2022 has been the most challenging year for investors since 2008. The biggest uncertainty is whether or not the Fed is successful in reducing inflation without tilting the economy into a recession. 

So far, the economy and inflation have proven to be more resilient to the effects of higher rates, while financial assets have proven to be much more sensitive. Thus, we are seeing weakness in stocks and commodities in anticipation of a recession even though a recession hasn’t materialized yet. This also means that we are seeing big oversold bounces and rallies in beaten down, cyclical stocks.

Within the sector, there are some interesting names that are trading at attractive valuations and would outperform even in a recessionary situation. Today’s featured stock – Atkore (ATKR) – should be on the radar of investors as it’s one of the higher-quality industrial stocks. 

Read on to find out why ATKR is our featured stock…

Company Background

ATKR is one of the top industrial suppliers in the US. It manufactures and sells industrial components and products like electrical conduits, metal frames, modular support, and mechanical pipes. 

Throughout its history, the company has grown organically and through acquisitions, becoming a conglomerate of sorts. The company has thrived in recent years due to increased infrastructure spending, construction, and CAPEX. It’s also a beneficiary of inflation as it has pricing power due to its products being essential for projects but being a small part of the overall cost. 

GARP

As an industrial stock, ATKR would certainly decline and underperform if we do get a recession. So far, it should be noted that the sector has evaded a recession. More importantly, there has been no erosion in terms of ATKR’s earnings.

Over the last 12 months, it’s earned $19.40 per share, giving it a very attractive P/E of 4.6. The stock is down about 35% from its all-time highs a couple of months ago. Another remarkable development is that the stock is basically flat over the last 16 months despite earnings increasing by about 60%. 

The company has also benefitted from margin expansion across all of its major units, indicating its ability to capitalize on inflation and that demand remains strong.

Ultimately, the stock is already pricing in some weakness in the industrial sector and could see more downside if the outlook deteriorates. However, it’s clearly one of the top industrial stocks and could outperform if the economy proves to be more resilient than expected.  

POWR Ratings

The POWR Ratings rate ATKR a B which equates to a Buy. B-rated stocks have posted an average annual performance of 21.1% which compares favorably to the S&P 500’s annual performance of 8%.

In terms of component grades, it’s not surprising that ATKR has a B for Growth and Value given its double-digit earnings and revenue growth in addition to a low P/E. It also has an A for Quality due to its strong balance sheet and capable management team. Click here to see ATKR’s complete POWR Ratings.

ATKR shares were unchanged in premarket trading Thursday. Year-to-date, ATKR has declined -15.14%, versus a -20.32% rise in the benchmark S&P 500 index during the same period.

About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. He is the Chief Growth Strategist for StockNews.com and the editor of the POWR Growth and POWR Stocks Under $10 newsletters. Learn more about Jaimini’s background, along with links to his most recent articles. More...

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