4 Unstoppable Industrial Stocks to Buy Right Now
Despite facing supply chain constraints and Hurricane Ida-related factory shutdowns, the industrial sector’s production has surpassed the pre-pandemic levels by some measures, thanks to substantial government spending. Furthermore, President Biden’s...
Despite facing supply chain constraints and Hurricane Ida-related factory shutdowns, the industrial sector’s production has surpassed the pre-pandemic levels by some measures, thanks to substantial government spending. Furthermore, President Biden’s infrastructure bill and the growing external and domestic demand have created optimism around the industrial sector for the first time in months. This should help fundamentally sound industrial stocks like CEMEX (CX), Owens Corning (OC), GMS (GMS), and Huttig Building Products (HBP) deliver solid returns in the upcoming months.
Industrial production increased 0.4% in August and rose 0.3% above its pre-pandemic (February 2020) level despite Hurricane Ida-induced plant closures and the pandemic not being completely over. Some contributing factors are increased government focus on infrastructure, higher capital expenditures, and an expanding global economy. Investor optimism surrounding the industrial sector’s prospects is evident from the Industrial Select Sector SPDR Fund’s (XLI) 28.8% returns over the past year.
Although the ongoing supply chain issues could curb growth, the acceleration in demand for manufacturing, logistic, non-residential, and business outsourcing services should enable the industrial sector to witness a steady growth trajectory. Moreover, President Biden’s infrastructure bill, which is expected to be passed by the end of October, should boost the sector.
Therefore, we think it could be wise to bet on quality industrial stocks CEMEX, S.A.B. de C.V. (CX), Owens Corning (OC), GMS Inc. (GMS), and Huttig Building Products, Inc. (HBP). They are expected to deliver significant returns in the near term based on their strong position in the market, persistent modernization, and diverse portfolio.
CEMEX, S.A.B. de C.V. (CX)
Headquartered in San Pedro Garza GarcÃa, Mexico, CX is an operating and holding company that engages in operating subsidiaries, mainly in the production and distribution of cement, ready-mix concrete, aggregates, clinker, and other construction materials. In addition, the company provides building solutions, cement trade maritime services, and information technology solutions.
This month, CX expanded its footprint in the regions of Madrid and the Balearic Islands. Through this expansion, the company acquired complementary assets from Heidelberg Cement that should enhance its vertically integrated positions in key metropolitan areas in Spain. Also, CX can optimize its portfolio and foster EBITDA growth through this investment.
CX’s net sales for the second quarter ended July 29, 2021, increased 32.8% year-over-year to $3.86 billion. The company’s gross profit grew 39.7% from the year-ago value to $1.3 billion. Its operating earnings rose 141.1% from the prior year's quarter to $502.07 million. Also, the company’s income before income tax increased 538.1% year-over-year to $336.73 million.
Analysts expect CX’s revenue to increase 12.9% year-over-year to $14.64 billion in the fiscal year 2021. In addition, its EPS is expected to increase 193.3% in the current year and 1,800% in the current quarter. Moreover, the stock has gained 36.1% over the past nine months and 86.2% over the past year.
CX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its weighting.
Also, the stock has a B grade for Value, Sentiment, and Quality. We’ve also graded CX for Growth, Stability, and Momentum. Click here to access all of CX’s ratings. CX is ranked #5 of 55 stocks in the B-rated Industrial – Building Materials industry.
Owens Corning (OC)
OC is a provider of building and industrial materials. The company’s three integrated businesses are dedicated to manufacturing and advancing a broad range of insulation, roofing, and fiberglass composite materials. It sells glass fiber products, fiberglass insulation, residential roofing shingles, oxidized asphalt materials, and synthetic packaging materials.
In August, OC launched a superior insulation solution, “PINK Next Gen Fiberglas insulation,” enabling up to 23% faster installation than its existing products. This product is a significant step-up change designed to meet building codes and should allow the professionals, contractors, homeowners, and builders to fulfill their expectations.
During the second quarter ended June 30, 2021, OC’s net sales increased 37.8% year-over-year to $2.24 billion. The company’s gross margin grew 80.2% from the year-ago value to $618 million. Its operating income rose 153% from the prior-year quarter to $425 million. Also, the company’s net earnings increased 213.7% year-over-year to $298 million.
OC’s revenue is expected to increase 18.5% year-over-year to $8.36 billion in the fiscal year 2021. In addition, the company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Moreover, its EPS is expected to increase by 70.6% in the current year. Over the past nine months, the stock has soared 19%. Also, the stock has returned 24.5% over the past year.
OC’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. Also, the stock has a B grade for Quality and Value.
In addition to the POWR Rating grades I’ve just highlighted, one can see OC’s ratings for Stability, Sentiment, Momentum, and Growth here. OC is ranked #4 in the same industry.
GMS Inc. (GMS)
GMS is a distributor of wallboard and suspended ceilings systems, or ceilings. In addition to offering gypsum wallboard and acoustical products, the company supplies a comprehensive inventory of other building materials, including FRP boards, metal framing, exterior insulation, finish systems, ready-mix joint compound, and various other related interior construction products.
In August, GMS announced the acquisitions of DK&B Construction Specialties’ EIFS division and Architectural Coatings Distributors, Inc. and the recent openings of five greenfield locations. The company believes that these acquisitions demonstrate the continued execution of its growth strategy through platform expansion while focusing on the complementary products received through these agreements.
GMS’s net sales increased 29.8% year-over-year to $1.04 billion for the fiscal first quarter ended July 31, 2021. The company’s gross profit grew 28.9% from the year-ago value to $335.83 million. Its operating income rose 87.1% from the prior-year quarter to $94.04 million. Also, the company’s net income increased 124.9% year-over-year to $61.2 million.
For the fiscal year 2022, analysts expect GMS’ revenue to increase 24.4% year-over-year to $4.1 billion. It has surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s EPS is estimated to increase 58.5% in the current year. The stock has gained 53.5% over the past nine months and 80.9% over the past year.
It’s no surprise that GMS has an overall B rating, which equates to a Buy in our POWR Rating system. Also, the stock has a B grade for Momentum and Growth.
Click here to see the additional POWR Ratings for GMS (Quality, Stability, Value, and Sentiment). In the same industry, GMS is ranked #6.
Huttig Building Products, Inc. (HBP)
Incorporated in 1865, HBP is a distributor of millwork, building materials, and wood products used for residential construction, in-home improvement, remodeling, and repair work. The company also provides fasteners and connectors, roofing, siding, insulation, flashing, and other building products under the Huttig-Grip, Louisiana Pacific, Simpson Strong-Tie, TimberTech, and several other brands.
Last month, HBP entered into a new $250 million senior credit facility. The facility has a five-year tenure and can be expanded to $325 million through an uncommitted $75 million accordion. Through this new credit facility, the company should get increased financial flexibility as it continues to execute its strategy.
For the second quarter ended June 30, 2021, HBP’s net sales increased 28.8% year-over-year to $247.4 million. The company’s gross margin grew 42.9% from the year-ago value to $55.3 million. Its operating income rose 532% from the prior-year quarter to $15.8 million. Also, the company’s net income increased 831.3% year-over-year to $14.9 million.
Analysts expect HBP’s EPS to increase at the rate of 14% per annum over the next five years. Moreover, the stock has gained 47.4% over the past nine months and 131.7% over the past year.
HBP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Growth and Value, and a B for Quality.
We’ve also graded HBP for Momentum, Stability, and Sentiment. Click here to access all of HBP’s ratings. In the same industry, HBP is ranked #1.
CX shares were trading at $6.91 per share on Tuesday morning, down $0.11 (-1.57%). Year-to-date, CX has gained 33.66%, versus a 17.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.