Despite macroeconomic uncertainty, the industrial sector remained resilient thanks to consistent demand and strong performance. So, investors interested in investing in industrial stocks can consider adding BHP Group Limited (BHP - Get Rating), Sterling Infrastructure, Inc. (STRL - Get Rating) and Matthews International Corporation (MATW - Get Rating) to their portfolios now.

Before delving deeper into their fundamentals, let’s discuss what’s happening in the industrial sector.

Industrial production increased by 0.2% in November 2023. Moreover, the Industrial Production Index came in at 102.7 in the United States, and a value of over 100 shows positive production performance.

Additionally, Industry 4.0, or the fourth industrial revolution, is revolutionizing sectors using advanced technologies such as artificial intelligence, machine learning, and the internet of things, increasing productivity and decision-making. The global industry 4.0 market is expected to reach $634.94 billion by 2032, increasing at a CAGR of 18.7%.

Furthermore, the global industrial machinery market is expected to grow at a 5.3% CAGR until 2032. Investors’ interest in industrial stocks is evident from the Industrial Select Sector SPDR ETF’s (XLI) 9.2% gains over the past three months.

Let’s delve deeper into the fundamentals of the stocks.

BHP Group Limited (BHP - Get Rating)

BHP, headquartered in Melbourne, Australia, operates globally through segments including Copper; Iron Ore; and Coal. It engages in mining activities for metals like copper, silver, zinc, molybdenum, uranium, gold, iron ore, and coal. It also participates in the mining and refining of nickel and potash development activities.

BHP’s trailing-12-month EV/EBITDA multiple of 5.81 is 30.2% lower than the industry average of 8.33. Its trailing-12-month EV/EBIT multiple of 7.13 is 44.7% lower than the industry average of 12.89.

BHP’s trailing-12-month net income margin of 23.85% is 306.2% higher than the industry average of 5.87%. Its trailing-12-month levered FCF margin of 16.75% is 306.8% higher than the industry average of 4.12%.

For the quarter that ended September 30, 2023, BHP’s copper production reported a 11.4% year-over-over growth to 457 Kt. The company’s production of iron ore, metallurgical coal, and nickel came in at 63.2 Mt, 5.6 Mt, and 20.2 Mt.

Analysts expect BHP’s revenue to increase 4.1% year-over-year to $56.01 billion for the year ending June 2024. Its EPS is expected to come in at $2.99 for the same period. The stock has gained 11.8% over the past three months to close the last trading session at $63.26.

BHP’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

BHP also has a B grade for Stability, Sentiment and Quality. It is ranked #7 out of 34 stocks in the Industrial – Metals industry. Click here for the additional POWR Ratings for Value, Growth and Momentum for BHP.

Sterling Infrastructure, Inc. (STRL - Get Rating)

STRL engages in the e-infrastructure, transportation, and building solutions primarily in the Southern United States, the Northeastern and Mid-Atlantic United States, the Rocky Mountain states, California, and Hawaii.

STRL’s trailing-12-month EV/Sales multiple of 1.21 is 32.3% lower than the industry average of 1.78. Its trailing-12-month Price/Sales multiple of 1.20 is 13.9% lower than the industry average of 1.40.

STRL’s trailing-12-month levered FCF margin of 17.29% is 187.6% higher than the 6.01% industry average. Its trailing-12-month ROCE of 23.34% is 89.8% higher than the 12.30% industry average.

STRL’s revenues came in at $560.35 million for the fiscal third quarter that ended September 30, 2023, up 13.7% year-over-year. Also, its gross profit increased 15.6% year-over-year to $91.87 million. Its net income and net income per share from continuing operations came in at $39.35 million and $1.26, up 33.3% and 29.9% year-over-year, respectively.

STRL’s revenue is expected to increase 10.4% year-over-year to $2.22 billion for the year ending December 2023. The company’s EPS for the same period is expected to grow 13.1% to $4.74. It surpassed EPS estimates in all four trailing quarters. Shares of STRL has gained 136.4% over the past year to close the last trading session at $78.40.

STRL’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.

STRL has a B grade for Growth, Momentum and Quality. It ranks #8 out of 79 stocks in the B-rated Industrial – Services industry. Click here to access additional STRL ratings (Value, Stability and Sentiment).

Matthews International Corporation (MATW - Get Rating)

MATW provides brand solutions, memorialization products, and industrial technologies worldwide. It operates through three segments: Memorialization; Industrial Technologies; and SGK Brand Solutions.

MATW’s trailing-12-month non-GAAP P/E multiple of 11.55 is 38.9% lower than the industry average of 18.91. Its trailing-12-month Price/Sales multiple of 0.56 is 60.2% lower than the industry average of 1.40.

MATW’s trailing-12-month gross profit margin of 31.36% is 3.6% higher than the 30.28% industry average. Its trailing-12-month asset turnover ratio of 1x is 24.2% higher than the 0.80x industry average.

For the fourth quarter that ended September 30, 2023, MATW’s revenue came in at $480.20 million, up 5.1% year-over-year. The company’s adjusted EBITDA increased 10.7% over the prior-year quarter to $61.90 million. In addition, its non-GAAP net income increased 18.4% year-over-year to $30.30 million. Also, its non-GAAP EPS came in at $0.96, representing an increase of 17.1% year-over-year.

Street expects MATW’s revenue to increase 2.1% year-over-year to $1.92 billion for the fiscal year ending September 2024. The company’s EPS for the same period is expected to grow 4.3% to $3.01. It surpassed EPS estimates in three of four trailing quarters. Over the past month the stock has gained marginally to close the last trading session at $34.70.

MATW has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Growth, Stability, Value and Sentiment. It is ranked #8 out of 35 stocks in the B-rated Industrial – Manufacturing industry.

Beyond what is stated above, we’ve also rated MATW for Momentum and Quality. Get all MATW ratings here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

BHP shares were trading at $61.41 per share on Tuesday afternoon, down $1.85 (-2.92%). Year-to-date, BHP has declined -10.10%, versus a -0.13% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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