Over the past year, the strong macroeconomic headwinds and geopolitical tensions have led to a surge in commodity prices and supply chain disruptions, causing inflation across goods and services and affecting global markets.
Given this backdrop, adding fundamentally sound industrial stocks Atlas Copco AB (ATLCY), The Weir Group PLC (WEGRY), and THK Co., Ltd. (THKLY), trading at attractive valuations, could be wise. Each of these stocks has an overall B (Buy) rating in our proprietary POWR Ratings system. So, let’s examine these names.
The last week's release of the March Consumer Price Index (CPI) report revealed that inflation remains on its downward path. CPI rose 0.1% in March and 5% from a year ago, putting inflation at a 5.6% annual rate. On the other hand, retail sales dropped 1% in March from February, a sharper decline than the 0.2% fall in the previous month.
Furthermore, a decline in consumer sentiment and concerns over the resurgence of recession fears have contributed to market volatility. Minutes of the Federal Reserve’s March 21-22 meeting revealed that the central bank’s staff economists are now forecasting a “mild recession” later this year, largely because the potential for a reduction in lending weighs on growth.
Moreover, according to the International Monetary Fund (IMF), the global economy is expected to register slow growth, with global inflation coming down slower than expected.
Regardless of market fluctuations, industrial production rose 0.4% in March. On top of it, thanks to rapid advances in technology driving innovation in industrial machinery manufacturing, the global industrial machinery market is expected to reach $708.30 billion in 2027, growing at a CAGR of 6.7%.
Furthermore, technologies such as 3D printing, artificial intelligence, and big data analytics are being adopted in manufacturing, thus resulting in higher productivity, lower operating costs, and higher margins.
So, it could be wise to scoop up shares of ATLCY, WEGRY, and THKLY, trading at $11.
Atlas Copco AB (ATLCY)
ATLCY is a Sweden-based industrial company that offers compressors, air treatment systems, vacuum solutions, industrial power tools and assembly systems, and power and flow solutions. It operates through four segments: Compressor Technique; Vacuum Technique; Industrial Technique; and Power Technique.
On April 5, the company acquired the assets of Shandong Bozhong Vacuum Technology Co., Ltd, a manufacturer of liquid ring vacuum pumps and systems. On April 4, ATLCY also announced the acquisition of vacuum service provider Trillium US Inc. and Argentinian compressed air distributor Asven S.R.L.
Such acquisitions should enable the company to expand its footprint into new geographies and help enhance its portfolio offerings.
ATLCY’s revenues rose 35.6% year-over-year for the fourth quarter that ended December 31, 2022, to SEK40.05 billion ($3.87 billion). Its operating profit rose 25% from the year-ago value to SEK7.81 billion ($755.53 million).
The company’s profit for the period increased 23.6% year-over-year to SEK6.06 billion ($586.24 million), while its adjusted EPS grew 24% from the prior-year quarter to SEK1.24. Also, its orders received came in at SEK36.15 billion ($3.40 billion), up 7.8% year-over-year.
Analysts expect ATLCY’s revenue to increase 17.5% year-over-year to $3.59 billion in the fiscal first quarter (ended March 31, 2023). It surpassed the revenue estimates in three of the trailing four quarters, which is impressive.
ATLCY’s revenue and net income grew at CAGRs of 10.9% and 12.4% over the past three years. Likewise, its EPS grew at a CAGR of 12.3% during the same period.
Shares of ATLCY have gained 35.6% over the past six months to close the last trading session at $11.31.
ATLCY’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Stability and a B for Growth, Momentum, and Quality. Out of 78 stocks in the A-rated Industrial - Machinery industry, it is ranked #11. To see the other ratings of ATLCY for Value and Sentiment, click here.
The Weir Group PLC (WEGRY)
Headquartered in Glasgow, the United Kingdom, WEGRY is a global producer and marketer of highly engineered original equipment. Its business operates through two segments: Minerals and ESCO.
On March 13, WEGRY subsidiary Weir Motion Metrics inaugurated a new state-of-the-art manufacturing and distribution center in Vancouver, British Columbia. Combined with manufacturing, R&D, and demonstration space, this facility would support customer demand and provide employees with an innovative workspace for collaboration and development.
During the fiscal year 2022, which ended on December 31, WEGRY’s revenues increased 27.8% year-over-year to £2.47 billion ($3.07 billion). Its operating profit rose 33.3% from its year-ago value to £394.80 million ($490.03 million). The company’s profit for the year increased 39.9% year-over-year to £256.20 million ($318 million), while its EPS stood at 97.80p, up 38.1% from the prior-year value.
Street expects WEGRY’s revenue for the fiscal year (ending December 2023) to increase 7.5% year-over-year to $3.19 billion. The stock’s revenue has grown at 6.4% and 4.5% CAGRs over the past three and five years, respectively. Also, its EBIT has grown at a 10% CAGR over the past three years.
Over the past nine months, the stock has gained 48.7% to close the last trading session at $11.72.
WEGRY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Stability and a B for Momentum. In the same industry, it is ranked #14 out of 78 stocks. Click here to see the other ratings of WEGRY for Growth, Value, Sentiment, and Quality.
THK Co., Ltd. (THKLY)
Based in Tokyo, THKLY manufactures and sells components for industrial and transportation equipment in the following geographical segments: Japan; the Americas; Europe; China; and Others. It offers machinery parts such as linear motion guides and ball screws and transportation equipment parts such as link balls and suspension ball joints.
THKLY’s total revenue increased 23.7% year-over-year to ¥393.69 billion ($2.94 billion) for the fiscal year that ended December 31, 2022. Its gross profit grew 32% from the prior-year value to ¥105.29 billion ($786.87 million), while its operating income increased 13.8% year-over-year to ¥34.46 billion ($257.54 million). Also, the company’s profit attributable to the owners of the parent amounted to ¥21.20 billion ($158.42 million) and ¥172.67 per share in the same period.
THKLY is expected to witness revenue growth of 6.4% for the fiscal year 2024. Moreover, it surpassed the revenue estimates in three of the trailing four quarters. Over the past three years, its net income and EBITDA have grown at CAGRs of 21.9% and 22.7%, respectively. Its EPS has grown at a CAGR of 23.2% in the same period.
The stock has gained 39% over the past six months and 18.2% year-to-date to close the last trading session at $11.14.
THKLY’s strong prospects are reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system. It has an A grade for Stability and a B for Value and Quality. Within the same industry, it is ranked #15.
Beyond what is stated above, we’ve also rated THKLY for Growth, Momentum, and Sentiment. Get all THKLY ratings here.
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ATLCY shares were trading at $11.36 per share on Monday afternoon, up $0.05 (+0.44%). Year-to-date, ATLCY has gained 6.72%, versus a 7.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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