Kalkine Media lists US industrial stocks to watch after recent GDP data - Kalkine Media

November 01, 2022 05:47 AM PDT | By Rupam Roy
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Highlights:

  • Caterpillar (NYSE: CAT) stock added over 33 per cent in the running quarter through October 31.
  • Rollins, Inc. (NYSE: ROL) noted a growth of over 12 per cent YoY in Q3 FY22.
  • The stock of Deere & Company (NYSE: DE) rose over 15 per cent YTD.

The industrial sector comprises firms that engage in manufacturing, machinery and equipment production, and other related services. It primarily focuses on the construction and manufacturing segment. Besides, several other services like defense, airlines, transportation, etc., also come under the segment.

The industrial segment is one of the key segments of the US market. It often depicts the health of the overall stock market, as its performance generally moves in tandem with economic growth.

Industrial stocks are cyclical, meaning the performance of the firms is closely followed by the swings in the economy. The demands of businesses generally retreat during an economic downturn or a recession and vice-versa.

Some of the well-known companies from this major segment include Honeywell International Inc. (NASDAQ: HON), Caterpillar, Inc. (NYSE: CAT), Rollins, Inc. (NYSE: ROL), Deere & Company (NYSE: DE), and PACCAR Inc. (NASDAQ: PCAR).

Now, given the recent GDP data for the third quarter, which came in positive after two straight quarters of being in the negative territory, investors are keeping a close track of the industrials sector.

Let's take a look at industrial stocks and see how they have performed amid the volatile trading scenario in recent months.

Honeywell International Inc. (NASDAQ: HON)

Honeywell International is a leading industrial conglomerate firm with a dividend yield of 1.91 per cent. The company engages in several businesses like aerospace, building technologies, performance and safety solutions, etc.

The stock of the industrial firm lost nearly one per cent this year while losing over six per cent YoY through October 31. However, in the last 30 days, it added over 22 per cent through Monday.

The US$ 137.29 billion market cap conglomerate firm reported strong quarterly financial results last week that topped its prior guidance on segment margin.

According to its Q3 FY22 earnings release of October 27, the sales of Honeywell International rose six per cent YoY to US$ 8.95 billion, and its EPS jumped 27 per cent YoY to US$ 2.28 apiece. The segment margin of the company was up by 60 bps in the third quarter to 21.8 per cent.

The Charlotte, North Carolina-based industrial firm now expects its annual sales to be between US$ 35.5 billion and US$ 36.1 billion, up from its prior guidance range of US$ 35.4 billion to US$ 35.7 billion.

Caterpillar, Inc. (NYSE: CAT)

One of the largest construction machinery and equipment firms, Caterpillar Inc, has a dividend yield of 2.19 per cent. The US$ 114.13 billion market cap leading construction machinery producer's stock rose six per cent YTD and about seven per cent YoY.

In the running quarter through October 31, the CAT stock added over 33 per cent. The company posted its Q3 FY22 earnings results on October 27, which showed a 15 per cent YoY jump in its sales and revenue of US$ 15 billion.

Caterpillar Inc's profit per share was US$ 3.87 apiece in the quarter, against a profit of US$ 2.60 per share in the year-ago period.

Rollins, Inc. (NYSE: ROL)

The major pest control firm, Rollins Inc's dividend yield was 0.96 per cent. The company's stock that provides its pest control services to residential and commercial clients rose around 22 per cent YTD and 20 per cent YoY.

In the running quarter, the ROL stock soared over 20 per cent through October 31 while touching its 52-week high of US$ 41.90 on October 28.

Rollins Inc's revenue rose 12.2 per cent YoY to US$ 729.7 million in Q3 FY22, while its net income jumped 14.7 per cent YoY to US$ 107.6 million.

Third quarter earnings of Deere & Company (DE)Source: ©Kalkine Media®; © Canva via Canva.com

Deere & Company (NYSE: DE)

The leading manufacturing firm, Deere & Company, which manufactures agricultural equipment, diesel engines, and other related products hold a dividend yield of 1.14 per cent.

The DE stock rose over 15 per cent YTD and about 13 per cent YoY. It gained over 18 per cent in the running quarter through October 31.

Deere & Company's net sales and revenue rose 22 per cent YoY to US$ 14.10 billion in Q3 FY22, and its net income rose 13 per cent YoY to US$ 1.88 billion.

PACCAR Inc. (NASDAQ: PCAR)

Another manufacturing firm, PACCAR, specializes in manufacturing high-quality premium trucks, holds a dividend yield of 1.41 per cent. The price of the PACCAR stock rose over nine per cent YTD and around seven per cent YoY. In the running month, the PCAR stock rose over 15 per cent through October 31.

The Bellevue, Washington-based company's net sales and revenue were US$ 7.05 billion in Q3 FY22, as compared to US$ 5.14 billion in the year-ago quarter. PACCAR's net income shot up 102 per cent YoY to US$ 769.4 million in the quarter.

Bottom line:

The economy started coming out from the COVID-19 pandemic hit in 2021, and investors were optimistic about economic growth then. But given the Russia-Ukraine war that bumped up the inflation, supply chain woes, and higher policy rates, most sectors noted a sharp decline in 2022.

In addition, concerns over a potential recession also left the investors cold, subsiding their risk-bet appetite. The economy contracted for the starting two quarters of the year, which generally indicated that the economy was heading toward a recession.

But, the recent government data from last week showed that the US economy rose at a 2.6 per cent rate annually, banishing the recessionary fears of investors.

Now, the investors are waiting for Fed's meeting this week, where the officials are expected to announce another 75 bps point hike. But the investors also anticipate that the policymakers would ease their aggressive measures in their fight against inflation after this week's decision.

The S&P 500 industrial sector fell over 10 per cent YTD and around nine per cent in the last 12 months. Hence, the investors should closely evaluate all the factors that could affect the market performance in the coming days and can diversify their portfolio to distribute the risks.


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