Industrial Sector Ideas

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>>> Mueller Industries, Inc. (NYSE:MLI)

https://finance.yahoo.com/news/mueller-industries-inc-mli-among-101813097.html

GAMCO Investors’ Stake: $214.54 million

Number of Hedge Fund Holders: 34

Market Capitalization as of May 8: $8.38 billion

Average Upside Potential as of May 8: 38.39%


Mueller Industries, Inc. (NYSE:MLI) manufactures and sells copper, brass, and aluminum products. It operates through three segments: Piping Systems, Industrial Metals, and Climate. It sells its products to wholesalers in the plumbing & refrigeration markets, distributors to the manufactured housing & recreational vehicle industries, building material retailers, and air-conditioning OEMs.

The Piping Systems Segment generated net sales of $639.7 million for Mueller in Q1 2025 due to higher selling prices, which were reflected in the increased raw material costs and tariffs. This outweighed modestly lower shipment volumes due to production challenges early in the quarter. The Piping Systems Segment also contributed significantly to the company’s profitability, reporting operating income of $158.2 million in Q1 2025, up from $142.7 million in Q1 2025.

Mueller Industries, Inc. (NYSE:MLI) acknowledges the potential challenges posed by tariffs and trade policies, but it’s proactively implementing price adjustments where necessary to mitigate these effects. Despite some initial production disruptions, the Piping Systems Segment remains a focus for Mueller and uses the company’s established market presence to adjust pricing to maintain profitability.

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>>> TransDigm (TDG)

https://finance.yahoo.com/news/1-safe-steady-stock-long-043735341.html

Rolling One-Year Beta: 0.93

Supplying parts for nearly all aircraft currently in service, TransDigm (NYSE:TDG) develops and manufactures components and systems for military and commercial aviation.

Why Are We Bullish on TDG?

Core business can prosper without any help from acquisitions as its organic revenue growth averaged 14.8% over the past two years

Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 30.8% outpaced its revenue gains

TDG is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its rising cash conversion increases its margin of safety

TransDigm is trading at $1,523 per share, or 37.9x forward P/E.

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>>> Waste Connections (WCN)

https://finance.yahoo.com/news/1-safe-steady-stock-target-044020973.html

Rolling One-Year Beta: 0.37

Operating a network of municipal solid waste landfills in the U.S. and Canada, Waste Connections (NYSE:WCN) is North America's third-largest waste management company providing collection, disposal, and recycling services.

Why Do We Watch WCN?

Annual revenue growth of 10.5% over the past five years was outstanding, reflecting market share gains this cycle

Operating profits and efficiency rose over the last five years as it benefited from some fixed cost leverage

WCN is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders

Waste Connections’s stock price of $191.46 implies a valuation ratio of 35.4x forward P/E.

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>>> Watts Water Technologies (WTS)

https://finance.yahoo.com/news/3-market-beating-stocks-long-043953425.html

Five-Year Return: +205%

Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

Why Is WTS Interesting?

Superior product capabilities and pricing power lead to a top-tier gross margin of 45%

Operating margin improvement of 4.5 percentage points over the last five years demonstrates its ability to scale efficiently

Share buybacks catapulted its annual earnings per share growth to 16.9%, which outperformed its revenue gains over the last five years

Watts Water Technologies’s stock price of $244.80 implies a valuation ratio of 26.4x forward P/E.

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>>> Trump signs order imposing 50% tariffs for steel, aluminum. Why economists are dismayed.

New level is taking effect at 12:01 a.m. Eastern on Wednesday


MarketWatch

by Victor Reklaitis

June 3, 2025


https://www.marketwatch.com/story/trump-signs-order-imposing-50-tariffs-for-steel-aluminum-why-economists-are-dismayed-0886d3fc?mod=home_ln


President Donald Trump looks set to lift the U.S. tariff on steel and aluminum imports to 50% from 25%. The beer industry, one of the largest consumers of aluminum, has expressed concerns about such levies.

The White House said Tuesday that President Donald Trump has stuck to his plan from Friday to double tariffs on imported steel and aluminum to 50% from 25%.

Trump has signed an executive order that increases the duties, and they will take effect at 12:01 a.m. Eastern on Wednesday, according to a social-media post from the White House.

Economists have been expressing alarm over Trump’s latest move with tariffs.

Diane Swonk, chief economist at KPMG U.S., warned in a social-media post that a Federal Reserve study found that Trump’s steel tariffs in 2018 and 2019 pushed up input costs so much that jobs saved in the steel industry were more than offset by losses in overall manufacturing employment. She suggested that the effects this year might be even worse, saying: “Now double steel tariffs & combine them with more tariffs.”

Sal Guatieri, a senior economist at BMO, said he was concerned in particular that the higher import taxes for steel and aluminum could be a signal that other industries will face relatively steep levies as well.

“This will lift the average U.S. tariff rate slightly to around 15%; but, more worrisome, it could set a precedent for possibly higher duties on motor vehicles and other sector-specific products, such as lumber and microchips, which are currently under investigation,” Guatieri said in a note.

Federal courts last week blocked and then reinstated the bulk of Trump’s tariffs, but the rulings didn’t affect the import taxes that he’s slapped on particular sectors — and that he’s expected to impose on other industries.

While economists typically view tariffs as destructive, one group that supports tariffs, the Coalition for a Prosperous America, offered praise for Trump’s latest trade action. The coalition said in a news release that the tariff increase “comes at a critical moment, reflecting a clear understanding of the ongoing threats faced by the U.S. aluminum and steel industry, particularly from heavily subsidized foreign competitors.”

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Parker Hannifin - >>> 2 Ultra-Safe Dividend Growth Stocks to Buy and Hold Forever


Motley Fool

by George Budwell

May 22, 2025


https://www.fool.com/investing/2025/05/22/2-ultra-safe-dividend-growth-stocks-to-buy-and-hol/


PG
Procter & Gamble Co

PH
Parker-Hannifin Corp


While tech giants dominate the headlines, dividend stocks have quietly driven a substantial share of long-term market returns. Their strength lies in compounding -- a force Albert Einstein famously dubbed "the eighth wonder of the world." When dividends are reinvested over decades, even modest yields can snowball into remarkable wealth as gains build upon gains.

In today's backdrop of persistent inflation and economic uncertainty, dividend growth stocks offer more than upside -- they deliver resilience. Companies with long histories of raising dividends often have stronger balance sheets, durable business models, and greater pricing power than non-dividend payers. These traits help reduce volatility during market downturns, when consistent cash flows matter most.

Two companies exemplify the best of this category. Procter & Gamble (NYSE: PG) has raised its dividend for 69 consecutive years, backed by a recession-resistant portfolio of household brands. Meanwhile, Parker-Hannifin (NYSE: PH), a diversified industrial leader, also sports a 69-year dividend growth streak while capitalizing on long-term trends in automation, aerospace, and clean energy.

Read on to find out more about these two top dividend growth stocks.

A household name with steady dividend growth

Procter & Gamble (NYSE: PG) remains a cornerstone in the consumer goods sector, sporting a diverse portfolio of iconic brands across beauty, healthcare, fabric care, and baby products. The stock currently offers a dividend yield of approximately 2.55%, which is nearly double the S&P 500 average of 1.27%. The company's dividend payout ratio stands at around 64%, indicating a balanced approach between rewarding shareholders and reinvesting in future growth. Notably, P&G has achieved 69 consecutive years of dividend increases, underscoring its commitment to delivering consistent returns to shareholders.

From a valuation standpoint, P&G's forward price-to-earnings (P/E) ratio is approximately 23.6, slightly above the S&P 500's forward P/E of 21.4. This premium reflects the company's robust brand equity and defensive business model. Despite recent challenges, including softened sales growth and market pressures in China, P&G continues to invest in product innovation and marketing, allocating about 13% of its sales to these areas to maintain brand relevance.

Looking ahead, P&G anticipates additional costs ranging from $1 billion to $1.5 billion in fiscal 2026 due to tariffs, representing approximately 3% of its cost of goods sold. To mitigate these impacts, the company is streamlining its stock-keeping units (SKUs), aiming to enhance operational efficiency and improve the consumer experience.

With its unparalleled brand portfolio, strategic investments in innovation, and disciplined capital allocation, P&G stock offers an attractive blend of reliability, modest growth, and resilience, making it a compelling choice for income-focused portfolios.

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An aerospace and industrial dividend powerhouse

Parker-Hannifin (NYSE: PH) has solidified its position as an exceptional dividend compounder within the industrial sector, sporting an impressive 69-year streak of consecutive annual dividend increases. While its current 1.06% yield might appear modest, the company's conservative 25.3% payout ratio provides substantial room for continued distribution growth. This disciplined approach to shareholder returns has enabled Parker-Hannifin to deliver a remarkable 10.9% annualized dividend growth rate over the past 10 years -- more than double the rate of many blue chip dividend payers.

The company's recent performance highlights its aerospace-driven growth strategy, with this segment delivering standout 11.7% organic growth and record 28.7% operating margins on an adjusted basis in fiscal Q3 2025. While Parker-Hannifin's diversified industrial segments have faced recent headwinds, with North American and international operations experiencing organic sales declines of 3.5% and 2.8% in the most recent quarter, respectively, the company has maintained exceptional operational efficiency, with record adjusted operating margins above 25% across both regions. This resilience during industrial softness demonstrates the effectiveness of Parker's "Win Strategy,™" focused on lean operations, product simplification, and supply chain optimization.

Looking ahead, Parker-Hannifin is exceptionally positioned to benefit from structural growth in commercial aerospace, where robust aftermarket demand provides recurring revenue streams and pricing power. The company's strategic focus on high-margin fluid power and motion control systems places it at the center of automation, electrification, and aerospace trends, with decades of runway ahead.

For income-focused investors, Parker-Hannifin stock offers a compelling combination of defensive industrial characteristics, aerospace growth exposure, double-digit dividend growth potential, and a management team with proven capital allocation expertise, making it an ideal cornerstone for building long-term wealth.

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ORLY, FAST - >>> Wall Street's Biggest Stock-Split Stock of 2025 Is All Systems Go 2 Weeks From Today


Motley Fool

by Sean Williams

May 27, 2025


https://finance.yahoo.com/news/wall-streets-biggest-stock-split-075100391.html


FAST
Fastenal Co

IBKR
Interactive Brokers Group Inc

ORLY
O'Reilly Automotive, Inc

Nothing has captivated the attention of investors more over the last two years than the rise of artificial intelligence (AI). The potential for this game-changing technology to add $15.7 trillion to the global economy by 2030, based on estimates from PwC, suggests a broad swath of AI-hardware and applications companies are going to benefit.

But it's far from the only trend that investors have flocked to. For instance, companies completing stock splits have consistently been a bright spot for the investing community.

Investors are gravitating to stock-split stocks

A stock split offers a way for public companies to cosmetically alter their share price and outstanding share count by the same factor. The "cosmetic" aspect has to do with stock splits not changing a company's market cap or operating performance in any way.

Splits themselves come in two forms, with investors gravitating to one far more than the other. Reverse splits, which are designed to increase a company's share price, are the less-popular of the two. Most companies undertaking reverse splits are doing so from a position of operating weakness and attempting to save their stock from delisting on a major U.S. stock exchange.

In comparison, investors tend to welcome forward stock splits with open arms. This type of split is enacted to make a company's shares more nominally affordable for everyday investors who might not be able to purchase fractional shares through their broker. Public companies whose shares have soared to the point where a forward split becomes necessary are typically out-executing their peers and on the leading edge of the innovative curve within their respective industry.

Last year, more than a dozen industry-leading businesses took the plunge and completed a forward split. Retail powerhouse Walmart kicked things off, with a quartet of AI kingpins following suit, including Nvidia, Broadcom, Super Micro Computer, and Lam Research.

Although 2025 began a bit slower than last year, stock-split euphoria is beginning to bloom. With the first major forward stock split officially in the books, the biggest stock split of the year has been given the green light for two weeks from today.

Wall Street's first stock-split stock of 2025 is official

Before giving credence to what'll be the biggest stock-split stock of 2025, let's recognize the first prominent business to actually announce and complete a forward stock split this year: wholesale industrial and construction supplies giant Fastenal (NASDAQ: FAST).

Fastenal is no stranger to completing forward splits. The 2-for-1 split announced on April 23 and completed after the close of trading on May 21 was its ninth stock split in the last 37 years. Inclusive of dividends paid, Fastenal stock has a total return of more than 214,000% since its August 1987 initial public offering (IPO).

Though Fastenal is cyclical and benefits from periods of economic growth lasting substantially longer than recessions, it's the company's ongoing innovation that's really helped it flourish. Fastenal's managed inventory solutions have helped it learn more about the supply chain needs of its on-site clients. Over time, it's become an integral part of many key supply chains.

But Fastenal isn't the only big-name company that's announced a split this year.

Automated electronic brokerage firm Interactive Brokers Group (NASDAQ: IBKR) announced its intent to conduct a 4-for-1 forward split on April 15, which was more than a week before Fastenal. This marks its first split -- set to take place after the close of trading on June 17 -- since the company went public in May 2007.

Interactive Brokers is a big beneficiary of optimistic investor sentiment. Despite some recent stock market gyrations, the benchmark S&P 500 is still firmly in a bull market. With the exception of the 2022 bear market, which lasted less than a year, and the COVID-19 crash, which completed in five weeks, the bulls have been in firm control for much of the last 16 years. When the benchmark index is climbing, investors tend to be willing to invest more.

Narrowing things down even further demonstrates how the current bull market, which began in October 2022, has been beneficial to Interactive Brokers Group. On a trailing-two-year basis, it's witnessed its customer count, customer equity on the platform, and customer margin loans all notably increase.

Wall Street's biggest stock-split stock of 2025 gets the green light

Although Interactive Brokers' market cap of $87 billion (as of this writing) makes it the largest public company to conduct a split in 2025, it's not the biggest stock-split stock of the year. That honor belongs to auto parts supplier O'Reilly Automotive (NASDAQ: ORLY), which is set to complete a 15-for-1 forward split after the close of trading on June 9. Two weeks from today, on June 10, O'Reilly's stock will open at its split-adjusted price, which should be below $100 per share.

Whereas Fastenal and Interactive Brokers simply announced they would be splitting their respective shares, O'Reilly Automotive put its mammoth stock-split measure up for vote at its annual shareholder meeting on May 15. Based on the voting results of its shareholder meeting, this historic split has been given the green light.

Since going public in April 1993, shares of O'Reilly Automotive have driven to a scorching-hot cumulative return that's approaching 58,000%! For the sake of comparison, the S&P 500 has gained around 1,260% since O'Reilly's IPO.

This undeniable outperformance for Wall Street's biggest stock-split stock of 2025 boils down to three competitive advantages.

O'Reilly Automotive's macro advantage is that consumers are keeping their vehicles longer than ever before. A May 2024 analysis from S&P Global Mobility found the average age of cars and light trucks on U.S. roadways hit a new all-time high of 12.6 years. This is up from an average age of 11.1 years in 2012. With interest rates rising and new vehicles becoming pricier, O'Reilly should be relied on by drivers and mechanics to keep existing vehicles in good working order.

On a more company-specific level, O'Reilly's hub-and-spoke distribution model has worked wonders. The company has 31 distribution centers to go along with nearly 400 hub stores. The hub-and-spoke distribution model ensures that over 153,000 stock keeping units (SKUs) can reach local storefronts the same-day or on an overnight basis.

The final puzzle piece that helps explain why O'Reilly Automotive stock has been unstoppable is the company's phenomenal share repurchase program. Taking after rival AutoZone, which has repurchased around 90% of its outstanding shares, O'Reilly has spent just shy of $26 billion to buy back more than 59% of its outstanding shares since 2011. Businesses with steady or growing net income that regularly repurchase their stock can expect a boost to earnings per share.

All the right boxes are checked for O'Reilly's to continue to outperform.

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>>> Watts Water Technologies, Inc. (WTS), together with its subsidiaries, supplies systems, products and solutions that manage and conserve the flow of fluids and energy into, though, and out of buildings in the commercial, industrial, and residential markets in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa. The company offers residential and commercial flow control and protection products, including backflow preventers, water pressure regulators, temperature and pressure relief valves, thermostatic mixing valves, leak detection and protection products, commercial washroom solutions, and emergency safety products and equipment for plumbing and hot water applications. It also provides heating, ventilation, and air conditioning and gas products comprising commercial boilers; water heaters and heating solutions; hydronic and electric heating systems for under-floor radiant applications; custom heat and hot water solutions; hydronic pump groups for boiler manufacturers and alternative energy control packages; and flexible stainless-steel connectors for natural and liquid propane gas in commercial food service and residential applications. In addition, the company offers drainage and water re-use products, such as drainage products, engineered rainwater harvesting solutions for commercial, industrial, marine, and residential applications; connected roof drain systems; and water quality products that include point-of-use and point-of-entry water filtration, conditioning, and scale prevention systems for commercial, marine, and residential applications. It sells its products to plumbing, heating, and mechanical wholesale distributors and dealers; original equipment manufacturers; specialty product distributors; and do-it-yourself and retail chains, as well as wholesalers and private label accounts. Watts Water Technologies, Inc. was founded in 1874 and is headquartered in North Andover, Massachusetts.

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O'Reilly Automotive (ORLY) -- >>> RBC Capital Markets analyst Steven Shemesh

https://finance.yahoo.com/news/wall-street-hunts-for-cheap-tariff-proof-stocks-after-the-carnage-124255618.html

Pick: O'Reilly Automotive (ORLY)

Shemesh joins Evercore ISI's Melich in using the pullback in an auto parts seller to issue an upgrade on the stock.

The drivers of Shemesh's upgrade jibe with Melich's.

"We estimate that about 50% of O'Reilly's cost of goods sold is sourced internationally, which is likely to result in incremental cost of about 9%. That being said, we estimate that about 85% of ORLY products fall in the required maintenance/parts bucket, which provides the company pricing power. We note that ORLY is lapping over a reinvestment year and should benefit from new car inflation keeping consumers in current vehicles longer," Shemesh explained.

"Our $1,503 price target is based on 30x (~29x prior) our 2026 EPS estimate of $50.11 (about 1% ahead of consensus estimates for $50.11). Our implied multiple represents peak multiple for the name, which we think is justified given relative attractiveness. While our revised price target represents limited absolute upside, the name should be a relative out-performer," he added.

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>>> Evercore ISI analyst Greg Melich

Pick: Genuine Parts Company (GPC)

Other Wall Street Insights on Yahoo Finance

"Auto parts stand out at the top of the list as being relatively well positioned to pass through higher input costs brought about from tariffs," Melich wrote in a note on Friday. Melich upgraded his rating on auto parts play Genuine Parts Company to Outperform from In-Line.

Explained Melich, "We view GPC as one of the better insulated companies in our coverage from a tariff perspective, with the ability to pass through rising prices in both its auto and industrial segments, there is even a possibility that earnings may move higher from tariffs. While we are currently below the Street, with the stock trading at about 14x depressed 2026 EPS and end markets largely depressed, we believe that much of the risk associated with a choppy low-income consumer and tariffs is baked in."

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>>> Hyundai shows off its new $7.6B electric vehicle plant in Georgia as Trump announces tariffs


AP

by RUSS BYNUM

3-26-25


https://www.msn.com/en-us/autos/news/hyundai-shows-off-its-new-7-6b-electric-vehicle-plant-in-georgia-as-trump-talks-tariffs/ar-AA1BIUvC?ocid=TobArticle


ELLABELL, Ga. (AP) — Hyundai celebrated the opening of its new $7.6 billion electric vehicle factory in Georgia on Wednesday by announcing plans to expand its production capacity by two-thirds to a total of 500,000 vehicles per year.

The news came as President Donald Trump announced 25% tariffs on auto imports at the White House. Hyundai will be spared from those tariffs on its U.S.-made vehicles. Trump praised the South Korean automaker on Monday, saying its American investments are “a clear demonstration that tariffs very strongly work.”

Hyundai began producing EVs just shy of six months ago at its sprawling manufacturing plant in southeast Georgia. More than 1,200 people are working there.

With employees in blue shirts filling bleachers behind him Wednesday, Hyundai Motor Group Executive Chairman Euisun Chung said the company plans to increase the plant's capacity from 300,000 vehicles per year to 500,000. He said it shows Hyundai has come to Georgia “to stay, to invest and to grow.”

“Standing here today, I can say I have never been more confident about building the future of mobility with America, in America," Chung said.

Hyundai Motor Company CEO Jose Munoz said the Georgia expansion was “like building a new plant.”

“This plant couldn’t come at a better time than now,” Munoz told reporters, "because definitely all the cars that we would produce here are going to be exempted from any tariffs.”

Hyundai employees worked the assembly line Wednesday alongside hundreds of robots that stamp sheets of steel into fenders and door panels, weld and paint auto bodies and even park finished vehicles awaiting their final inspections.

The plant that sprawls across 3,000 acres churns out a finished vehicle about once a minute. Its 1,200 workers are currently producing two electric SUV models — the Ioniq 5 and the larger Ioniq 9 set for release this spring. Hyundai also plans for the plant to make hybrids, which Munoz predicted will eventually make up one-third of the vehicles produced there.

The newly announced Georgia expansion is part of $21 billion in U.S. investments over the next three years that Hyundai announced at the White House with Trump on Monday. They also include a $5.8 billion steel mill in Louisiana to produce auto parts for Hyundai's assembly plants in Georgia and Alabama.

Chung told Trump at the White House: “We are really proud to stand with you and proud to build the future together.”

Before the expansion was announced, Hyundai said it planned to employ 8,500 total workers at the Bryan County site, about 50 miles (80 kilometers) west of Savannah. Two partners making batteries at the site are expected to add another 3,500 workers.

Hyundai hasn't said how many additional workers would be needed to increase capacity by 200,000 vehicles per year.

During the first half of 2024, the Ioniq 5 was America’s second-best-selling electric vehicle not made by industry leader Tesla.

Hyundai took less than two years to start making EVs in Georgia after breaking ground in the fall of 2022. It was the largest economic development project the state had ever seen, and it came with a whopping $2.1 billion in tax breaks and other incentives from the state and local governments.

EVs accounted for 8.1% of new vehicle sales in the U.S. last year, up from 7.9% in 2023, according to Motorintelligence.com.

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>>> Generac Stock Rises After Earnings Beat. Power Outages Helped.


Barron's

By Al Root

Feb 12, 2025


https://www.barrons.com/articles/generac-price-earnings-stock-power-outages-844ffd83?siteid=yhoof2


Generac stock was down about 26% over the past three months, but only 1% over the past six months, as it entered Wednesday. Shares tend to be volatile around extreme weather events.

More extreme weather and power outages mean more earnings for generator maker Generac

The company reported fourth-quarter earnings per share of $2.80 from sales of $1.2 billion on Wednesday. Wall Street was looking for $2.53 and $1.2 billion, respectively.

Sales rose 16% year over year, up from about 10% growth in the third quarter. Residential sales grew 28% year over year. Commercial sales were flat.

CEO Aaron Jagdfeld said in a news release that the results showed it capitalized on the strong demand for portable generators when there were power outages in the second half of the year. “The mega-trends that support our long-term expectations were on full display in 2024 as power quality continued to deteriorate and power prices continued to increase,” he said.

Power outage hours in the U.S. were the highest since 2010 when Generac started tracking the metric.

Generac stock was up 1.6% in early trading at $143.96, while the S&P 500 and DJIA were down about 1% and 0.9%, respectively. The market fell after monthly inflation data came in hotter than expected.

Coming into Wednesday’s trading, Generac stock was down about 26% over the past three months. Shares are down only 1% over the past six months. Generac stock tends to be volatile around extreme weather events such as hurricanes and wildfires.

Looking ahead, Generac expects sales growth of 3% to 7% and earnings before interest, taxes, depreciation, and amortization, or Ebitda, profit margins of between 18% and 19%.

That implies sales and Ebitda of about $4.5 billion and $835 million, respectively. Wall Street currently projects $4.6 billion and $877 million, respectively, according to FactSet.

Guidance is a little below the Street, but investors don’t seem to mind.

Management hosts a conference call at 10 a.m. Eastern time to discuss results. Investors and analysts will want to hear more about the demand for backup power in 2025 and beyond.

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>>> Honeywell, one of the few remaining US industrial conglomerates, will split into three companies


AP

by MICHELLE CHAPMAN

February 6, 2025


https://finance.yahoo.com/news/honeywell-one-few-remaining-us-113124365.html


Honeywell, one of the last remaining U.S. industrial conglomerates, will split into three independent companies, following in the footsteps of manufacturing giants like General Electric and Alcoa.

The company said Thursday that it will separate from its automation and aerospace technologies businesses. Including plans announced earlier to spin off its advanced materials business, Honeywell will consist of three smaller entities in hopes that they will each be more agile.

"The formation of three independent, industry-leading companies builds on the powerful foundation we have created, positioning each to pursue tailored growth strategies, and unlock significant value for shareholders and customers,” Honeywell Chairman and CEO Vimal Kapur said in a statement.

Honeywell had said in December that it was considering spinning off its aerospace division. The public announcement arrived about one month after Elliott Investment Management revealed a stake of more than $5 billion in the aerospace, automation and materials company. Elliott had been pushing for the Charlotte, North Carolina, company to separate its automation and aerospace businesses.

The board of Honeywell International Inc. had been exploring strategic options for the company since earlier in 2024.

The company, which makes everything from eye solution to barcode readers, has been seeking ways to make itself more nimble. Over the past year and a half, just after Kapur took over as CEO, Honeywell has announced plans for the advanced materials business spinoff, entered into an agreement to sell its personal protective equipment business, and made several acquisitions.

The separation of the automation and aerospace technologies businesses is expected to be completed in the second half of 2026. The spinoff of the advanced materials business is anticipated to be completed by the end of this year or early next year.

Like Honeywell, other U.S. conglomerates have been pressured by shareholders to simplify their structures, allowing each segment of the company to move more freely and adapt to changes in their respective markets.

Iconic CEOs like Jack Welch of General Electric spent years building corporate American behemoths with the belief that with scale came power. Yet those massive companies were forced to compete with upstarts with a narrow focus and a more clearly defined set of goals.

Investors also wanted a more clear view of the priorities within each division, which became more murky as the companies grew.

In 2015 metals maker Alcoa said that it was splitting into two independent companies, separating its bauxite, aluminum and casting operations from its engineering, transportation and global rolled products businesses.

GE announced in 2021 that it was dividing itself into three public companies focused on aviation, health care and energy. At the time, the move was viewed as a potential signal of the end of conglomerates as a whole thanks to the move toward a digital economy.

Shares fell almost 3% before the market opened Thursday.

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>>> Comfort Systems Stock Looks Hot As It Cools Data Centers


IBD

by KIMBERLEY KOENIG

01/17/2025


https://www.investors.com/stock-lists/ibd-big-cap-20/data-centers-comfort-systems-stock-fix/?src=A00220


Servers in data centers use a large amount of heat and require specialized cooling systems. Building and cooling services company Comfort Systems USA (FIX) is tapping into the growing market for these much-needed systems.

Comfort Systems provides mechanical, electrical, plumbing and ventilation services for data centers, pharmaceutical, health care and industrial facilities. It employs around 18,000 plumbers, welders, pipe fitters and electricians, plus technology for robotic welding. It also makes modular cooling units used in data centers.

The IBD Big Cap 20 and IBD 50 company sees hefty demand for its construction business stretching into 2026. Comfort Systems also sees opportunity in its modular delivery business, used primarily for data centers, which is currently only about 17% of its overall business.

The company builds modular cooling units used in data centers, which can be shipped for on-site construction by workers or even robots.

Comfort Systems ranks No. 1 out of 13 stocks in IBD's Building-A/C & Heating Products industry group.

Comfort Systems Back Near Record High

The stock is forming a late-stage cup base with a 510.79 buy point, according to MarketSurge pattern recognition. That's a mark of leadership that may help offset the risk of being a late-stage pattern.

Shares retook the 10-week moving average in a 14% climb the past week as they try to complete the right side of the cup. The bounce off the 10-week line offered an early entry around 465.

Its relative strength line has reached a 52-week high, as shown by the blue dot on its IBD MarketSurge charts. The stock has climbed a healthy 17% so far in January, after more than doubling in 2024 and more than quadrupling since January 2023.

Its 1.5 up/down volume ratio indicates positive demand for the stock over the last 50 days.

Data Center Cooling Provider Shows Robust Profit Growth

Comfort Systems beat third-quarter earnings estimates but missed sales forecasts on Oct. 24. It saw an increase in its technology-sector sales from data centers and chip plants. Its average project takes six to nine months to complete.

"We are happy to report record earnings and cash flow this quarter," said President and CEO Brian Lane in the earnings release. The company also reported a backlog of $5.68 billion as of Sept. 30, down from $5.77 billion on June 30.

Third-quarter earnings grew 49% following gains of 78% and 94% in the prior two quarters. And its Q3 sales lifted 32% after rising 31% and 40% in Q1 and Q2.

Forecasts call for a 30% pop in its Q4 sales, then tapering to 14% and 9% over the following two quarters. Analysts estimate 2024 earnings to grow 64% after a 65% burst in 2023. For this year, the consensus estimate is for a 20% earnings increase.

Its IBD Earnings Stability factor of 15 out of 99 possible (lower is better), shows stable earnings over the last three to five years. It also holds a perfect 99 EPS Rating and a 98 Composite Rating.

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>>> Trane Technologies (TT) Stock Trades Down, Here Is Why


StockStory

by Anthony Lee

January 27, 2025


https://finance.yahoo.com/news/trane-technologies-tt-stock-trades-184601026.html


Trane Technologies (TT) Stock Trades Down, Here Is Why

What Happened?

Shares of HVAC company Trane (NYSE:TT) fell 8.6% in the afternoon session as stocks heavily tied to the AI market took a hit after Chinese artificial intelligence startup DeepSeek released a new large language model that ranks competitively on key global benchmarks, uses less advanced semiconductor chips, costs significantly less to build, and has already achieved strong adoption after topping the iPhone App Store for AI apps. TT in particular supplies HVAC (heating, ventilation, air conditioning) to the datacenter market, which is being buoyed by AI.

Notably, DeepSeek has also open-sourced this model, a move that may make it harder for rivals to justify huge upfront expenditures on hardware, software, and expertise to develop similar systems. Speaking at the World Economic Forum in Davos, Switzerland, Microsoft CEO Satya Nadella praised DeepSeek's efforts, calling the new model "super impressive" for its open-source design, efficient inference-time computing, and high compute efficiency. "We should take the developments out of China very, very seriously," he added.

Nadella's comments suggest that upstarts like DeepSeek could reshape the competitive landscape of AI. DeepSeek's announcement disrupts long-held assumptions in key ways: 1.) It undercuts the narrative that bigger budgets and access to top-tier chips are the only ways forward for AI development. 2.) By using less advanced hardware, DeepSeek opens the door for innovators who face high chip costs or export restrictions, reaffirming they can still compete. 3.) The model's success bring uncertainty to the growth narrative of companies that develop AI powered chips and the infrastructure that supports the production and maintenance of these AI tools, including datacenter servers, as well as the HVAC and water systems providers that cool datacenters.

Overall, today's news shows that the market sees more uncertainty in demand as DeepSeek shows that top-tier infrastructure may not be as needed.

The shares closed the day at $367.74, down 8.3% from previous close.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Trane Technologies?

What The Market Is Telling Us

Trane Technologies’s shares are not very volatile and have only had 2 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

Trane Technologies is down 1.7% since the beginning of the year, and at $367.62 per share, it is trading 12.3% below its 52-week high of $419.14 from November 2024. Investors who bought $1,000 worth of Trane Technologies’s shares 5 years ago would now be looking at an investment worth $2,849.

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>>> BWXT Awarded Historic Manufacturing Contracts to Support Pickering Life Extension and Darlington New Build Projects


Business Wire

January 27, 2025


https://finance.yahoo.com/news/bwxt-awarded-historic-manufacturing-contracts-213900330.html


CAMBRIDGE, Ontario, January 27, 2025--(BUSINESS WIRE)--BWX Technologies, Inc. (NYSE: BWXT) announced today contracts with a total value of more than C$1 billion for two major nuclear energy projects that will enable Ontario Power Generation’s (OPG) life extension of the Pickering Nuclear Generating Station, and the deployment of a new small modular reactor (SMR) at the Darlington site.

Under the first contract, BWXT will manufacture 48 steam generators at its Cambridge facility for the Pickering life extension program. The project will create more than 250 highly skilled trades positions, including welders, fitters and machinists, as well as add more engineers and supporting staff. The duration of the project will be more than seven years, with a significant portion booked in fourth quarter 2024. BWXT is performing the work for its customer CanAtom, a joint venture between AtkinsRéalis and Aecon.

BWXT also announced a contract to manufacture the reactor pressure vessel (RPV) for customer GE Hitachi Nuclear Energy’s BWRX-300 SMR. The largest component within the technology, the RPV contains the reactor core, coolant and support structures. BWXT is the first manufacturer in North America to begin this type of work for an SMR technology and will play a key role in the deployment of SMRs across Canada and the world. This order was booked in second quarter 2024.

The Province’s Minister of Energy and Electrification Stephen Lecce joined BWXT at its Cambridge, Ontario, facility for the announcement.

"Ontario needs more nuclear energy to meet growing electricity demand, and it’s our province’s highly skilled workers that will make it all possible," said Stephen Lecce, Minister of Energy and Electrification. "I am so pleased to work with companies like BWXT that are investing in Ontario and in our workers, as we continue to cement Ontario’s position as a global leader in new nuclear technologies."

"The BWXT team stands ready to help our customers and Ontario create a future that provides abundant, emissions-free electricity, while increasing sustainable, good-paying jobs for Canada," said John MacQuarrie, president, BWXT Commercial Operations. "We’ve been taking strategic steps to further meet the current and anticipated demand for nuclear power. These significant projects leverage BWXT’s extensive capabilities and specialized expertise in the delivery of large components for the domestic and global nuclear industry."

"The contract to fabricate the reactor pressure vessel for the first BWRX-300 is another key milestone in the deployment of this technology," said Lisa McBride, Canada Country Leader, GEH. "We are excited to be working with BWXT to move this project forward, while bringing benefits to manufacturing workers in Ontario."

The Pickering Life Extension Program is in its initial phases and will enable the Pickering "B" fleet of reactors to operate for an additional 30 years. The work is anticipated to be completed in the mid-2030s. Pickering features four operating CANDU® reactors and accounts for approximately 10% of Ontario’s electricity needs.

"By refurbishing existing assets at Pickering Nuclear, and building SMRs at the Darlington New Nuclear Project, OPG is helping Ontario meet rapidly growing demand for low-carbon, reliable baseload nuclear energy," said Nicolle Butcher, OPG President CEO. "Ontario’s robust nuclear supply chain, including trusted partners like BWXT, will help ensure these large nuclear projects have the components necessary to complete these projects on time, on budget, safely and with quality."

"CANDU technology, as Canada’s only domestically developed, large scale nuclear technology, is a source of national pride," said Joe St. Julian, President, Nuclear, AtkinsRéalis. "We are pleased to continue working with BWXT as a major player in the CANDU supply chain and a proud Canadians for CANDU supporter. The CANDU reactors at OPG are indispensable to providing Ontario with energy security and reliable, clean power to millions of people. Their refurbishment and continued operation helps to support many Ontario jobs."

"The Pickering Refurbishment Project will help ensure the supply of clean, safe, reliable, and affordable electricity for future generations while stimulating the economy and further expanding Ontario’s strong nuclear supply chain. We look forward to safely delivering this critical project and advancing our work with BWXT alongside our client OPG and partner AtkinsRéalis," said Aaron Johnson, Senior Vice President, Nuclear, Aecon Group Inc.

The BWRX-300 scheduled for the OPG Darlington New Nuclear Project is on track to be the first on-grid SMR among G7 nations. The design is a 300-MWe water-cooled, natural circulation SMR with passive safety systems that leverages the design and licensing basis of GEH’s U.S. NRC-certified ESBWR.

Already one of the largest commercial nuclear equipment manufacturing facilities in North America, the BWXT Cambridge facility is undergoing preparatory work for its C$80 million expansion to further support current and anticipated demand for nuclear projects in Ontario and around the world.

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>>> Mueller Industries, Inc. (MLI) manufactures and sells copper, brass, aluminum, and plastic products in the United States, the United Kingdom, Canada, South Korea, the Middle East, China, and Mexico. It operates through three segments: Piping Systems, Industrial Metals, and Climate.

The Piping Systems segment offers copper tubes, fittings, line sets, and pipe nipples. It also resells steel pipes, brass and plastic plumbing valves, malleable iron fittings and faucets, and plumbing specialties; and supplies water tubes. This segment sells its products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs).

The Industrial Metals segment manufactures brass, bronze, and copper alloy rods; plumbing brass, valves, fittings, and gas assemblies; cold-form aluminum and copper products; machining of aluminum, steel, brass, and cast iron impacts and castings; brass and aluminum forgings; brass, aluminum, and stainless-steel valves; fluid control solutions; and gas train assembles to OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets.

The Climate segment offers valves, protection devices, and brass fittings for various OEMs in the commercial HVAC and refrigeration markets; high-pressure components and accessories for the air-conditioning and refrigeration markets; coaxial heat exchangers and twisted tubes for the HVAC, geothermal, refrigeration, swimming pool heat pump, marine, ice machine, commercial boiler, and heat reclamation markets; and insulated HVAC flexible duct systems.

Mueller Industries, Inc. was founded in 1917 and is headquartered in Collierville, Tennessee.

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>>> Caterpillar Inc. (CAT) manufactures and sells construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives in worldwide.

Its Construction Industries segment offers asphalt pavers, compactors, road reclaimers, forestry machines, cold planers, material handlers, track-type tractors, excavators, telehandlers, motor graders, and pipelayers; compact track, wheel, track-type, backhoe, and skid steer loaders; and related parts and tools.

The company's Resource Industries segment provides electric rope and hydraulic shovels, draglines, rotary drills, hard rock vehicles, tractors, mining trucks, wheel loaders, off-highway and articulated trucks, wheel tractor scrapers and dozers, fleet management products, landfill and soil compactors, machinery components, autonomous ready vehicles and solutions, work tools, and safety services and mining performance solutions, as well as related parts and services.

Its Energy & Transportation segment offers reciprocating engine powered generator sets; reciprocating engines, drivetrain, and integrated systems and solutions; turbines, centrifugal gas compressors, and related services; and diesel-electric locomotives and components, and other rail-related products.

The company's Financial Products segment provides operating and finance leases, installment sale contracts, revolving charge accounts, repair/rebuild financing services, working capital loans, and wholesale financing; and insurance and risk management products and services.

Its All Other Operating segment offers filters and fluids, undercarriage, ground engaging tools, fluid transfer products, precision seals, and rubber sealing and connecting components; parts distribution; logistics solutions and distribution services; brand management and marketing strategy services; and digital investments services. Caterpillar Inc. was founded in 1925 and is headquartered in Irving, Texas.

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>>> Deere Shares Surge on Optimism Farm Gloom Will Lift in 2025


Bloomberg

by Michael Hirtzer

November 21, 2024


https://finance.yahoo.com/news/deere-sees-lower-2025-profit-124230338.html


(Bloomberg) -- Shares of Deere & Co. jumped to the highest level in more than a year as investors in the biggest farm machinery maker looked past a disappointing profit outlook amid speculation that the slump in agriculture is poised to turn.

The maker of iconic green and yellow tractors reported fourth-quarter earnings that topped expectations, but said net income for fiscal 2025 will be between $5 billion and $5.5 billion. That’s below the $5.83 billion average of analyst estimates compiled by Bloomberg.

The full-year guidance “is ugly, but expectations were already very low,” according to Vital Knowledge analyst Adam Crisafulli. In one positive sign, North American inventories declined, showing that “destocking is taking hold,” Baird analysts including Mircea Dobre said in a note.

The company’s shares rose as much as 8.2%, the most intraday since February 2023.

The sector has been suffering as sales have dropped from peak levels of 2022, when Russia’s invasion of Ukraine sent crop prices soaring and gave farmers more to spend on gear. Rivals CNH Industrial NV and AGCO Corp. earlier this month reduced their sales forecasts as results missed estimates. Companies have been cutting production to deal with the high dealer inventories.

Traders and executives have been looking for signs of an end to the industry downturn. Farmer sentiment bounced in October on optimism that economic conditions will improve, according to the Purdue University and CME Group’s Ag Economy Barometer. CNH, whose brands include red Case IH and blue New Holland tractors, earlier this month said 2025 could be the bottom of the cycle.

Excessive amounts of used machinery continue to drag on demand for new equipment. Cory Reed, president of worldwide agriculture and turf at Deere, told investors on an earnings call that the situation is improving, though “it’s too early to call an inflection point on used equipment.”

Deere also said it was too soon to know any impacts from President-elect Donald Trump’s policies. He has threatened tariffs on any products Deere makes in Mexico and sells in the US — a potential wild card even as farmer sentiment recently has been rising.

Chief Executive Officer John May said on the call that more than 75% of what Deere sells in the US is assembled domestically. “So we feel really positioned well,” he said.

Deere has been shifting into high-tech machines such as autonomous plows and a sprayer that automatically detects weeds. However, farmers who recently harvested crops with grain and oilseed prices trading near four-year lows have been putting off machinery purchases after many upgraded in 2022.

US sales of agriculture tractors continued their decline in October, falling about 14% from the previous year, the Association of Equipment Manufacturers said in a report.

Deere expects sales in its largest production and precision agriculture segment to be down about 15% in fiscal 2025, while prices are seen up 1%.

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GE Vernova - >>> A GE spinoff's stock is surging as it positions itself as the 'supermarket' for AI energy demand


Yahoo Finance

by Ines Ferrér

October 6, 2024


https://finance.yahoo.com/news/a-ge-spinoffs-stock-is-surging-as-it-positions-itself-as-the-supermarket-for-ai-energy-demand-140019819.html


The massive demand for energy as Big Tech races to build its AI infrastructure has been a tailwind for GE Vernova (GEV), the power equipment maker that spun out of iconic GE earlier this year.

Shares of the Cambridge, Mass.-based company have been hovering near all-time highs, along with the broader S&P 500 Industrial ETF (XLI), as investors look to play off the electrification and artificial intelligence theme led by AI chip heavyweight Nvidia (NVDA).

"[Vernova] seems to be caught up in the broader trade of AI and power demand," Daniel Rich, analyst at CFRA, told Yahoo Finance. The firm has a Buy rating and a price target of $230 on the stock.

Much of Wall Street's bullishness stems from expectations of power demand growth stemming from Big Tech's commitment to record infrastructure technology investments.

Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT), and Meta (META) are expected to spend a combined $200 billion this year on cloud and AI investments, including building and maintaining data centers.

Power demand from infrastructure technologies in the US is expected to more than double by 2030 thanks to use of AI, according to consulting firm McKinsey & Co.

"Because of how much more power we're going to need —if the projections are accurate to power data centers — to power AI applications, Vernova is definitely a winner," he added.

One Wall Street analyst dubbed the $72 billion company the "supermarket" for the electric power industry — from natural gas turbines used to generate electricity to servicing of power plants, modernizing electric grids, and building wind turbines.

"This company does everything," Raymond James managing director Pavel Molchanov told Yahoo Finance in an interview this week.

"Because the buildout of electric power infrastructure is an all-of-the-above story, that means all of these solutions are going to be needed," he added.

The analyst notes Vernova's reach is global, with roughly 30% of its revenue stemming from the US. Some of its big competitors, like Siemens Energy, Schneider Electric, and ABB, are based abroad.

Vernova expects to deliver 70 to 80 heavy-duty gas turbines per year in 2026, up from roughly 55 for the last few years. Servicing those units is also expected to grow substantially.

"We're seeing increasing demand for power generation, driven by manufacturing growth, industrial electrification, EVs, and emerging data center needs," Vernova CEO Scott Strazik said during the company's latest earnings call over the summer.

The recent deal between software giant Microsoft and nuclear power provider Constellation Energy (CEG) to restart a reactor at Pennsylvania's Three Mile Island is one recent example of the growing energy demand among Big Tech.

The partnership has made Morgan Stanley analysts more bullish on the prospects of gas-powered plants adjacent to data centers.

"We believe a co-located data center and gas-fired power plant utilizing GEV's gas-turbine equipment could be announced in 2025," Morgan Stanley analyst Andrew Percoco wrote in a note last week.

The analyst reiterated an Overweight rating and increased his bull case scenario price target on the stock to $397 from $371.

Vernova stock is up more than 100% since its spinoff, compared to the S&P 500's (^GSPC) 21% year-to-date gain. That's despite negative headlines in the company's most challenged unit — its wind turbines — after incidents of blades breaking off in key offshore projects.

Molchanov from Raymond James cautions the strong run-up means there could be little room to run, though.

"It’s an S&P 500 stock that has doubled in the last six months. If that sounds a little bit like certain other AI-related companies that people are familiar with, well, that’s not a coincidence," said Molchanov.

Calling the AI-fueled rally "overstretched," the analyst and his team downgraded the stock from Outperform to Market Perform based on valuation. Much of the enthusiasm over AI is already baked into Vernova's share price, he said.

"The bottom line is that we think the stock could use a period of consolidation after its sentiment-driven gains, and we look forward to revisiting our rating if and when the trade becomes less crowded," he said.

The stock has 19 Buy, six Hold, and two Sell analyst recommendations.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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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).

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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https://finance.yahoo.com/quote/ROK/profile/


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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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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.

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>>> 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.”

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>>> 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.

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>>> 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...

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>>> 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.

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>>> 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.

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>>> 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.

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>>> 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.

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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.

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>>> 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.

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https://finance.yahoo.com/quote/NVT/profile



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>>> 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.

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>>> 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."

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