The industrial sector was in a downturn for much of 2023 and 2024, with sharply varying performance across companies during that time. Some firms are thriving, such as power management giant Eaton Corp. plc. New York Stock Exchange: ETNOn the other hand, even some sector stalwarts saw share prices decline during this period. Boeing Company. New York Stock Exchange: BA is an example at the latter end of the spectrum; Its shares have fallen by about a third over the past year.
Given the new administration’s outlook and approach to important industry issues such as the role of regulation and corporate taxes, some investors have become optimistic about the near-term prospects of industrial companies. Maybe it’s time to consider moving to industrial firms? If so, pay close attention to the three companies below. They will likely be unknown to many investors without much experience in the sector, but they could be poised for growth in the new year.
MRC Global: resilient cash flow despite moderate profits
MRC Global today
(As of 12/19/2024 5:31 PM ET)
- 52 week range
- $9.77
▼
US$14.91
- P/E ratio
- 14.49
- Target price
- $16.33
MRC Global Inc. New York Stock Exchange: MRC distributes a variety of infrastructure products, including pipes, fittings and valves for use in extreme operating conditions. The widespread adoption of MRC’s product line makes the company resilient in the face of some market downturns and should provide momentum for energy and infrastructure projects.
In November, MRC announced results for the third quarter of 2024 were somewhat mixed. Adjusted net income attributable to common stockholders decreased slightly year-over-year to $19 million, and sales fell 4% to $797 million in the same period. However, MRC is still able to generate significant cash flow; Despite these weak revenue and profit figures, the company reported operating cash flow of $96 million for the quarter. With cash flow of $197 million generated in the first three quarters, the company nearly met its $200 million target for 2024 by a block earlier.
Given MRC’s strong cash flow, as well as the fact that the company was expecting a lackluster quarter due to slowing activity in the U.S. oil fields, among other factors, investors actually reacted positively to the company’s earnings, and the share price briefly jumped in early November. MRC’s ability to generate cash flow should allow it to capitalize on growth opportunities as the broader industrial sector gains momentum again.
H&E Equipment Services: Dividends and Value Prospects Despite Challenges
H&E Equipment Services Today
H&E equipment services
(As of 12/19/2024 5:31 PM ET)
- 52 week range
- $40.92
▼
$66.18
- Dividend yield
- 2.23%
- P/E ratio
- 12.53
- Target price
- $61.25
An important company in the sales and service of construction and industrial equipment and related parts, H&E Equipment Services Inc. NASDAQ: SONG currently has a Buy recommendation 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 stock has been on a long-term growth path for at least five years. In the five years to December 13, 2024, the stock returned more than 70%. This improvement slowed last year, with an increase of just 5% during that time. The stock hit an all-time high of over $65 per share in the spring of 2024, but then fell back for several months and now appears to be heading into the new year with renewed upward momentum.
Like MRC above, H&E reported weaker-than-expected earnings for the latest quarter, including revenue and earnings per share that fell short of analysts’ expectations. However, with annual sales of $1.47 billion, H&E continues to offer an attractive P/S ratio for investors expecting a resurgence in the construction industry in the new year.
DXP Enterprises: high profits and stock price dynamics
DXP Enterprises Today
(As of 12/19/2024 5:31 PM ET)
- 52 week range
- $30.08
▼
$82.33
- P/E ratio
- 20.33
- Target price
- $75.00
Among the stocks on this list is DXP Enterprises Inc. NASDAQ: DXPE in 2024 showed undoubtedly the highest results. Shares of the maintenance, repair and operations products and services company are up 136% in the year to Dec. 13, with most of those gains accumulated during brief gains in March and November.
In both cases, the share price jump was linked to strong earnings performance, highlighting the company’s resilience in the face of broader industry-wide challenges. For example, DXP generated nearly $473 million in sales in the third quarter, up nearly 13% year over year, and adjusted EBITDA improved 19% over the same period. Earnings per share also sharply beat analysts’ expectations.
DXP is in the midst of an aggressive growth campaign, having made several acquisitions in recent months while still managing to generate free cash flow of $24.4 million in the most recent quarter. The company’s performance is led by its Innovative Pumping Solutions and Service Centers segments, both of which look set to continue to outperform in the new year. For investors, the question may be whether DXP has room for further share price growth.
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