The industrials sector witnessed a period of contraction during most of 2023 and 2024, with performance varying sharply between different companies during that period. Some companies, such as energy management giant Eaton Corp., have flourished New York Stock Exchange: ETNwith its returns of nearly 50% in the year ending December 13, 2024. On the other hand, even some of the strong companies in this sector saw their stock prices decline during this period as well. Boeing Company NYSE: B.S It is an example of the latter end of the spectrum; Its shares have fallen by about a third in the past year.
With the prospect of new management and a new approach to important industrial considerations such as the role of regulation and corporate taxation, some investors have become optimistic about the near-term prospects for industrial companies. Is it time to think about shifting towards industrial companies? If so, pay close attention to the three companies below. These are likely unknowns for many investors who do not have extensive experience in the sector, but they may be poised for growth in the new year.
MRC Global: Resilient cash flow despite tepid earnings
MRC Global Today
(As of 12/19/2024 at 05:31 PM ET)
- 52 week range
- $9.77
▼
$14.91
- P/E ratio
- 14.49
- Price target
- $16.33
MRC International Company New York Stock Exchange: MRC It distributes a variety of infrastructure products, including piping, fittings and valves for use in extreme operating conditions. The broad application of the MRC product line makes the company resilient to some market downturns and should provide a boost when energy and infrastructure projects take off.
In November, the Medical Research Council announced that results for the third quarter of 2024 were somewhat mixed. Adjusted net income attributable to common shareholders decreased slightly year over year to $19 million, and sales declined 4% to $797 million during the same period. However, the MRC remains able to generate significant cash flow; Despite these low numbers top and bottom, the company generated operating cash flow of $96 million for the quarter. With $197 million in cash flow in the first three quarters, the company nearly completed its goal of generating $200 million in 2024 before the quarter.
Given MRC’s strong cash flow — and the fact that the company expected a lackluster quarter due to slowing U.S. oilfield activity, among other factors — investors have already reacted positively to the company’s earnings, with the stock price briefly rising in early November. MRC’s ability to generate cash flow should put it in a good position to capitalize on growth opportunities when the broader manufacturing sector picks up speed again.
H&E Equipment Services: Earnings and Value Outlook Despite Challenges
H&E Equipment Services Today
H&E Equipment Services
(As of 12/19/2024 at 05:31 PM ET)
- 52 week range
- $40.92
▼
$66.18
- Dividend yield
- 2.23%
- P/E ratio
- 12.53
- Price target
- $61.25
An important name in the sales and maintenance of construction equipment, industrial equipment and related spare parts, H&E Equipment Services Inc. Nasdaq: song It currently has a Buy rating from four out of six analysts. For investors, H&E is an attractive dividend proposition, as the company has a dividend yield of 1.97% and a sustainable payout ratio of just under 28%. The last payment of $0.275 per share was made on December 13, 2024.
HEES shares have been on a long-term growth trajectory for at least five years. During the five years leading up to December 13, 2024, stocks returned more than 70%. This improvement has slowed in the past year, with gains of just 5% during that period. The stock hit an all-time high of over $65 per share in the spring of 2024 but then lost value for several months and now appears to be heading into the new year with new upward momentum.
As with MRC above, H&E reported lower-than-expected earnings for the latest quarter, including revenue and EPS that beat analysts’ expectations. With annual sales of $1.47 billion, H&E continues to offer an attractive P/E ratio for investors anticipating a recovery in the construction industry in the new year.
DXP Institutions: Strong earnings and share price performance
DXP companies today
(As of 12/19/2024 at 05:31 PM ET)
- 52 week range
- $30.08
▼
$82.33
- P/E ratio
- 20.33
- Price target
- $75.00
Among the stocks on this list is DXP Enterprises Inc. Nasdaq: DXPE The company had its strongest performance ever in 2024. Shares of this maintenance, repair and operation products and services company returned 136% in the year ended December 13, with much of those gains accumulating in brief rallies in March and November.
In both cases, the rise in share price was linked to strong earnings performance, highlighting the company’s resilience in the face of broader sector-wide challenges. In the third quarter, for example, DXP generated approximately $473 million in sales, an increase of approximately 13% year over year and an improvement in adjusted EBITDA of 19% over the same period. Earnings per share have sharply exceeded analyst expectations as well.
DXP is in the midst of a strong growth campaign, completing several acquisitions in recent months while still managing to generate $24.4 million of free cash flow last quarter. The company’s performance was driven by its Pumping Solutions and Innovative Service Centers segments, both of which look poised to continue to outperform in the new year. For investors, the question may be whether DXP has room for further share price growth as well.
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