delivers projects on time and within budget, which has earned it a strong reputation in the industry. Moreover, as governments around the world prioritize infrastructure investments to stimulate economic growth, Sterling is primed to capture a significant share of the market.
Its financial performance in recent years has also been noteworthy, leading the company to significantly outperform the S&P 500 over the last five years. In the 2023 fiscal year, Sterling saw record revenue and earnings. Additionally, its annual free cash flow more than doubled to $428 million. Growth continues to accelerate in 2024, and management remains confident in its ability to increase its earnings and contracted backlog.
With its solid track record and strong growth prospects, Sterling is a top contender among promising stocks to buy in 2024.
<<<
---
>>> Emcor Group (NYSE:EME), a leader in mechanical and electrical construction services, is well positioned for growth in 2024. The company’s diversified portfolio, which includes facilities services, industrial services and energy solutions, provides a robust foundation for stability and expansion.
https://finance.yahoo.com/news/3-most-promising-stocks-worth-192205838.html
One of the key drivers of Emcor’s growth is the increasing demand for infrastructure development and maintenance. With the U.S. government and other countries investing heavily in infrastructure projects, Emcor’s expertise in construction and facilities services positions it to benefit immensely. Additionally, the company’s focus on energy efficiency and sustainability aligns perfectly with the growing trend towards green building practices.
Financially, Emcor has consistently delivered strong revenue, earnings and free cash flow growth. After coming off a record year in 2023, Emcor’s management team anticipated growth to accelerate. In its latest quarterly financial results, revenue increased 19% year-over-year to $3.43 billion. Earnings per share skyrocketed 80% from the year-ago period to $4.17 per share, with remaining performance obligations hitting a record high. With EPS forecasted to rise more than 20% in FY24, EME stock is one of the top stocks to buy in 2024.
<<<
---
>>> Watsco (NYSE:WSO) distributes air conditioning, heating, and refrigeration equipment and related parts in the HVAC/R industry. I believe Watsco is poised to capitalize on the mega trend of people moving to the Sun Belt states, especially Florida. As more folks relocate to hotter climates, the demand for air conditioning will only intensify, particularly with worsening heat waves. Watsco did underperform in Q1 due to a traditionally slow season. In the short term, the stock could also see a small correction as it trades at a historically high premium versus its trailing twelve month earnings.
https://finance.yahoo.com/news/3-florida-stocks-buy-capitalize-114500110.html
However, I expect more positivity in the summer quarter. Additionally, earnings beats could drive WSO stock much higher.
The company is seeing compounding growth in the HVAC sector, with its stock surging nearly 200% over the past five years. Watsco also rewards shareholders with a 2.23% dividend yield and recently boosted its annual dividend by 10% to $10.80 per share, marking its 50th consecutive year of paying dividends. With a strong balance sheet and a fragmented $64 billion North American market ripe for consolidation, Watsco appears well-positioned to ride the tailwinds of the southern migration trend.
<<<
---
>>> Deere may be cyclical, but the stock is a bargain
https://finance.yahoo.com/news/high-hopes-3-dirt-cheap-121500958.html
After an initial surge in early 2021, Deere stock has gone practically nowhere despite achieving record profits last year. Unfortunately, there have been glaring signs that Deere could enter a downturn.
It is a highly cyclical stock. When the company's customers are in expansion mode (and financing is inexpensive), they might be inclined to make a big purchase of its industrial machinery like farming and forestry equipment.
But when the cycle turns, Deere's sales can fall in a flash. The trick is to pay a reasonable multiple based on a company's mid-cycle earnings. Its P/E will look low when it is coming off a strong year and will be high coming off a bad year. Understandably, its P/E looks dirt cheap at just 10.9 -- but earnings are expected to decline over the medium term.
Consensus analyst estimates have Deere earning $22.79 per share in fiscal 2024 and $22 in fiscal 2025, compared to $33.17 in fiscal 2023.
It would be one thing if Deere's stock surged in lockstep with its earnings growth, but it didn't. In fact, earnings have nearly doubled over the last three years while the stock is up just 3%. Deere's earnings could be cut in half, and it would still have a P/E of about 22. It is simply too good a company to be this cheap.
Another reason to get excited about Deere is its earnings trajectory and automation and artificial intelligence advancements. The company has been ramping up research and development spending, investing in autonomous tractors, and automating farm tasks, such as crop spacing and recommended fertilizer use that can save operators money. It is making sizable product improvements that might not impact its bottom line until the next uptick in the cycle.
The stock only yields 1.6%, but that's mainly because it uses both dividends and buybacks to reward shareholders. Over the last five years, the dividend is up over 93% while its outstanding share count is down 12.5%. That's roughly the same pace of buybacks that Apple has done in the last five years, which is impressive considering Apple is famous for buying back a boatload of its stock.
Add it all up, and Deere looks like an excellent value stock to buy now.
<<<
---
>>> American Icon John Deere Slashing 600 Jobs To Move To Mexico
6-29-24
https://www.msn.com/en-us/money/companies/american-icon-john-deere-slashing-600-jobs-to-move-to-mexico/ar-BB1p7Ue1?OCID=ansmsnnews11
John Deere, the renowned manufacturer of tractors and crop harvesters, has recently announced a significant wave of layoffs.
On Friday, approximately 610 production staff at its plants in Illinois and Iowa were told they would be out of job at the end of summer. The company is letting go 280 workers from a plant in East Moline, Illinois, and 230 from a factory in Davenport, Iowa.
Additionally, about 100 production employees at the company's Dubuque, Iowa, plant will also be impacted.
These layoffs are said to be effective from August 30, as stated in a press release.
The reason cited for these layoffs is the reduced demand for John Deere's products from these particular factories.
The company, which reported profits of $10.166 billion last year, mentioned that rising operational costs and declining market demand necessitate enterprise-wide changes to better position the company for the future.
In light of the layoffs, affected workers will be offered Supplemental Unemployment Benefits (SUB). This will cover approximately 95% of their weekly net pay for up to 26 weeks, depending on their years of service.
They will also receive profit-sharing options and health benefits to assist them during this transition period.
It's the latest round of layoffs that started last fall.
John Deere, known for its iconic green and yellow branding and long-standing history since its establishment in 1837, recently announced a decision to shift the manufacturing of skid steer loaders and compact track loaders from its Dubuque facility to Mexico by the end of 2026.
This move is aimed at adapting its business model, addressing rising manufacturing costs, and enhancing operational efficiencies.
The company has faced previous rounds of layoffs including:
225 at its Harvester Works plant in East Moline
34 at its Moline Cylinder Works factory
150 at a plant in Ankeny, Iowa.
Approximately 500 employees have been let go at its Waterloo plant in Iowa.
Despite these changes, John Deere's market capitalization stood at around $102.81 billion, with significant net sales and revenues reported over the first two quarters of the year.
This comes months after a judge stated that plaintiffs in a lawsuit against John Deere met legal thresholds. Crop farmers and farmers have filed a suit stating that John Deere unlawfully conspired to restrict services for maintenance and repair.
"According to the complaint's allegations, Deere has the ultimate control of the repair services market," Johnston wrote in his 89-page order. "These allegations are not mere legal conclusions. The complaint is chock-full of factual allegations to support this conclusion."
In addition, the agricultural equipment industry is experiencing challenges due to lower crop prices, leading to excess inventory and decreased sales of large agricultural equipment
The Department of Agriculture forecasts a 25.5% decline in farm income this year, adding to the industry's struggles.
These developments come amidst reports that John Deere CEO John May has put his 80-acre horse farm property up for sale, with an asking price of $3.925 million.
As the company navigates market challenges and restructuring efforts, the impact on employees and the broader industry remains a focal point of concern.
<<<
---
>>> Axon is using technology to benefit society
https://finance.yahoo.com/news/forget-nvidia-likely-next-once-113000380.html
Justin Pope (Axon Enterprise): Years from now, investors may look back at Axon as a generational company that hid in plain sight. The company started with Tasers but has evolved into a full-fledged technology business offering cloud-based solutions for law enforcement.
In addition to non-lethal weapons, Axon sells body cameras and cloud-based software for evidence management and law enforcement operations. These products help protect law enforcement and citizens, ensuring accountability from all parties.
Axon's revenue has grown virtually uninterrupted for years, benefiting from dependable government budgets:
Today, Axon has over 17,000 customers, and the business boasts a 122% net revenue retention rate, meaning that solid growth is baked into the business even without it acquiring new customers.
The stock has already been a big winner. Shares have returned a staggering 54,000% over their lifetime. Axon could continue to deliver. The business still does "just" $1.5 billion in annual revenue.
Management estimates that its current addressable market is $63 billion, leaving a clear opportunity for growth over the coming decade and beyond.
<<<
---
Vertiv Holdings - >>> Here's Why Shares in This Nvidia Partner Soared in March
by Lee Samaha
Motley Fool
Apr 5, 2024
https://finance.yahoo.com/news/heres-why-shares-nvidia-partner-121917710.html
Shares in data center equipment company Vertiv Holdings (NYSE: VRT) rose by a whopping 20.8% in March as the company rode the artificial intelligence (AI) investment boom. The stock price took a leg up in mid-March following the announcement that Vertiv would become a Solution Advisor: Consultant partner in the Nvidia (NASDAQ: NVDA) Partner Network.
Data centers are cool
You can't have a burgeoning investment in AI applications without data centers, and you can't have data centers without cooling. As such, Vertiv has a critical role in the growth of AI, a fact acknowledged by Nvidia CEO Jensen Huang at Nvidia's GPU Technology Conference (GTC) a day after the announcement. Huang noted that Nvidia and Vertiv were working on cooling systems, with Vertiv acknowledged as "very important" in ensuring the cooling of data centers.
While that's a red rag to an Nvidia bull, there's reason and hard numbers behind the optimism.
Spending on data centers continues to surge
As previously discussed, there's been an incredible boom in U.S. manufacturing construction investment over the last couple of years, led by investment in semiconductors and electronics, including data centers. In fact, U.S. manufacturing spending came in at $214 billion in 2023 compared to less than $100 billion in 2022 and even lower in the pre-pandemic era.
Moreover, the boom in interest in AI has made spending on data centers higher. For example, here's a look at capital expenditures at leading data center company Equinix. Although it dipped through 2022 in line with a correction after the boom inspired by the pandemic, it's now taken off again. Equinix management expects $2.9 billion to $3 billion in capital spending in 2024.
Vertiv will benefit from booming data center spending
The ongoing spending in data centers is also seen in Vertiv's order growth -- up 23% on a year-over-year basis in the fourth quarter of 2023 and 18% in the third quarter of 2023. Moreover, CEO Giordano Albertazzi expects spending "to continue to be strong up in the high teens on a year-on-year basis in the first quarter across the portfolio" in the first quarter.
As such, Vertiv is set for another year of strong growth, and management forecasts call for a double-digit increase in organic revenue for the full year.
<<<
---
>>> Vertiv Holdings Co (NYSE:VRT) - Number of Hedge Fund Investors: 75
https://finance.yahoo.com/news/billionaire-stanley-druckenmiller-top-12-114039919.html
Duquesne Capital’s Q4 2023 Investment Value: $111.1 million
Vertiv Holdings Co (NYSE:VRT), an American multinational corporation, specializes in providing critical infrastructure and services for data centers, communication networks, and commercial and industrial environments. On February 21, the company released its fourth-quarter results. Adjusted earnings per share for the period were reported at $0.56, exceeding estimates by $0.03. However, revenue for the quarter saw a 12.7% year-over-year increase, reaching $1.87 billion, falling short of estimates by $0.03.
As of Q4 2023, Vistra Corp. (NYSE:VST) was one of the top picks in Stanley Druckenmiller's portfolio. A total of 75 elite hedge funds tracked by Insider Monkey held its shares, valued at $3.1 billion.
ClearBridge SMID Cap Growth Strategy stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its fourth quarter 2023 investor letter:
“Within IT, AI trends continue to positively impact order trends at data center and technology hardware companies to the benefit of companies like Monolithic Power Systems, our top-performing holding during the quarter. Enthusiasm supplying power management for Nvidia’s AI GPUs supported both strong 2023 performance and a robust future outlook. This strong demand also translated into positive performance for industrials holding Vertiv Holdings Co (NYSE:VRT), a leader in power and thermal management and related tools and systems used by data centers. However, we continue to monitor the sustainability of such trends, as well as their valuations, on a case-by-case basis. As a result, we trimmed the position size of both of these investments, following strong stock performance.”
<<<
---
>>> Sterling Infrastructure (NASDAQ:STRL) is a construction company that specializes in e-infrastructure. This segment includes data centers, e-commerce distribution centers and warehouses, and multi-use facilities. As tech companies grow, they will need more properties for data storage.
https://finance.yahoo.com/news/market-mavericks-7-growth-stocks-154037454.html
It’s a boon for Sterling Infrastructure which has resulted in a 135% gain over the past year. Shares are up by an astonishing 512% over the past five years. The company is outperforming most of the big tech, and tailwinds for big tech trickle down to Sterling.
The company isn’t only invested in its e-infrastructure category. Sterling Infrastructure recently won big contracts for a major Nevada highway project and from the Lihue Airport in Hawaii in Kauai, Hawaii.
Sterling Infrastructure reported an 8% year-over-year revenue increase in Q4 2023. Net income was up by 99% year-over-year. The company’s midpoints for 2024 guidance are $2.17 billion for $160 million for net income. Those figures represent 10.2% and 15.4% year-over-year growth rates respectively.
<<<
---
>>> Axon 2023 Revenue Grows 31% to $1.56 Billion
PR Newswire
Feb 27, 2024
https://finance.yahoo.com/news/axon-2023-revenue-grows-31-210100362.html
SCOTTSDALE, Ariz., Feb. 27, 2024 /PRNewswire/ --
Axon Cloud and Services revenue grows 52% to $561 million
Annual recurring revenue grows 47% to $697 million
Annual net income of $174 million supports Adjusted EBITDA of $329 million
Company projects Full Year 2024 revenue of $1.88 billion to $1.94 billion, representing 20% to 24% annual growth
Fellow shareholders,
Axon is delighted to deliver another year of record company performance, fueled by product innovation, partnership with our customers and strong industry trends. Demand for our mission-driven product ecosystem continued to grow in the fourth quarter of 2023, and we recorded our fifth consecutive year of 25% or greater revenue growth, growing 31% year over year. We achieved this growth with a full year net income margin of 11% and Adjusted EBITDA margin of 21%.
Our core measure of success as a company is progress on our mission to protect life. Our mission aligns our people, our customers and our communities. Together, we focus on solving problems with modern technology, pioneering new ways of thinking and taking new approaches to complex social dynamics, driving toward our moonshot goal to cut gun-related deaths between police and the public in half by 2033. In this first year after announcing our moonshot, we introduced new technology, new modern training capabilities and new sources of improved data and analytics. We've laid the groundwork for the next nine years, and we are just getting started.
Our mission and products have resonated with our customers and afford us a growing pipeline across our business. In 2024, Axon expects to deliver annual revenue in a range of $1.88 billion to $1.94 billion, and Adjusted EBITDA of $410 million to $430 million, reflecting more than 20% annual growth and continued Adjusted EBITDA margin expansion from the prior year. We are propelling our growth through innovation and diversification while realizing efficiencies and leverage on our business as it scales. We are humbled to enter a new year with robust expectations for each of our product categories and customer verticals. In this letter, we recap a historic 2023 for our company and provide an update on the opportunities we see ahead, our roadmap and our progress.
2023 Key Takeaways
Commitment to being a Force for Good
Axon's mission is embodied in our moonshot goal to cut gun-related deaths between police and the public by 50% over 10 years. 2023 was the first year in our moonshot journey, and we progressed significant advancements to help us achieve this goal, including introducing technology, new ways of training, and optimized data collection and reporting with the Axon Public Safety Gun Fatality Database. We also published our Force For Good report in November, a bi-annual update on our progress in the areas of Corporate Social Responsibility. In addition, we summarize 5 Giant Leaps we made over the last year, here.
Strong financial results
Axon delivered annual revenue of $1.56 billion and net income of $174 million in 2023. This represents 31% annual revenue growth and an 11.1% net income margin, supporting Adjusted EBITDA of $329 million (21.1% margin). We are delivering profitable growth at scale and improvement in our operating expenses as a percentage of revenue was primarily driven by leverage on sales, general and administrative ("SG&A") expenses. Axon continues to grow our research and development ("R&D") footprint to invest in several multi-year growth opportunities, and our R&D expenses grew roughly in-line with revenue. 2023 revenue and Adjusted EBITDA margin exceeded our expectations and reflect record performance for our company.
Product innovation
We power our business through relentless product innovation. In 2023, years of investments materialized in two major new product launches — TASER 10 and Axon Body 4 — and a number of advancements in our ecosystem, including groundbreaking real-time communications features such as two-way voice communications and WatchMe, as well as an expanded virtual reality ("VR") training suite including all-new bespoke TASER VR controllers alongside expanded training content and more. We also reached key adoption milestones, including new deployments bringing us to over 100 agencies live on one or more modules of Axon Records.
New customer vertical expansion
Axon has diversified beyond U.S. state and local law enforcement. In 2023, we achieved significant growth in emerging customer verticals, including U.S. federal, international, justice, corrections and enterprise. A few examples of our progress include the successful deployment of Axon Records with the U.S. Department of Veterans Affairs, two of our largest TASER 10 orders coming from international and corrections customers, and our partnership with the Government of Scotland to power its digital evidence management system across courts, lawyers, government and police. We also have several trials kicking off with our newly launched product for enterprise, including Fairview Health, where they are trialing Body Workforce with nurses as part of their commitment to patient and staff safety.
Strategic investments to further enhance our ecosystem and expand our TAM
Axon's investment and partner strategy is geared to accelerate our product roadmap and enhance our ecosystem while building our talent base in product categories accretive to our long-term growth. In 2023, we acquired Sky-Hero and earlier this month we announced our acquisition of Fusus. Sky-Hero is an example of an acquisition supporting Axon in building next-generation technology in public safety that will leverage enhanced robotic security capabilities to improve situational awareness, power more effective means of response and protect life. With Fusus, Axon advances mission control, the future of real-time operations for public safety, enabling customers to aggregate live video, data and sensor feeds from virtually any source. Even without updating our core total addressable market ("TAM"), which we updated last year and update on a bi-annual basis, these acquisitions expand Axon's TAM from $50 billion to more than $63 billion...
<<<
---
>>> Hyliion Holdings Reports Fourth-Quarter and Full-Year 2023 Financial Results
Business Wire
Feb 13, 2024
https://finance.yahoo.com/news/hyliion-holdings-reports-fourth-quarter-213000641.html
AUSTIN, Texas, February 13, 2024--(BUSINESS WIRE)--Hyliion Holdings Corp. (NYSE: HYLN) ("Hyliion"), a developer of sustainable electricity-producing technology, today reported its fourth-quarter and full-year 2023 financial results.
Key Business Highlights
Announced today, the KARNOTM generator is expected to qualify for up to a 40% tax credit under the Inflation Reduction Act’s Infrastructure Tax Credit (ITC)
Announced today, Detmar Logistics executed a letter of intent for an initial KARNO unit to be deployed in the Permian Basin to operate on waste flare gas
Executed a letter of intent to provide KARNO generators to GTL Leasing
Confirmed plans to deliver initial KARNO generator units to customers in late 2024
Began printing production-intent design components of the KARNO generator
Successfully tested KARNO reactor technology on unprocessed Permian Basin gas; results surpassed emissions standards by 98% for CO and 76% for NOx
Appointed Govindaraj Ramasamy as Chief Commercial Officer
Announced $20 million Stock Repurchase Program
Ended the year with $291 million of total cash and investments
Guidance of $40 to $50 million cash expenditures for KARNO development in 2024
Executive Commentary
"I’m pleased to report that the company’s strategic shift to wind down powertrain operations and focus on our KARNO generator is on track, with significant achievements made in advancing our generator technology and engaging prospective customers during the quarter," said Hyliion’s Founder and CEO, Thomas Healy. "We expect to deliver the initial KARNO generator deployment units with customers late in 2024 followed by a ramp-up in production and additional deliveries in 2025."
KARNO Commercial Updates
Today, the company announced that, under the Inflation Reduction Act, the KARNO generator is expected to be characterized the same as a fuel cell, enabling customers to qualify for up to a 40% tax credit under the current ITC.
Hyliion is addressing the commercial power market first with a locally-deployable 200kW generating system which it intends to deliver to initial deployment customers in late 2024. To lead these efforts, Hyliion recently hired former Cummins powergen executive, Govi Ramasamy, as Chief Commercial Officer.
Hyliion also announced today that Detmar Logistics has executed a non-binding letter of intent for a KARNO generator and to be part of Hyliion’s early adopter program. Detmar, who supplied Hyliion with test gas from the Permian Basin, intends to operate their unit on waste flare gas to produce electricity at oil & gas sites, without the need for pre-treating the gas.
In addition to Detmar, Hyliion also announced a non-binding letter of intent with GTL Leasing to deliver two KARNO generators for their portable electric vehicle recharging business. Other customers’ letters of intent are in place or being finalized to represent the remaining planned deployments in 2024 and initial deliveries in 2025. Hyliion plans for initial deployments to represent a broad range of applications, including vehicle charging, waste gas fuel sourcing, and prime power generation.
KARNO Generator Development
Hyliion is developing a revolutionary new electrical generator powered by a linear heat motor that is expected to deliver step-change improvements in performance characteristics compared to conventional generating systems, including efficiency, emissions, maintenance requirements, noise levels and fuel flexibility. The KARNO generator is enabled by the latest advances in additive manufacturing technology. Hyliion hosted a Technology Fireside Chat in December 2023 during which Thomas Healy and Josh Mook, Chief Technology Officer, explained the capabilities and advantages of the generator.
Recent technological advancements include beginning to print production-intent design parts of the BETA design of the KARNO generator. The BETA generator design will go through validation throughout 2024 and then is expected to be ready for customer deployments later this year.
The company also tested unprocessed flare gas that was collected from the Permian Basin and confirmed the ability for the KARNO reactor to operate on this fuel, showcasing the fuel agnostic characteristics of the generator. Recent test results on this fuel highlight that the KARNO’s flameless oxidation process is expected to surpass current EPA Tier 4 emissions standards by 98% for CO and 76% for NOx with no additional aftertreatment or catalyst needed.
Powertrain Wind-Down
In November 2023, Hyliion announced that it was winding down its powertrain business segment to maintain the company’s strong cash position as it furthers development of the KARNO generator technology. The company intends to retain the powertrain technology, enabling it to explore future use or sale of the technology and tangible assets. Most wind-down activities are expected to be completed in the first quarter of 2024 while efforts to monetize powertrain assets and technology continue.
Financial Highlights and Guidance
Fourth quarter operating expenses totaled $32.6 million, compared to $31.6 million in the prior-year quarter as the company initiated powertrain wind-down actions. Fourth quarter expenses include $11.5 million of charges directly related to the wind-down, including employee severance, contract cancellation costs, and accelerated depreciation of assets.
Full-year expenses totaled $136.3 million, compared to $152.4 million for the full year in 2022. Expenses in 2022 include $28.8 million of one-time charges associated with the purchase of KARNO generator technology from GE. Cash expenditures for 2023 were $131 million, including net losses and capital investments. The company ended the year with $291 million in unrestricted cash, and short-term and long-term investments.
For 2024, total cash consumed by the KARNO generator business is expected to be between $40 and $50 million, down compared to $131 million in capital consumed by the company in 2023. This estimate excludes cash payments associated with the stock repurchase program, payments associated with the ongoing wind-down of powertrain operations, and cash generated from the sale of powertrain assets and technology. Hyliion expects to achieve commercialization of the KARNO generator with the capital on hand.
Projections for 2025 include growth of KARNO generator deliveries with proceeds from sales in the low double-digit millions of dollars. The company also projects gross margins to be approximately break-even or slightly negative and cash spending to grow modestly compared to 2024.
About Hyliion
Hyliion is committed to creating innovative solutions that enable clean, flexible and affordable electricity production. The Company’s primary focus is to provide distributed power generators that can operate on various fuel sources to future-proof against an ever-changing energy economy. Headquartered in Austin, Texas, and with research and development in Cincinnati, OH, Hyliion is addressing the commercial space first with a locally-deployable generator that can offer prime power, peak shaving, and renewables matching. Beyond stationary power, Hyliion will address mobile applications such as vehicles and marine. The KARNO generator is a fuel-agnostic solution, enabled by additive manufacturing, that leverages a linear heat generator architecture. The Company aims to offer innovative, yet practical solutions that contribute positively to the environment in the energy economy.
<<<
---
>>> Here's What Will Make Caterpillar Stock a Buy
Motley Fool
By Lee Samaha
Feb 10, 2024
https://www.fool.com/investing/2024/02/10/heres-what-will-make-caterpillar-stock-a-buy/
KEY POINTS
The cyclicality of Caterpillar's earnings means investors should be careful about what they assume for the company's earnings growth.
The company displayed impressive pricing power in 2023 as its product lineup fell into favor.
Weakening end markets, notably in construction industries in China and Europe, are creating near-term headwinds, but lower interest rates will boost growth.
The company's valuation is looking stretched, but there are pathways to value for the industrial stock.
Caterpillar (CAT) just delivered one of the best earnings reports in the industrial sector this earnings season. As the chart below demonstrates, its stock price continues to rise. However, the question now is what will make the stock a buy for investors. Here's what you need to know.
Three things to make Caterpillar a buy
There are three key answers to this question, and I will flesh them out below:
A lower stock price because Caterpillar's valuation is starting to look stretched.
An improvement in earnings from better operational execution.
An upside catalyst to earnings from an improvement in its end markets.
Caterpillar's valuation
The stock is an excellent value based on its trailing earnings and free cash flow (FCF). For example, earnings per share (EPS) of $21.21 puts it on just 15.2 times earnings, and machine, energy & transportation (ME&T) FCF of $10 billion puts it on 16.4 times FCF.
However, there's something else to consider: Caterpillar is, and always will be, a cyclical company (more on that later), and its earnings and FCF history reflect that.
Take FCF, for example. Management previously guided toward $4 billion to $8 billion through the cycle. The good news is that the guidance was raised to $5 billion to $10 billion through the cycle. For 2024, CFO Andrew Bonfield expects "to be within the top half of our updated ME&T free cash flow target range of $5 billion to $10 billion."
In summary, Caterpillar's guidance implies that its FCF may have peaked in 2024, so investors shouldn't consider the $10 billion reported in 2023 as a base level.
A conservative way to value a cyclical like Caterpillar is to take the midpoint of its FCF range through the cycle. Using the updated guidance of $5 billion to $10 billion and the midpoint of $7.5 billion and applying a 20 times FCF multiple to it (reasonable for a mature industrial), Caterpillar is better valued at $150 billion -- an 8.5% discount to the current price.
Operational improvement
Caterpillar is doing an excellent job operationally, and investors can be confident that the company can potentially improve its profitability, FCF, or earnings quality. There's no better way to tell if a company has a strong product lineup than by looking at its pricing power, specifically comparing the profit change due to sales volumes vs. price realization.
As the table below shows, sales volumes declined in the fourth quarter but were more than offset by powerful price realization. Clearly, Caterpillar has pricing power, and it might be able to increase profits even as volumes decline.
In addition, management can improve the quality of its earnings by continuing to grow its less cyclical services revenue. Indeed, it aims to hit $28 billion in services revenue by 2026, given that it increased services revenue from $14 billion in 2016 to $23 billion in 2023. It's reasonable to expect Caterpillar to hit its target, which might lead investors to value the company on higher earnings and FCF multiples.
Improving end markets
There's little doubt Caterpillar's growth is slowing, and Bonfield's full-year guidance calls for sales to "be broadly similar to 2023." Moreover, a look at Caterpillar's retail-sales data (Caterpillar primarily sells its machines and power systems to independent dealers, who then sell to end users) shows the slowdown graphically. The data below is retail sales to end users.
Strength in U.S. infrastructure spending will support construction sales in 2024, but China is softening, and Caterpillar sees Europe declining in 2024. Bonfield expects "lower sales versus 2023, impacted by lower machine volume primarily in off-highway and articulated trucks" in resource industries. Finally, Bonfield thinks energy and transportation sales will only be "slightly higher" in 2024.
Lower interest rates will support construction activity and possibly lead to higher commodity prices, encouraging investment in oil and gas and mining industries.
Is Caterpillar a buy?
Based on the idea that its earnings have hit a local peak, the stock looks overvalued. On the other hand, this is a high-quality company with strong pricing power, so don't be surprised if its earnings surpass estimates if the global growth outlook improves. Caterpillar is the kind of company investors should look to pick up should the market present a better opportunity, though.
<<<
---
>>> Can General Electric's Fantastic Bull Run Keep Going?
Motley Fool
By Lee Samaha
Jan 31, 2024
https://www.fool.com/investing/2024/01/31/can-general-electrics-fantastic-bull-run-keep-goin/
KEY POINTS
Despite some margin headwinds, GE Aerospace looks set for another year of strong revenue growth and margin expansion.
GE Vernova has to turn its loss-making offshore business into profit.
The game plan at GE Vernova is well understood, and management has a good track record of implementing a similar strategy at GE Power.
The stock has had a great run, and here's a look at how it could continue.
General Electric (GE) isn't going out with a whimper but with a bang. The stock is up almost 64% over the last year as the company readies itself for a breakup that will see GE disappear as GE Aerospace and GE Vernova (a combination of GE Power and GE Renewable Energy) appear. Investors holding the stock will get a piece of both companies, but is it time to take profits, or does it make sense to keep holding the stock?
Improving but still a work in progress: GE Aerospace
The spinoff and the nature of the aerospace industry make it a bit difficult to get a handle on GE Aerospace's prospects and financials. The following table combines the guidance on the recent earnings call with the 2025 guidance on the investor day in March.
As you can see, there are some asterisks, but they shouldn't be ignored as trivialities.
Firstly, the 2024 operating profit guidance is $6 billion to $6.5 billion. Still, since this includes $600 million of corporate and stand-alone costs due to the spinoff, I've used the "current reporting" guidance for ease of comparison to show the bridge to the 2025 guidance. The same logic applies to the 2025 guidance, where management assumes $500 million in stand-alone costs, making the actual profit guidance $7.1 billion to $7.6 billion.
Furthermore, the 2024 profit margin guidance is my estimate using the midpoint of the "current reporting" guidance and assuming that 12.5% equates to low double digits.
Of course, the next question is why GE Aerospace's margins will possibly be flat in 2024 and then bounce in 2025. It's especially relevant as GE's rival engine maker, RTX's Pratt & Whitney, sees margin expansion in 2024 -- a point noted by Jefferies analyst Sheila Kahyaoglu on the RTX earnings call.
GE and GE Aerospace may be conservative with their guidance. Culp has a good track record of exceeding guidance, not least in 2023, where initial guidance for $5.3 billion to $5.7 billion was easily trumped by the $6.1 billion noted in the table above.
One answer to the question comes from the nature of the airplane engine industry, whereby engines are sold at a loss only to generate decades of highly profitable aftermarket and service revenue. Indeed, GE and GE Aerospace CFO Rahul Ghai noted that the ramp in the LEAP engine (used on the Airbus A320 neo family and the sole engine on the Boeing 737 MAX) production ramp would negatively impact margins. In addition, "even though LEAP services becomes profitable in '24, it's still a margin headwind," and then there's the GE9X engine (used on the Boeing 777X) ramp in 2025 as well.
Lots of places to improve: GE Vernova
Turning briefly to GE Vernova, the business managed to eke out a small profit in 2023, and management expects further improvement in 2024 with profitability at GE Power, onshore wind, and digital, offsetting losses at offshore (all GE Renewable Energy business), ultimately resulting in $0.7 billion to $1.1 billion in free cash flow (FCF).
I've discussed the game plan at GE Vernova in a previous article, and GE Vernova CEO Scott Strazik noted it had reduced the offshore equipment backlog to $4 billion and said, "The industry is beginning to reset, and while it does, we'll be highly selective on adding to the backlog."
Is GE stock a buy?
Conservatively combining the 2024 FCF guidance at both industrial businesses of ">$5 billion" at GE Aerospace and $0.7 billion to $1.1 billion for GE Vernova would put GE on a forward multiple of around 24 times FCF. That might appear rich, but it includes stand-alone costs for the breakup, and both businesses are set for long-term growth.
GE Aerospace is set for multidecade services/aftermarket revenue from LEAP and existing engines. GE Vernova's margins should improve as it works through an unfavorable backlog offshore and improves the business's margin profile.
It's still an attractive stock for investors but is not far from fair value now.
<<<
---
>>> Veralto Corporation (VLTO) provides technology solutions that monitor, enhance, and protect resources worldwide. Its technologies address challenges across regulated industries, including municipal utilities, food and beverage, pharmaceutical, and industrials. The company core offerings include water analytics, water treatment, marking and coding, and packaging and color. It operates through two segments Water Quality (WQ) and Product Quality & Innovation (PQI). The WQ segment improves the quality and reliability of water through brands, including Hach, Trojan Technologies, and ChemTreat. The PQI segment promotes consumer trust in products and help enable product innovation through brands, such as Videojet, Linx, Esko, X-Rite, and Pantone. Veralto Corporation was formerly known as DH EAS Holding Corp. and changed its name to Veralto Corporation on February 22, 2023. The company was incorporated in 2022 and is based in Waltham, Massachusetts. Veralto Corporation operates as a subsidiary of Danaher Corporation.
<<<
---
Comfort Systems, Watsco, nVent Electric - >>> 3 Super Stocks Trading Near All-Time Highs That You Can Still Buy
by Lee Samaha
Motley Fool
February 21, 2024
https://finance.yahoo.com/news/3-super-stocks-trading-near-133100241.html
There's always a reason why stocks trade near their all-time highs, usually because they are firing on all cylinders. That's certainly the case with Comfort Systems (NYSE: FIX), Watsco (NYSE: WSO), and nVent Electric (NYSE: NVT). All three have excellent tailwinds behind them, making them attractive stocks for investors who like to buy high and sell higher.
Comfort Systems (FIX)
You can always find pockets of growth in an economy, even in the slowing one we have now. One such pocket is shown in the remarkable chart below. According to the Department of the Treasury, the spending boom is "principally driven by construction for computer, electronic, and electrical manufacturing," partly encouraged by the CHIPS Act.
One way to make money from this trend comes from the mechanical and electrical contracting services company Comfort Systems. The company generates a third of its revenue from the manufacturing sector, with technology second at 21%. Given this exposure, it was no surprise to hear CEO Brian Lane say on the third-quarter earnings call in October, "Our revenue mix continues to trend toward data centers, life science, food and other manufacturing such as chip plants and battery."
Indeed, order strength led to the company's backlog rising to $4.3 billion at the end of the third quarter of 2023 compared to just $1.5 billion at the end of 2020.
If these trends continue, encouraged by ongoing demand for A.I. and semiconductor manufacturing in the U.S., then Comfort Systems' strong run can continue.
Watsco (WSO)
The heating, ventilation, air conditioning, and refrigeration (HVACR) equipment and parts distributor is one of those boring stocks that quietly goes on, generating stellar returns for investors almost unseen. The stock is up 1,560% over the last 20 years and 315% over the last decade, and has paid a dividend for 50 consecutive years.
It's an impressive record due to management's "buy and build" strategy. In a nutshell, Watsco is the leading player in a highly fragmented market for HVACR distribution characterized by myriad small local players serving localized markets. Its strategy involves expanding geographically by acquiring small distributors and improving its performance by adding products and technologies to the acquired distributors' offerings.
There's even more benefit to the "buy and build" strategy as Watsco continues to roll out technological improvements such as e-commerce-enabled websites, mobile apps, and digitized product information -- solutions making it much easier for technicians to order products from distributors.
Last year marked a year of consolidation following 16% sales growth in 2022 and 24% in 2021, as high levels of replacement demand occurred due to stay-at-home measures leading to high levels of equipment usage. It's an impressive result, and Wall Street analysts expect 6.4% growth in 2024. As such, Watsco can continue its remarkable track record of delivering returns for investors.
nVent Electric (NVT)
Alongside Comfort Systems and Watsco, nVent is another "boring" company that happens to deliver significant returns for investors. The electrical connection and protection product company's stock is up 135% over the last five years, driven by the electrification of everything trend.
The trend encompasses everything from AI and increasing demand for data centers and networks to electric vehicles and renewable energy driving demand for electrical installations. Industrial automation, smart buildings/infrastructure, and connected technologies require electrical installations, which means more demand for nVent's enclosures, fastening solutions, and heat tracing systems.
Led by an all-female CEO/CFO team, the company has attracted attention for its consistent record of beating and raising guidance. Management believes it's on track for organic growth of 3%-5% in 2024, with adjusted earnings per share up 4%-7% to hit a range of $3.17-$3.27. That may seem unimpressive, but consider that there's a headwind of $0.11 built into its guidance due to a change in tax standards. Without that, nVent would be heading for 7%-10% growth.
The electrification of everything trend is still in its early innings, and investors in nVent can expect many more years of growth from a company with an excellent track record of success.
<<<
---
>>> nVent Electric plc (NVT), together with its subsidiaries, designs, manufactures, markets, installs, and services electrical connection and protection solutions in North America, Europe, the Middle East, Africa, the Asia Pacific, and internationally. The company operates through three segments: Enclosures, Electrical & Fastening Solutions, and Thermal Management.
The Enclosures segment provides solutions to protect electronics and data in mission critical applications, including data solutions. This segment also offers digital and automation solutions, system integrations, and global services.
The Electrical & Fastening Solutions segment provides solutions that connect and protect power and data infrastructure. This segment also offers power connections, fastening solutions, cable management solutions, grounding and bonding systems, and tools and test instruments.
The Thermal Management segment offers heat management solutions that protect people and assets. This segment includes heat tracing for freeze protection and process temperature maintenance and control; pipe freeze protection, surface deicing, hot water temperature maintenance, floor heating, fire-rated wiring, and leak detection; and heat trace systems, connected controls, remote monitoring, and annual service programs.
The company markets its products through electrical distributors, contractors, and original equipment manufacturers under the CADDY, ERICO, GARDNER BENDER, HOFFMAN, ILSCO, RAYCHEM, SCHROFF, and TRACER brand names. Its products are used for various applications, such as industrial, commercial and residential, infrastructure, and energy. nVent Electric plc was founded in 1903 and is based in London, the United Kingdom.
<<<
https://finance.yahoo.com/quote/NVT/profile
---
>>> Watsco, Inc. (WSO), together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. It operates in the United States, Canada, Mexico, and Puerto Rico, as well as exports its products to Latin America and the Caribbean Basin. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.
<<<
---
>>> What Makes Generac Holdings (GNRC) an Investment Choice?
Insider Monkey
by Soumya Eswaran
Feb 21, 2024
https://finance.yahoo.com/news/makes-generac-holdings-gnrc-investment-131705104.html
Polen Capital, an investment management company, released its “Polen U.S. Small Company Growth Strategy” fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund delivered 10.46% gross and 10.22% net of fees compared to a 12.75% return for the Russell 2000 Growth Index. The firm views the performance in many respects as evidence of the stability of its investment approach in the face of frequent and significant market swings. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Polen U.S. Small Company Growth Strategy featured stocks such as Generac Holdings Inc. (NYSE:GNRC) in the Q4 2023 investor letter. Headquartered in Waukesha, Wisconsin, Generac Holdings Inc. (NYSE:GNRC) is a power generation equipment, energy storage systems, and other power product manufacturer and supplier. On February 20, 2024, Generac Holdings Inc. (NYSE:GNRC) stock closed at $114.39 per share. One-month return of Generac Holdings Inc. (NYSE:GNRC) was 1.08%, and its shares lost 3.63% of their value over the last 52 weeks. Generac Holdings Inc. (NYSE:GNRC) has a market capitalization of $6.879 billion.
Polen U.S. Small Company Growth Strategy stated the following regarding Generac Holdings Inc. (NYSE:GNRC) in its fourth quarter 2023 investor letter:
"Generac Holdings Inc. (NYSE:GNRC) is the leading brand for a wide range of power equipment including standby generators for homes and backup power for commercial and industrial markets. Generac is uniquely positioned due to its scale–it’s the largest manufacturer in the U.S. and has the largest dealer/distributor network with 75% market share in the residential business and elevated market share in commercial/industrial depending on the end market. Generac was previously held in the U.S. SMID strategy prior to exiting the position in 2021 due to concerns around the supply chain and a wider range of potential outcomes given a surge in demand through the pandemic. Since then, earnings have declined as pandemic era pull-forward demand normalized and the valuation is far more attractive. We believe long-term earnings per share (EPS) growth is in the mid to high teens but that EPS will grow significantly faster over the next two years as margins inflect post COVID re-set—something we are already observing in the business fundamentals."
<<<
---
>>> Comfort Systems USA Announces Acquisition
Business Wire
Feb 2, 2024
https://finance.yahoo.com/news/comfort-systems-usa-announces-acquisition-130000094.html
- Acquires Utah’s J & S Mechanical Contractors, Inc. -
HOUSTON, February 02, 2024--(BUSINESS WIRE)--Comfort Systems USA, Inc. (NYSE: FIX) (the "Company") today announced that it has acquired J & S Mechanical Contractors, Inc. ("J & S") headquartered in West Jordan, Utah.
J & S was founded in 1976 and provides mechanical construction services to commercial and industrial sectors across the Mountain West region of the United States. J & S works on many of the largest and most technical construction projects in their region. Initially, J & S is expected to contribute annualized revenues of approximately $145 million to $160 million, and earnings before interest, taxes, depreciation, and amortization of $12 million to $15 million. In light of the amortization expense, J & S is expected to make a neutral to slightly accretive contribution to earnings per share in 2024 and 2025.
Brian Lane, Comfort Systems USA’s Chief Executive Officer, commented, "We are extremely happy to announce that J & S is now a part of the Comfort Systems USA family of companies. J & S has deep roots and a strong reputation in Utah for providing extraordinary outcomes for its customers in industrial, institutional, and commercial markets. This partnership will increase our commitment to the vibrant markets of the Intermountain West, as J & S brings excellent expertise, capability, and leadership at all levels. J & S has earned its tremendous reputation and solid customer relationships thanks to its formidable workforce, and we are confident that the people of J & S will thrive as a part of our family of similar businesses."
Jack Jensen, President of J & S, commented, "We believe that Comfort Systems USA shares our core beliefs, including strong performance for our customers, growth and opportunity for our employees, and honesty and integrity in our daily business. We are happy to embark on this new stage in our development and we are committed to continuing to serve, innovate, grow, and thrive in both Utah and Nevada." Justin Barlow, Executive Vice President of J & S, added, "We chose Comfort Systems USA as the best answer for us to preserve our founders’ legacy of excellence and commitment to our community, while providing a bright future for our unmatched team members. We look forward to a strong partnership for our collective future."
Comfort Systems USA® is a leading provider of commercial, industrial, and institutional heating, ventilation, air conditioning and electrical contracting services, with 172 locations in 131 cities across the nation.
<<<
---
Amphenol, Carlisle - >>> Electronics equipment maker Amphenol to buy Carlisle's unit for about $2 bln
Reuters
January 30, 2024
https://finance.yahoo.com/news/1-electronics-equipment-maker-amphenol-134720806.html
Jan 30 (Reuters) - Electronics equipment maker Amphenol said on Tuesday it plans to buy a unit of Carlisle Companies for about $2 billion in cash.
Carlisle Interconnect Technologies (CIT), the unit that supplies cables and connectors to defense and industrial end markets, is expected to broaden Amphenol's existing portfolio.
The deal comes at a time when Amphenol is seeing growing demand for its products as countries across the world expand their investments in defense technology amid the conflict in the Middle East and the Russia-Ukraine war.
The acquisition of CIT is expected to be accretive to Amphenol's earnings per share in the first year post-closing of the deal, the company said.
The deal is expected to close by the end of the second quarter of 2024 and will be financed through a combination of Amphenol's cash on hand and its existing credit and commercial paper facilities.
<<<
---
>>> What Makes AAON (AAON) a Lucrative Investment?
Insider Monkey
by Soumya Eswaran
February 7, 2024
https://finance.yahoo.com/news/makes-aaon-aaon-lucrative-investment-112143112.html
Baron Funds, an investment management company, released its “Baron Discovery Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. In 2023, the fund (Institutional Shares) returned 22.58% outperforming the 18.66% return for the Russell 2000 Growth Index. In Q4, the fund returned 12.44% compared to a 12.75% return for the index. Since its inception, investors in the fund have earned an annualized return of 12.42%, resulting in a more than tripled investment. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Discovery Fund featured stocks such as AAAON, Inc. (NASDAQ:AAON) in the fourth quarter 2023 investor letter. Headquartered in Tulsa, Oklahoma, AAON, Inc. (NASDAQ:AAON) is an air conditioning and heating equipment manufacturer. On February 6, 2024, AAON, Inc. (NASDAQ:AAON) stock closed at $72.07 per share. One-month return of AAON, Inc. (NASDAQ:AAON) was 0.31%, and its shares gained 40.29% of their value over the last 52 weeks. AAON, Inc. (NASDAQ:AAON) has a market capitalization of $5.855 billion.
Baron Discovery Fund stated the following regarding AAON, Inc. (NASDAQ:AAON) in its fourth quarter 2023 investor letter:
"AAON, Inc. (NASDAQ:AAON) is a high-quality manufacturer of HVAC equipment based in Tulsa, OK. It is a leader in providing premium, semi-custom HVAC equipment to the non-residential market with products that are more energy efficient, have longer life spans, and overall are better customized than peers to fit customers’ needs. This has driven significant outperformance over the past decade with organic growth in the high single-digit to low double-digit range compared to a low to mid-single-digit range for its peers.
Strong secular growth driven by decarbonization and broader ESG trends/ regulations is leading to greater demand for the types of products AAON specializes in such as energy efficient HVAC equipment that provides better air quality. To satisfy incoming regulations, peers have been forced to update their offerings and raise prices, while AAON today has ready-to-ship products satisfying all regulations. This dynamic is reducing the price premium between AAON’s products and the industry standards from 15% to 20% historically to a high single-digit level today. This price gap reduction is accelerating volume growth and enabling the company to take share. With the acquisition of BasX Solutions, a leader in data center, cleanroom systems, and custom HVAC units in December 2021, AAON expanded its addressable market by around 50% to over $30 billion in segments of the market where its focus on energy efficient units is extremely valuable. BasX’s adjusted cash flow (EBITDA) has roughly doubled over the past two years under AAON’s ownership. Lastly, CEO Gary Fields has undertaken a multi-year reorganization of the company’s management team and invigoration of company culture with a greater focus on selling and pushing the AAON solution from niche to mainstream. A simple illustration of the change brought by Gary is the opening of the exploration center this past April. This is a 28,000 square foot facility with over 10,000 square feet of exhibits and AAON products. We toured this facility at the company’s Analyst Day this past May where AAON units were placed next to competitor solutions. By purchasing and deconstructing competitors solutions, the team clearly highlighted the value of AAON’s superior products. They are more durable and have higher levels of efficiency. The team hoped that they would bring one to two potential customers a week to the center, but the demand has been so strong that one to two customers a day are visiting with a strong conversion from visits to eventual orders.
Going forward, with run-rate revenue at a little over $1 billion in a $30 billion market, there is ample opportunity ahead for AAON to grow and take market share. We expect mid-single-digit price increases across its product set along with mid-single-digit volume growth. The business is about 65% replacement/35% new construction with a mix of end-markets and limited exposure to new office construction. Given the growth opportunity ahead, the company is continuing to invest aggressively but at the same time has taken steps to maximize its physical footprint and, over time, will achieve greater levels of operating leverage. We believe the company will drive gross margins from the low 30% to the mid-high 30% levels with EBITDA margins expanding from the low to high 20% levels over our five year investment horizon. We calculate this combination of above market growth combined with significant margin expansion will allow us to double our investment over the next five years."
AAON, Inc. (NASDAQ:AAON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held AAON, Inc. (NASDAQ:AAON) at the end of third quarter which was 19 in the previous quarter.
We discussed AAON, Inc. (NASDAQ:AAON) in another article and shared the list of best growth stocks to buy according to billionaire Ray Dalio’s Bridgewater Associates. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
<<<
---
Deere, Lincoln Elect, Mueller Indust - >>> Manufacturing Marvels: 3 Industrial Stocks Set for Success
Investor Place
by Will Ashworth
Jan 18, 2024
https://finance.yahoo.com/news/manufacturing-marvels-3-industrial-stocks-184428692.html
The S&P 500 generated a 24.23% return (26.44% with dividends) in 2023. Of the 11 sectors in the index, industrial stocks had the fourth-best performance, up 16.04%. Only technology (56.39%), communication services (54.36%), and consumer discretionary (41.04%) did better.
How did smaller industrial stocks do?
According to S&P Dow Jones Indices, industrials in the S&P MidCap 400 had a 30.10% return in 2023, the best performance of the 11 sectors. In the S&P SmallCap 600, industrial stocks returned 30.36%, the best-performing sector, behind only consumer discretionary at 30.74%.
So, as you can see, industrial stocks in the S&P Composite 1500, which makes up the three sub-indexes, had an excellent year.
Fidelity Investments’ outlook for industrial stocks in 2024 is quite encouraging. David Wagner, Fidelity Sector Portfolio Manager, stated:
“I believe the current environment offers reasons for bullishness on industrials. After decades of underinvestment in the U.S. industrial base, supply-chain difficulties during the pandemic and geopolitical tension have highlighted the advantages of greater U.S. self-sufficiency.”
So, industrial stocks should do well in 2024 and beyond unless we go into a severe recession this year.
Here are three that are set for success, one from each sub-index.
Deere & Co. (DE)
Representing the S&P 500 is Deere & Co. (NYSE:DE), One of the world’s leading agriculture and construction equipment manufacturers. In recent years, the Moline-based company has emphasized technology innovation for its end-user customers.
The more technologically advanced its customers are, the more profitable and successful they will be, leading to further purchases of their products. It’s Business 101.
The company estimates that its three addressable markets, Production & Precision Agriculture, Small Agriculture & Turf, and Construction & Forestry, generate more than $150 billion annually.
In 2015, Deere’s OROA (operating return on operating assets) was 15%. In 2022, it had increased to 40%. In 2022, its SVA (shareholder value added) — defined as NOPAT (net operating profit after tax) minus its cost of capital — was $5.8 billion, the highest amount since the company started using SVA as a critical measure in 2001.
DE stock is up 131% over the past five years, 1.7x the index.
Lincoln Electric (LECO)
Lincoln Electric (NYSE:LECO) represents the S&P MidCap 400. It has a 5-year return of 151%, 3x the index. I recently recommended the welding company’s stock as an income opportunity in addition to its capital appreciation potential.
Although its bread-and-butter is welding equipment, I like its move into DC fast EV chargers. American-made, they’ll do very well once America gets back on the renewable energy bandwagon.
In June 2020, I wrote about 10 cash-rich stocks to buy for peace of mind. The two metrics I used were free cash flow to net income, an indication of how much free cash flow a company generates from its net income — more than 100% is ideal — while the second was total cash to total debt. The higher, the better.
In the trailing 12 months ending September 30, 2023, Lincoln Electric’s free cash flow was $572 million, 115% of its $498 million net income. It’s over 100%. That’s good. Its cash was $343 million, 31% of its $1.11 billion in total debt. While it’s not overly cash-rich, it has plenty for its capital allocation decisions.
Its 1.3% yield is an excellent industrial stock for total returns.
Mueller Industries (MLI)
Mueller Industries (NYSE:MLI) represents the S&P SmallCap 600. It’s the top stock from a performance perspective over the past five years, up 259%.
The Memphis-based industrial company’s first sentence in its November presentation emphasizes why you must own MLI stock: “Profitable throughout all economic cycles.”
It doesn’t get much better than that. Or does it?
Mueller specializes in manufacturing copper and copper alloy products for many uses, including building construction, appliances, defense, energy and automotive. It also produces products made from aluminum, steel and plastics. Given it’s been around since 1917, it’s learned a thing or two about manufacturing quality products, which has led to tremendous financial performance.
Here are a few key numbers.
Its EBITDA margin in 2022 was 23% on $4.0 billion in revenue. It had a net debt of $0 at the end of 2022. That hasn’t changed. It’s got a net cash position of $1.07 billion. Its return on invested capital is a high 42%. About 85% of its $4 billion in revenue have operating margins of 24-29%, which helps explain its $11.64 per share earnings in 2022.
Its products touch every part of America. The demand for its products isn’t going away.
As for cash-rich companies, it meets the test. In the trailing 12 months ended Sept. 30, its free cash flow was $658 million, 106% of its $623 million in net income. Its cash was $1.11 billion, 3,154% of its $35 million in total debt.
What’s not to like?
<<<
---
>>> Lincoln Electric Holdings, Inc. (LECO, through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide. The company operates through three segments: Americas Welding, International Welding, and The Harris Products Group. It offers brazing and soldering filler metals, arc welding equipment, plasma and oxyfuel cutting systems, wire feeding systems, fume control equipment, welding accessories, and specialty gas regulators, as well as consumables used in the brazing and soldering alloys market. In addition, it is involved in the retail business in the United States. Further, the company manufactures copper and aluminum headers, distributor assemblies, and manifolds for the heating, ventilation, and air conditioning sector in the United States and Mexico. The company serves general fabrication, energy and process, automotive and transportation, and construction and infrastructure industries, as well as heavy fabrication, ship building, and maintenance and repair markets. It sells its products directly to users of welding products, as well as through industrial distributors, retailers, and agents. The company was founded in 1895 and is headquartered in Cleveland, Ohio.
<<<
https://finance.yahoo.com/quote/LECO/profile?p=LECO
---
>>> RELX PLC (RELX), together with its subsidiaries, provides information-based analytics and decision tools for professional and business customers in North America, Europe, and internationally. It operates through four segments: Risk; Scientific, Technical & Medical; Legal; and Exhibitions.
The Risk segment offers information-based analytics and decision tools that combine public and industry specific content with technology and algorithms to assist clients in evaluating and predicting risk.
The Scientific, Technical & Medical segment provides information and analytics that help institutions and professionals to progress in science and advance healthcare.
The Legal segment provides legal, regulatory, and business information and analytics that help customers in decision-making, as well as increases the productivity.
The Exhibitions segment is involved in the business that combines face-to-face with data and digital tools to help customers learn about markets, source products, and complete transactions. The company was formerly known as Reed Elsevier PLC and changed its name to RELX PLC in July 2015. RELX PLC was incorporated in 1903 and is headquartered in London, the United Kingdom.
<<<
https://finance.yahoo.com/quote/RELX/profile?p=RELX
---
>>> Tetra Tech, Inc. (TTEK) provides consulting and engineering services in the United States and internationally. The company operates through two segments, Government Services Group (GSG) and Commercial/International Services Group (CIG).
The GSG segment offers early data collection and monitoring, data analysis and information management, science and engineering applied research, engineering design, project management, and operations and maintenance services; and climate change and energy management consulting, as well as greenhouse gas inventory assessment, certification, reduction, and management services. This segment serves federal, state, and local governments; and development agencies in water resources analysis and water management, environmental monitoring, data analytics, government consulting, waste management, and a range of civil infrastructure master planning and engineering design markets.
The CIG segment provides early data collection and monitoring, data analysis and information management, feasibility studies and assessments, science and engineering applied research, engineering design, project management, and operations and maintenance services; and environmental remediation and reconstruction services, and industrial water treatment services. This segment serves natural resources, energy, and utilities markets, as well as sustainable infrastructure master planning and engineering design for facilities, transportation, and local development projects. Tetra Tech, Inc. was founded in 1966 and is headquartered in Pasadena, California.
<<<
https://finance.yahoo.com/quote/TTEK/profile?p=TTEK
---
>>> Illinois Tool Works Inc. (ITW) manufactures and sells industrial products and equipment worldwide. It operates through seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.
The Automotive OEM segment offers plastic and metal components, fasteners, and assemblies for automobiles, light trucks, and other industrial uses.
The Food Equipment segment provides warewashing, refrigeration, cooking, and food processing equipment; kitchen exhaust, ventilation, and pollution control systems; and food equipment maintenance and repair services.
The Test & Measurement and Electronics segment produces and sells equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics.
The Welding segment produces arc welding equipment; and metal arc welding consumables and related accessories.
The Polymers & Fluids segment produces adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance.
The Construction Products segment offers engineered fastening systems and solutions for the residential construction, renovation/remodel, and commercial construction markets.
The Specialty Products segment offers beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. It serves the automotive OEM/tiers, commercial food equipment, construction, general industrial, and automotive aftermarket end markets. The company distributes its products directly to industrial manufacturers, as well as through independent distributors. Illinois Tool Works Inc. was founded in 1912 and is based in Glenview, Illinois.
<<<
https://finance.yahoo.com/quote/ITW/profile?p=ITW
---
>>> Parker-Hannifin Corporation (PH) manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates through two segments: Diversified Industrial and Aerospace Systems.
The Diversified Industrial segment offers sealing, shielding, thermal products and systems, adhesives, coatings, and noise vibration and harshness solutions; filters, systems, and diagnostics solutions to ensure purity and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors used in fluid and gas handling; and hydraulic, pneumatic, and electromechanical components and systems for builders and users of mobile and industrial machinery and equipment. This segment sells its products to original equipment manufacturers (OEMs) and distributors who serve the replacement markets in manufacturing, packaging, processing, transportation, construction, refrigeration and air conditioning, agricultural, and military machinery and equipment industries.
The Aerospace Systems segment offers products for use in commercial and military airframe and engine programs, such as control actuation systems and components, engine build-up ducting, engine exhaust nozzles and assemblies, engine systems and components, fluid conveyance systems and components, fuel systems and components, fuel tank inerting systems, hydraulic systems and components, lubrication components, avionics, sensors, pneumatic control components, thermal management products, fire detection and suppression systems and components, and wheels and brakes, as well as fluid metering, delivery, and atomization devices. This segment markets its products directly to OEMs and end users. The company markets its products through direct-sales employees, independent distributors, and sales representatives. Parker-Hannifin Corporation was founded in 1917 and is headquartered in Cleveland, Ohio.
<<<
https://finance.yahoo.com/quote/PH/profile?p=PH
---
>>> Hubbell Incorporated (HUBB), together with its subsidiaries, designs, manufactures, and sells electrical and utility solutions in the United States and internationally. It operates through two segments, Electrical Solutions and Utility Solutions. The Electrical Solution segment offers standard and special application wiring device products, rough-in electrical products, connector and grounding products, lighting fixtures, and other electrical equipment for use in industrial, commercial, and institutional facilities by electrical contractors, maintenance personnel, electricians, utilities, and telecommunications companies, as well as components and assemblies. It also designs and manufactures various industrial controls, and communication systems for use in the non-residential and industrial markets, as well as in the oil and gas, and mining industries. This segment sells its products through electrical and industrial distributors, home centers, retail and hardware outlets, lighting showrooms, and residential product-oriented internet sites; and special application products primarily through wholesale distributors to contractors, industrial customers, and original equipment manufacturers. The Utility Solution segment designs, manufactures, and sells electrical distribution, transmission, substation, and telecommunications products, such as arresters, insulators, connectors, anchors, bushings, and enclosures cutoffs and switches; and utility infrastructure products, including smart meters, communications systems, and protection and control devices. This segment sells its products to distributors. Its brand portfolio includes Hubbell, Kellems, Bryant, Burndy, CMC, Bell, TayMac, Wiegmann, Killark, Hawke, Aclara, Fargo, Quazite, Hot Box, etc. The company was founded in 1888 and is headquartered in Shelton, Connecticut.
<<<
---
>>> EMCOR Group, Inc. (EME) provides electrical and mechanical construction, and facilities services primarily in the United States and the United Kingdom. It offers design, integration, installation, start-up, operation, and maintenance services related to electrical power transmission, distribution, and generation systems; energy solutions; premises electrical and lighting systems; process instrumentation in the refining, chemical processing, and food processing industries; low-voltage systems, such as fire alarm, security, and process control systems; voice and data communications systems; roadway and transit lighting, signaling, and fiber optic lines; heating, ventilation, air conditioning, refrigeration, and geothermal solutions; clean-room process ventilation systems; fire protection and suppression systems; plumbing, process, and high-purity piping systems; controls and filtration systems; water and wastewater treatment systems; central plant heating and cooling systems; crane and rigging services; millwright services; and steel fabrication, erection, and welding services. The company also provides building services that cover commercial and government site-based operations and maintenance; facility management, maintenance, and services; outage services to utilities and industrial plants; military base operations support services; mobile mechanical maintenance and services; services for indoor air quality; floor care and janitorial services; landscaping, lot sweeping, and snow removal services; vendor management and call center services; installation and support for building systems; program development, management, and maintenance for energy systems; technical consulting and diagnostic services; infrastructure and building projects; small modification and retrofit projects; and other building services. It offers industrial services to oil, gas, and petrochemical industries. The company was incorporated in 1987 and is headquartered in Norwalk, Connecticut.
<<<
---
>>> Applied Industrial Technologies, Inc. (AIT) distributes industrial motion, power, control, and automation technology solutions in North America, Australia, New Zealand, and Singapore. It operates in two segments, Service Center Based Distribution, and Engineered Solutions. The company distributes bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, advanced automation products, industrial rubber products, linear motion components, automation solutions, tools, safety products, oilfield supplies, and other industrial and maintenance supplies; and motors, belting, drives, couplings, pumps, hydraulic and pneumatic components, filtration supplies, valves, fittings, process instrumentation, actuators, and hoses, filtration supplies, as well as other related supplies for general operational needs of customers' machinery and equipment. It also operates fabricated rubber shops and service field crews that install, modify, and repair conveyor belts and rubber linings, as well as offer hose assemblies. In addition, the company provides technical support services; engages in the distribution of fluid power and industrial flow control products; advanced automation solutions, including machine vision, robotics, motion control, and smart technologies. It distributes industrial products through a network of service centers. The company serves various industries, including agriculture and food processing, cement, chemicals and petrochemicals, fabricated metals, forest products, industrial machinery and equipment, life sciences, mining, oil and gas, primary metals, technology, transportation, and utilities, as well as government entities. The company was formerly known as Bearings, Inc. and changed its to name to Applied Industrial Technologies, Inc. in 1997. The company was founded in 1923 and is headquartered in Cleveland, Ohio.
<<<
---
>>> Deere & Company (DE)
https://www.insidermonkey.com/blog/5-best-mario-gabelli-stocks-other-billionaires-are-also-piling-into-1235826/2/
Number of Billionaire Investors In Q3 2023: 14
Deere & Company (NYSE:DE) is one of the world’s biggest industrial machinery firms known for its tractors, crawlers, and other products. More than three quarters of its stock is owned by institutional investors, indicating a strong foundation but also implying low liquidity.
During September 2023, 55 out of the 910 hedge funds profiled by Insider Monkey were the firm’s shareholders. Deere & Company (NYSE:DE)’s biggest hedge fund investor is Michael Larson’s Bill & Melinda Gates Foundation Trust as it owns $1.4 billion worth of shares.
<<<
---
>>> U.S. Space Force Awards Booz Allen $630M Systems Engineering and Integration Contract
Business Wire
October 4, 2023
https://finance.yahoo.com/news/u-space-force-awards-booz-120000256.html
Booz Allen to support engineering and integration of space sensing systems
MCLEAN, Va., October 04, 2023--(BUSINESS WIRE)--Booz Allen Hamilton (NYSE: BAH) announced today it was awarded a seven-year, $630-million, single-award contract with the U.S. Space Force to support systems engineering and integration of next-generation space-based missile warning, environmental monitoring, and surveillance, reconnaissance, and tracking. As part of this work, Booz Allen will support Space Systems Command (SSC)—the Space Force field command for space development, acquisition, launch, and logistics—in engineering resilient space sensing capabilities. In addition, the firm will integrate the Next Generation Overhead Persistent Infrared (OPIR) program, a $14.4 billion program to upgrade U.S. missile warning and missile tracking capabilities to combat emerging missile threats.
This contract will leverage Booz Allen’s capabilities and mission expertise in digital engineering, mission integration, agile software development, cybersecurity, change management, AI, and machine learning (ML) to help the Space Force achieve its vision for a Digital Service. It also demonstrates the criticality of the space domain in delivering key decision-making information to warfighters and intelligence agencies to protect the nation.
"Booz Allen has been a trusted partner for defense, national security, and civil space missions for more than 50 years, starting with the nation's first missile defense strategy," said Andrea Inserra, executive vice president and leader in Booz Allen’s Aerospace business, which includes critical work for the U.S. Air Force, Space Force, U.S. Space Command, and NASA. "This is an exciting moment for Booz Allen, and we are thrilled to continue building upon our partnership with Space Force and the Department of Defense for critical missions aimed at accelerating and maintaining space superiority and driving information to action—no matter the domain."
Work on the contract will primarily take place in El Segundo, California, and Colorado Springs and Aurora, Colorado, with the ability to leverage teams and technology capabilities at additional U.S. locations as needed.
"This contract win is a key element of Booz Allen’s long-term, multiyear space strategy to meet client needs at the intersection of mission and technology," said Eric Hoffman, vice president and leader in Booz Allen’s space business. "This partnership reaffirms Booz Allen’s position as a leader in building and delivering world-class, mission-critical systems engineering, cyber architecture, and remote sensing capabilities to sustain U.S. space superiority."
This win builds on Booz Allen’s deep history in space solutions. The firm’s work includes over 50 years of multifaceted support for the International Space Station, modernization of NASA’s infrastructure and policies, engineering and analysis for the Artemis mission, and the Cybersecurity and Privacy Enterprise Solutions and Services (CyPrESS) contract—the first time NASA has united cybersecurity for IT, operational technology, and mission systems under one contract.
For more information about Booz Allen’s space solutions, visit here, and for more information on space careers, visit Booz Allen’s open space positions here.
About Booz Allen Hamilton
Trusted to transform missions with the power of tomorrow’s technologies, Booz Allen Hamilton advances the nation’s most critical civil, defense, and national security priorities. We lead, invest, and invent where it’s needed most—at the forefront of complex missions, using innovation to define the future. We combine our in-depth expertise in AI and cybersecurity with leading-edge technology and engineering practices to deliver impactful solutions. Combining more than 100 years of strategic consulting expertise with the perspectives of diverse talent, we ensure results by integrating technology with an enduring focus on our clients. We’re first to the future—moving missions forward to realize our purpose: Empower People to Change the World®.
With global headquarters in McLean, Virginia, our firm employs more than 32,600 people globally as of June 30, 2023 and had revenue of $9.3 billion for the 12 months ended March 31, 2023.
<<<
---
UFPI - >>> DECKORATORS® VOYAGE DECKING RECOGNIZED IN GOOD HOUSEKEEPING'S 2023 HOME RENOVATION AWARDS
PR Newswire
October 9, 2023
https://finance.yahoo.com/news/deckorators-voyage-decking-recognized-good-142800731.html
GRAND RAPIDS, Mich., Oct. 9, 2023 /PRNewswire/ -- Deckorators®, a leading brand of UFP Industries, Inc. (Nasdaq: UFPI), announced today that its patented Voyage Mineral-Based Composite Decking has been recognized in the prestigious Good Housekeeping 2023 Home Renovation Awards. A full list of winners can be found at
https://www.goodhousekeeping.com/home/renovation/a44870187/home-renovation-awards-2023/.
"We are honored to have our Voyage Decking line recognized with this award," says Michelle Hendricks, Deckorators Category Marketing Manager. "Voyage was specially designed to provide a timeless, versatile look for outdoor living spaces that will stand the test of time."
Deckorators Voyage Decking features a patented mineral-based composite technology that produces a fiber-like structure like wood. It has unmatched strength yet is nearly 35% lighter than other composites. With unique textured embossing for greater surface traction, Voyage is ideal for decks as well as areas around pools, spas, and hot tubs. Voyage Varied-plank Decking is available in four widths and six hues, allowing contractors and do-it-yourselfers to create custom wood-look floors.
"Homeowners are moving away from playing it safe in their outdoor living designs," Hendricks continues. "Now more than ever, they're seeking opportunities to add personality into those spaces. Our Voyage line was developed with that in mind, offering countless combinations for customization."
Compared to other multi-width decking options composed of PVC, Voyage Varied-plank Decking is stronger, allows less thermal movement and absorbs less moisture allowing Deckorators to back Voyage with industry-leading 50-year structural and 25-year stain-and-fade limited warranties.
Deckorators' growing network of more than 800 contractors across North America brings outdoor living to life nationwide.
About Deckorators
Deckorators, the first name in decking, railing and accessories, invented the low-maintenance aluminum balusters category and has since led the industry with innovative decking and railing products. With dependably on-trend designs, Deckorators lets DIYers and builders extend their creative ideas from a home's interior to its outdoor living spaces. Deckorators is a brand of UFP Retail Solutions, LLC, a UFP Industries company.
<<<
---
>>> General Electric Company (NYSE:GE) -- Goldman Sachs’ Stake Value: $443,959,690
https://www.insidermonkey.com/blog/goldman-sachs-defense-stocks-top-5-stock-picks-1190422/2/
Number of Hedge Fund Holders: 71
General Electric Company (NYSE:GE) operates as a high-tech industrial company worldwide. It offers gas and steam turbines, power generation solutions, and data-driven software for different sectors. Additionally, General Electric Company (NYSE:GE) designs and produces commercial and military aircraft engines, integrated engine components, electric power, and mechanical aircraft systems. It is one of the best Goldman Sachs defense stocks. In Q2 2023, Goldman Sachs held a $444 million stake in General Electric Company (NYSE:GE).
On July 25, General Electric Company (NYSE:GE) reported a Q2 non-GAAP EPS of $0.68 and a revenue of $16.7 billion, outperforming Wall Street consensus by $0.22 and $1.55 billion, respectively.
According to Insider Monkey’s second quarter database, 71 hedge funds were bullish on General Electric Company (NYSE:GE), up from 59 funds in the prior quarter. Chris Hohn’s TCI Fund Management is the leading stakeholder of the company, with 41.6 million shares worth $4.5 billion.
Vulcan Value Partners made the following comment about General Electric Company (NYSE:GE) in its Q1 2023 investor letter:
“General Electric Company (NYSE:GE) was a material contributor during the quarter. With the successful spin-off of GE HealthCare in early January, the company operates in two major markets: GE Aerospace and GE Vernova. GE Aerospace powers three out of every four commercial flights. GE Vernova helps generate 30% of the world’s electricity and has a meaningful role to play in the energy transition. The company’s service activities, which are higher margin and more resilient, represent approximately 60% of revenue and 85% of its backlog. The company reported strong fourth quarter 2022 results and management’s 2023 outlook is positive.”
<<<
---
>>> Caterpillar Stock : More Recession-Resistant Than You’d Think
Tip Ranks
by Nikolaos Sismanis
Apr 12, 2023
https://www.tipranks.com/news/article/caterpillar-stock-nysecat-more-recession-resistant-than-youd-think
Story Highlights
Caterpillar is more recession-resistant than investors realize, with strong industry tailwinds shielding its performance against a potential market downturn. Its focus on services and strong backlog should also contribute to this rationale.
Given the cyclical nature of its industry, Caterpillar (NYSE:CAT) is often expected to bear the brunt of a recession, leading to a significant impact on its financial performance. With market uncertainty remaining elevated against the backdrop of a tumultuous macroeconomic environment, it makes sense for investors to consider Caterpillar as a rather risky investment these days. While this is technically true, Caterpillar is more recession-resistant than most investors realize.
Planned infrastructure spending remains elevated, benefiting Caterpillar’s results, while its backlog continues to grow, shielding the company against short-term uncertainties. Furthermore, the company’s focus on services is gradually transitioning its revenue mix to a more predictable one, strengthening its position and making it more resilient to potential market downturns.
Coupled with its commitment to rewarding shareholders and the fact that the stock is trading at a reasonable valuation, I am bullish on Caterpillar.
Strong Infrastructure Spending Drives Solid Results
Caterpillar is enjoying a significant boost in demand thanks to record-high infrastructure spending that stems from the 2021 bipartisan Infrastructure Investment and Jobs Act. The legislation provides $1.2 trillion in funding expected to be spent over a five-year period, with a primary focus on road, bridge, and large-scale projects. In fact, as of October 2022, approximately 60% of the $185 billion infrastructure spending was attributed to these key areas.
Given Caterpillar’s leadership in the production of construction equipment and heavy machinery needed to complete these projects, the company is among the top beneficiaries of the bill. This is evidenced by its recent financial performance.
Caterpillar’s 2022 revenues saw a substantial increase of 17% from the previous year, reaching $59.4 billion. The growth can be attributed to higher sales volumes, boosted by favorable price realization and the impact of changes in dealer inventory.
Importantly, the company’s Q4 revenue growth of 20.3% indicates strong upward momentum for upcoming quarters. This is further evidenced by the fact that the company’s backlog rose by $400 million in Q4, bringing the year-end total to $30.4 billion, a 32% increase from the previous year.
These figures should sufficiently exemplify the company’s continued success in a favorable market environment and potential for sustained growth. Regardless, a potential recession is unlikely to result in worsening financials in the short term, given the planned infrastructure spending and growing backlog.
Growth in Services to Enhance Revenue Mix
Caterpillar has taken another strategic step by focusing on the growth of its Services segment. Growing Services revenues should have a positive impact on the company’s revenue mix and improve cash-flow predictability. This is because, through this initiative, Caterpillar is essentially attempting to convert its equipment sales into a source of recurring revenue. This should enhance Caterpillar’s ability to withstand potential economic downturns, further strengthening its resilience to a potential market downturn.
Last year, Caterpillar experienced a noteworthy surge in its Services revenues, reaching $22 billion, marking a 17% increase from the previous year. This growth was propelled by the company’s persistent drive to promote its services through strategic initiatives and investments, as well as effective price realization.
Caterpillar’s assets also grew, having 1.4 million connected assets, up from 1.2 million in 2021. The launch of the company’s new e-commerce app, Cat Central, further amplified its growth in this area. With the highest level of parts availability to date, along with a robust Services segment, the company projects that its Services revenues will hit $28 billion by 2026.
Strong Profitability Boosts Dividends, Buybacks
With strong revenue growth following favorable pricing and sales volumes, Caterpillar has been able to record a strong boost in its profitability. This growth has allowed the company to achieve impressive economies of scale, reflected in an adjusted operating margin of 15.4% in 2022 compared to 13.7% in 2021. The combination of higher revenues and margins has led to even more impressive earnings growth, with adjusted earnings per share skyrocketing by 28% to $13.84.
Thus, Caterpillar was able to increase its rewards to shareholders rather comfortably. In 2022, the company demonstrated its commitment to creating shareholder value by increasing its dividend for the 29th consecutive year. The noteworthy 8.1% hike led to an annualized dividend rate of $4.80, which currently translates to a yield of 2.2%.
The company also took advantage of its boosted profitability to buy back $4.2 billion worth of stock, significantly more than the $2.7 billion repurchased in 2021. Growing capital returns, coupled with strong revenue and earnings growth visibility, should keep stimulating investor interest in the stock. This is also likely to contribute to the stock potentially outperforming the market in the event of a market downturn.
Is CAT Stock a Buy, According to Analysts?
Turning to Wall Street, Caterpillar has a Hold consensus rating based on five Buys, seven Holds, and three Sells assigned in the past three months. At $243.07, the average Caterpillar stock price target implies 10.2% upside potential.
The Takeaway
Caterpillar is currently benefiting from record infrastructure spending, which has led to growing revenues, expanding margins, and record profits. This trend is expected to last over the next few years, which should shield the company from a potential recession in the near term. In the meantime, Caterpillar’s focus on growing its Services segment should improve its revenue mix, making it a more resilient company to potential market downturns further down the future.
Overall, Caterpillar’s ongoing momentum, strong capital returns, and the fact that shares are trading at about 13.85x this year’s projected earnings (about 22% lower than its five-year average forward earnings multiple) form a bullish blend for the stock, in my view.
<<<
---
>>> Caterpillar or Deere: Which Is the Better Investment?
Yahoo Finance
by Jonathan Poland
April 26, 2023
https://finance.yahoo.com/news/caterpillar-deere-better-investment-141241587.html
It could be argued that Deere & Co. (NYSE:DE) and Caterpillar Inc. (NYSE:CAT) have a virtual monopoly on the farm and heavy construction equipment market. While there is some overlap in the equipment offered by these companies, each dominates separate industries. However, both have incredible brand power and financial metrics.
About Deere
Deere & Co., commonly known as John Deere, is a leading global manufacturer of agricultural, construction and forestry machinery, diesel engines, drivetrains (axles, transmissions, gearboxes) and precision agriculture technology. The company was founded by John Deere in 1837 and has a strong global presence, with manufacturing facilities in the U.S, Europe, Asia and South America. The companys products are distributed through a vast network of dealers, distributors and retail outlets worldwide. Collectively, these added up to nearly $52 billion in revenue during 2022.
That said, Deere generates the bulk of its revenue (86%) from two primary business segments, Agriculture & Turf Equipment at $34 billion and Construction & Forestry Equipment at $11.3 billion.
The Agriculture & Turf Equipment division is the largest business, accounting for 65% of total revenue. This segment includes the sale of tractors, combines, harvesters and other machinery used to plant, cultivate and harvest crops. The Construction & Forestry Equipment unit accounts for 21% of total revenue. This segment includes the sale of backhoes, excavators, loaders and other machinery used to build and maintain roads, bridges and other infrastructure.
The two other services are worth billions to the company as well. The Financial Services segment accounted for 6% of total revenue, or $3.2 billion in 2022, providing financing and insurance products to Deere's customers. The Other segment accounted for 8% of total revenue, or $4.1 billion, and includes the sale of parts, services and other products and services.
About Caterpillar
Caterpillar Inc. (NYSE:CAT), often referred to simply as "CAT," was created nearly 100 years after Deere in 1925 through the merger of the Holt Manufacturing Co. and the C. L. Best Tractor Co. Today, the company's products are used in a variety of industries, including construction, mining, energy, transportation and agriculture. The revenue breakdown is pretty straightforward, all told adding up to $59.40 billion during 2022.
Machinery is largest source of revenue for Caterpillar, accounting for approximately 70% of total sales. The company sells a wide range of machinery, including construction equipment, mining equipment, diesel engines and natural gas engines. Engine sales account for around 15% of total revenue.
Finally, Caterpillar has a variety of related products and services, accounting for roughly 15% of total revenue.
What's the difference?
While Caterpillar and Deere may sell similar products, the companies are industry leaders by addressing completely separate markets with notable differences that distinguish them.
One of the most significant differences is in agricultural equipment. Deere is a leading manufacturer of agricultural machinery, offering products such as tractors, combines, cotton harvesters, balers, sprayers, planters, tillage equipment and mowers. Caterpillar, on the other hand, has a more limited agricultural product line, primarily offering Challenger tractors and some hay and forage equipment.
Deere also has a dedicated forestry equipment segment, which includes products like forwarders, skidders, feller bunchers and knuckleboom loaders. Caterpillar does offer some forestry equipment, but has a more limited range.
While both Caterpillar and John Deere manufacture construction equipment, their product offerings differ slightly. Caterpillar has a more extensive range of construction machinery, including products such as motor graders, pipelayers and paving equipment, which are not part of Deere's core product lineup. Deere, on the other hand, focuses primarily on equipment like excavators, backhoes, wheel loaders, dozers and compact equipment. One caveat is that in 2017, with its acquisition of Wirtgen, Deere became a more prominent player in this segment behind Caterpillar and Komatsu. Long term, Deere is not likely to surpass Caterpillar, but the acquisition could take market share away from it.
The bottom line is that these companies cater to different end users for the most part and have distinct brand identities. Caterpillar is known for its dominance in the heavy construction, mining and energy sectors, whereas Deere is primarily recognized for its agricultural and landscaping equipment.
Brand dominance
Caterpillar has consistently delivered reliable, top-quality products to its customers, offering the lowest overall cost of ownership throughout its history. This commitment to excellence has placed Caterpillar as one of the world's most valuable brands. The company is well-positioned to benefit from favorable trends in the construction sector with a huge gain from the $1.2 trillion U.S. infrastructure deal, as the nation faces a significant backlog of road construction projects. In the energy industry, the rebound in oil prices since the Covid-19 floor should prompt exploration and production companies to boost capital spending, which is good news for Caterpillar's oil well servicing products.
As for Deere, the same bio applies and so does a wide economic moat with strong durable competitive advantage. The companys dealer network is a huge differentiator, distributing products and proprietary aftermarket parts and services across numerous regions. With over 2,000 dealer locations in North America and around 3,700 worldwide, the company has a significant presence on every continent. More importantly, dealers are typically large organizations dedicated solely to selling Deere products. It would be nearly impossible for anyone, let alone upstarts, to replicate the scope and coverage of this network.
Financial dominance
Caterpillar and Deere are boring companies. Neither will produce 10 times returns. However, they will not destroy shareholder value either. Both have nearly the same market capitalization, gross margins, return on equity and forward earnings multiples. Since 2001, Deere has driven annual revenue up from $13.8 billion to $55.6 billion. Caterpillar has a similar story, growing sales from $20.4 billion to more than $59 billion since the turn of the century.
Deere has a slight advantage in terms of growth potential and current net profit. On the bottom line, it generates $38,000 more per employee, which translated to $8.2 billion in the last 12 months versus Caterpillars $6.7 billion. However, Deere carries significantly more total debt - $55.6 billion versus $37.5 billion.
Further, both companies have paid out dividends for 33 straight years and Caterpillar has recorded 29 years of dividend growth. For me, it is a toss up, which is why investing in both stocks would make the most sense.
<<<
---
>>> Deere Hoists Guidance After Earnings Beat. Why DE Stock Fell.
Deere earnings topped views on strong farm equipment sales
Investor's Business Daily
APARNA NARAYANAN
05/19/2023
https://www.investors.com/news/deere-earnings-q2-de-stock-caterpillar-outlook/
Deere (DE) guided higher for fiscal 2023 early Friday, after easily topping earnings estimates for its second quarter on healthy equipment demand. DE stock jumped to seize a key level, then reversed lower.
On an earnings call, Deere management indicated that Q2 results benefited from a pull-forward of production from the latter half of 2023.
That led to concerns about a sequential sales decline in the current third quarter, with Q2 marking the year's production peak, analysts said.
Deere may have "to manage inventory levels with lower production, so as to exit the year in good shape given the increasing end market concerns due to lower crop prices," William Blair analyst Lawrence De Maria told IBD in an email.
Tractor maker Deere is seen as a bellwether for the farm economy. It also makes heavy machinery for the construction and forestry markets.
Deere Earnings
Estimates: For the quarter ended April 30, Deere earnings were forecast to grow 26% to $8.58 per share, according to FactSet consensus estimates. Total revenue was seen rising nearly 20% vs. a year earlier to $15.993 billion.
Results: Deere earnings jumped 42% to $9.65 a share, though that's a slowdown from 124% in the first quarter. Revenue swelled 30% to $17.39 billion, above expectations, but still the second straight quarter of slowing sales growth.
Production and precision agriculture sales leapt 53%. Smaller agriculture and turf sales grew 16%. Construction and forestry sales rose 23%.
"Deere continues to benefit from favorable market conditions and an improving operating environment," CEO John May said in the Deere earnings release.
"Though supply-chain constraints continue to present a challenge, we are seeing further improvement," May added.
Outlook: Deere now sees full-year net income of $9.25 billion-$9.50 billion, vs. its prior target of $8.75 billion-$9.25 billion. Analysts had forecast net income of $9.06 billion, FactSet shows.
DE Stock Reverses Lower
Shares of Deere closed down 1.9% to 363.55 on the stock market today, falling back below the 50-day moving average. DE stock had gapped up as much as 6% to 393 in the Friday morning session, clearing the 50-day for the first time since early April.
Deere stock peaked last November and has been trending lower, with the 10-week moving average now below the 40-week line, the MarketSmith chart shows.
Caterpillar (CAT), CNH Industrial (CNHI) and United Rentals (URI) are also heading lower and below key levels. CAT stock was almost unchanged, at 214.79, Friday. CNHI stock lost 0.1% while URI stock rose 1.3%.
'Prudent' Move On Production
Deere management "is prudently limiting production to ensure inventories at the dealer level remain lean," Edward Jones analyst Matt Arnold told IBD Friday.
That "should set up another solid year in 2024," he added.
The move comes with the outlook for Deere's end markets under scrutiny.
The World Bank projects agricultural commodity prices will drop 7% this year and will likely fall again in 2024, the Texas Farm Bureau said on May 18.
Prices for all types of farm equipment soared in recent years for reasons very similar to those that drove automobile prices to record levels. As supply chain issues and demand begin to balance, lower farm commodity prices could place additional pressure on farm equipment sales.
In April, construction giant Caterpillar gave a lackluster outlook for equipment sales as well. United Rentals, which rents out scissor lifts and a range of heavy equipment, turned in a mixed report the same month.
Year to date, Deere stock is down around 15%. It pays a 1.3% dividend yield.
<<<
---
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |