As the global economy gradually reopens, infrastructure-related activities—such as building and repairing bridges, roads and tunnels—are expected to increase markedly. Investors are taking note of this and increasingly betting on the infrastructure space. This is evident from iShares U.S. Infrastructure ETF’s (IFRA) 16.9% returns over the past three months compared to SPDR S&P 500 ETF Trust (SPY) 8.8% gains.
The infrastructure sector is also expected to receive a major boost from President Joe Biden’s proposed $2 trillion-plus infrastructure spending.
So, we think it wise to bet on Federal Signal Corporation (FSS) and Columbus McKinnon Corporation (CMCO). These companies are not necessarily making headlines, but we expect them to gain significantly in the coming months by leveraging their strong business models.
Federal Signal Corporation (FSS)
FSS designs, manufactures, and supplies a suite of products and integrated solutions for municipal, governmental, industrial, and commercial customers internationally. It operates through two segments: Its Environmental Solutions Group, and Safety and Security Systems Group. It offers a wide range of products, including street sweepers, sewer cleaners, industrial vacuum loaders, safe-digging trucks, road-marking and line-removal equipment, trailers, and industrial signaling equipment.
On February 18,FSS completed the acquisition of OSW Equipment & Repair, LLC., which also includes the operations of Northend Truck Equipment. This should help the company expand its geographic market reach.
FSS’ net sales for the fourth quarter, ended December 31, 2020, came in at $294.80 million compared to $279.80 in the third quarter (ended September 30, 2020). Its $75,90 million gross profit for the quarter compares to $72.60 million in the previous quarter. Its $0.44 adjusted EPS surpassed the consensus estimate by 7.3%. Also, its net cash generated from operations came in at $57 million, up 27% year-over-year.
For the quarter ending June 2021, analysts expect FSS’ EPS and revenue to increase 16.7% and 16.4%, respectively, year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 47.3% over the past year and closed yesterday’s trading session at $41.30.
FSS’ POWR Ratings reflect this promising outlook. The company has a B overall rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Stability, Sentiment, and Quality. Within the A-rated Industrial – Services industry, FSS is ranked #22 of 84 stocks.
To see the additional POWR Ratings for FSS (Growth, Value, and Momentum), click here.
Columbus McKinnon Corporation (CMCO)
CMCO designs, manufactures, and markets intelligent motion solutions that help move, lift, position, and secure materials worldwide. It offers material handling equipment such as electric and air hoists, trolleys, crane systems rigging equipment and power fluid transfer technology. The company offers its products to end-users, distributors, private companies, engineering procurement contractors, crane builders, integrators of factory production systems, and original equipment manufacturers (OEMs).
On April 7, CMCO completed its acquisition of Dorner Manufacturing Corporation. David Wilson, the company’s President and CEO, said “The acquisition of Dorner significantly advances our growth objectives and strategy by providing a new platform in the specialty conveying space, while leveraging our combined leadership position to create greater scale as a preeminent provider of intelligent motion solutions for material handling.”
CMCO’s net sales were negatively affected by the COVID-19 pandemic, but it increased 5.5% sequentially to $166.55 million for fiscal 2021 third quarter, ended December 31, 2020. The company’s net income came in at $6.59 million for the quarter compared to net loss of $4.10 million in its fiscal year 2021 second quarter. Moreover, its non-GAAP EPS of $0.26 surpassed the Street’s estimate by 62.5%.
Analysts expect CMCO’s EPS and revenue to increase 104.8% and 25.5%, respectively, year-over-year in its fiscal year 2022. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has gained 120.2% over the past year and closed yesterday’s trading session at $53.57.
CMCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B grade for Growth, Stability, and Quality.
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FSS shares were unchanged in after-hours trading Tuesday. Year-to-date, FSS has gained 24.68%, versus a 12.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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