The U.S. infrastructure sector is looking at a potential trillion-dollar federal spending initiative, which will be targeted at upgrading the country’s existing infrastructure base. The “once-in-a-generation” investment proposal should be a significant boost to the overall economy. The planned vote to pass the infrastructure package has been delayed due to intraparty disagreements and a lack of support from some Democrats.
However, President Biden and his Democratic caucus intend to wrap up negotiations and pass the bipartisan infrastructure bill and a larger “Build Back Better” package (an ambitious plan to fund meaningful climate action and achieve a carbon-zero electric grid by 2035, create jobs, cut taxes, and lower costs for working families) by the end of the month. When passed, the bill should stimulate growth in the U.S. infrastructure sector.
The potential infrastructure spending opens an attractive opportunity to invest in quality infrastructure stocks, which could generate substantial returns over an extended term, bolstered by the massive government spending. Given this backdrop, we think Dover Corporation (DOV), Regal Rexnord Corporation (RRX), and Crane Co. (CR) could be attractive additions to one’s portfolio, based on their immense growth potential.
Click here to check out our Infrastructure Sector Report for 2021
Dover Corporation (DOV)
DOV provides equipment and components, consumable supplies, aftermarket parts, software and digital solutions, and support services worldwide. Its operating segments are Engineered Products; Fueling Solutions; Imaging & Identification; Pumps & Process Solutions; and Refrigeration & Food Equipment. DOV is headquartered in Downers Grove, Ill.
On October 15, DOV announced its acquisition of LIQAL B.V., a turnkey supplier of liquefied natural gas (LNG) and hydrogen refueling equipment and solutions, and micro liquefaction solutions. LIQAL’s innovation capabilities and proprietary technologies are expected to strengthen DOV’s fueling solutions segment and position the company to support its customers who are actively investing in lower-carbon fuels.
Also this month, DOV collaborated with Shep Digital Solutions, an industry-leading merchandising platform that helps convert fuel-only consumers into multi-product purchasers. Regarding this collaboration, Kendra Keller, Vice President and General Manager of North America at Dover Fueling Solutions, said, “Our recent collaboration with Shep Digital Solutions provides customers who are interested in managing their own media with more options to maximize their promotional and media content initiatives, further engage their customers and drive additional sales in their stores.”
For its third fiscal quarter, ended September 30, DOV’s revenues increased 15% year-over-year to $2.02 billion. Its operating earnings grew 23.5% from its year-ago value to $342.03 million. DOV’s adjusted net earnings came in at $288 million, indicating a 24% rise year-over-year. The company’s adjusted EPS increased 24% year-over-year to $1.98.
The Street expects DOV’s revenues to rise 8% year-over-year to $1.92 billion in the current quarter, ending December 2021. A $1.69 consensus EPS estimate for the current quarter indicates a 9% improvement year-over-year. Also, DOV has an impressive earnings surprise history; it has surpassed the Street’s EPS estimates in each of the trailing four quarters.
DOV has gained 48.9% over the past year and 33% year-to-date to close yesterday’s trading session at $167.91.
It’s no surprise that DOV has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
DOV also has a grade of B for Stability and Quality. Among the 81 stocks in the B-rated Industrial – Machinery industry, DOV is ranked #22. Get additional POWR Ratings for Growth, Value, Momentum, and Sentiment here.
Click here to check out our Industrial Sector Report for 2021
Regal Rexnord Corporation (RRX)
RRX in Milwaukee, Wis., engineers and manufactures industrial powertrain solutions, power transmission components, electronic motors and controls, air moving products, and specialty electronics, serving customers worldwide.
Regal Beloit Corporation (RBC) recently completed its merger with Rexnord PMC, creating Regal Rexnord Corporation (RRX), closing the deal on February 15, 2021. RBC shares began trading under ‘RRX’ from October 5. The company expects this merged business to be faster-growing, higher-margined, and more cash generative. Following the merger, management anticipates revenue generation of approximately $5.0 billion in 2022.
On August 27, RRX announced the addition of its new Century® VGreen Evo™ pool pump motor to its Century® motors lineup. The new motor is among the most energy-efficient pool pump motors in the industry, complying with the efficiency standards of the U.S. Department of Energy. This demonstrates the company’s innovation capabilities in incorporating energy efficiency in its offerings.
RRX’s net sales increased 39.9% year-over-year to $886.90 million in its fiscal second quarter ended July 3. Its gross profit stood at $251.50 million, up 47.7% from the same period last year. Its net income attributable to the company grew 183.3% from its year-ago value to $79.60 million. Its EPS rose 181.2% from the prior-year quarter to $1.94.
A $1.01 billion consensus revenue estimate for its fiscal fourth quarter (ending December 2021) indicates a 30% increase year-over-year. The Street expects the company’s EPS to rise 13.5% from the prior-year quarter to $2.02 in the current quarter. Furthermore, the company surpassed the Street’s EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 48.3% in price to close yesterday’s trading session at $145.82. It also gained 7.9% over the past five days.
Crane Co. (CR)
CR manufactures and sells engineered industrial products in the United States, Canada, the United Kingdom, Continental Europe, and internationally. The Stamford, Conn.-based company’s segments include Aerospace & Electronics; Process Flow Technologies; and Payment & Merchandising Technologies.
On July 26, CR announced its regular quarterly dividend of $0.43 per share for the third quarter of 2021. The dividend was payable on September 8, 2021, to shareholders of record as of the close of business on August 31, 2021.
CR’s net sales increased 24% year-over-year to $796 million in the second quarter, ended June 30. Its operating profit grew 377% from its year-ago value to $137 million, while net income attributable to common shareholders improved 834.5% year-over-year to $138.30 million. The company’s EPS from continuing operations increased 713% year-over-year to $1.87.
Analysts expect CR’s revenues to increase 4% year-over-year to $758.42 million in the current quarter, ending December 2021. A $1.32 consensus EPS estimate for the current quarter indicates a 32% rise from the same period last year. CR has a notable earnings surprise history; it beat the consensus EPS estimates in three out of the trailing four quarters.
Shares of CR have gained 71.5% in price over the past year and 19.2% year-to-date.
CR’s strong fundamentals are reflected in its POWR Ratings. CR has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system.
The stock also has a B grade for Growth, Value, Stability, and Quality. It is ranked #2 in the Industrial – Machinery industry. To see additional CR ratings for Sentiment and Momentum, click here.
Click here to check out our Infrastructure Sector Report for 2021
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DOV shares were trading at $170.92 per share on Wednesday morning, up $3.01 (+1.79%). Year-to-date, DOV has gained 36.76%, versus a 22.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...
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