HON: 3 Industrial Stocks Positioned for Economic Recovery

The industrial sector is gaining momentum as global economic recovery takes shape, driven by infrastructure investments, onshoring, and increasing manufacturing activity. The adoption of advanced technologies like AI, machine learning, and smart devices is also one of the reasons why industrial stocks are well-positioned for growth.

Amid this backdrop, investors looking to invest in the industrial sector might consider stocks like Honeywell International Inc. (HON), Franklin Electric Co., Inc. (FELE), and The Gorman-Rupp Company (GRC), which are well-positioned in this economic recovery environment.

Massive infrastructure spending initiatives, such as the U.S. Infrastructure Investment and Jobs Act and the Inflation Reduction Act, are directly fueling industrial growth. These projects require heavy investments in construction equipment, transport systems, and manufacturing.

The industrials and services (I&S) sector is expected to see a steady pace of deal activity in the remainder of 2024. The sector is expected to drive Merger and Acquisition (M&A) activity. The rapid pace of technological change continues to propel M&A activity as companies seek to acquire new technologies to enhance their product offerings, improve internal operations, and enter new markets.

Furthermore, the global Industry 4.0 market is projected to reach $482 billion by 2032, exhibiting a CAGR of 20.7%.

As economic recovery strengthens, industrial stocks will likely continue their upward trajectory. Analysts predict stable growth fueled by ongoing infrastructure upgrades, technological innovation, and the green energy revolution.

Considering these favorable market trends, let’s look at the fundamentals of the above-mentioned stocks.

Honeywell International Inc. (HON)

2024 STOCK MARKET OUTLOOK

HON engages in aerospace technologies, building automation, energy and sustainable solutions, and industrial automation businesses globally. It operates through four segments: Aerospace; Honeywell Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions.

On November 22, HON announced the sale of its Personal Protective Equipment (PPE) business to Protective Industrial Products, Inc. (PIP), an Odyssey Investment Partners portfolio company, for $1.325 billion in cash. This transaction will allow HON to simplify and optimize its businesses. Also, it should position HON to continue creating long-term value for shareholders.

On September 27, buoyed by strong financial performance, the company declared a quarterly dividend of $1.13 per share, payable on December 6, 2024.

HON pays an annual dividend of $4.52, which translates to a yield of 1.97% at the current share price. Its four-year average dividend yield is 2.08%. Moreover, the company’s dividend payouts have increased at a CAGR of 5.4% over the past five years.

For the third quarter of 2024, which ended on September 30, HON’s net sales increased 5.6% year-over-year to $9.73 billion, while its Aerospace Technologies segment’s net sales grew 11.8% from the same period last year to $3.91 billion.

Its attributable net income stood at $1.41 billion, while its adjusted EPS for the quarter increased 8.4% year-over-year to $2.58. Also, the company’s free cash flow amounted to $1.72 billion, representing an increase of 10.1% from the last year.

Street expects HON’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase 8.5% and 6.9% year-over-year to $10.24 billion and $2.78, respectively. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.

The stock has gained 19.2% over the past year to close the last trading session at $230.60.

HON’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

HON has a B grade for Growth, Momentum, Stability, and Sentiment. It is ranked #22 out of 79 stocks in the A-rated Industrial – Machinery industry. Click here to access the other HON ratings for Value and Quality.

Franklin Electric Co., Inc. (FELE)

FELE designs, manufactures, and distributes water and fuel pumping systems worldwide. The company operates through three segments: Water Systems; Fueling Systems; and Distribution.

On November 21, the company paid a quarterly dividend of $0.25 per common share. With 30 years of consecutive dividend growth, FELE pays an annual dividend of $1.00, which translates to a yield of 0.92% at the current share price. Its four-year average dividend yield is 0.90%. Moreover, its dividend payouts have increased at CAGRs of 12.6% and 11.5% over the past three and five years, respectively.

On October 23, FELE announced the realigning of Headwater Companies’ Engineered Systems facility in Abernathy to its Global Water Systems segment. This move will allow FELE to increase its investment in water systems product innovation. Also, the realignment is to support the availability of configured-to-order pumping solutions, packaged systems, and after-market re-bowling services for turbines.

FELE’s net sales for the third quarter (ended September 30, 2024) amounted to $531.44 million. It reported a gross profit of $189.66 million, indicating a 3.4% growth from the prior year’s quarter. The company’s attributable net income came in at $54.59 million, and its EPS stood at $1.17.

Analysts expect FELE’s revenue for the first quarter (ending March 2025) to grow 4.3% year-over-year to $480.66 million. However, the consensus EPS estimate of $0.81 for the same period indicates an increase of 16.3% year-over-year.

Shares of FELE have gained 23% over the past year and 14.2% year-to-date to close the last trading session at $110.40.

FELE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It also has a B grade for Momentum, Stability, and Quality. Within the B-rated Industrial – Manufacturing industry, it is ranked #11 out of 35 stocks. Click here to see FELE’s ratings for Growth, Value, and Sentiment.

The Gorman-Rupp Company (GRC)

GRC designs, manufactures, and sells pumps and pump systems internationally. The company’s products include self-priming centrifugal, standard centrifugal, magnetic drive centrifugal, axial and mixed flow, vertical turbine line shaft, submersible, high-pressure booster, rotary gear, diaphragm, bellows, and oscillating pumps.

On October 25, demonstrating its commitment to returning value to shareholders, the company declared the 299th consecutive quarterly dividend of $0.185 per common share, payable December 10, 2024.

GRC pays an annual dividend of $0.74, which translates to a yield of 1.74% at the current share price. Its four-year average dividend yield is 2.07%. Also, the company’s dividend payouts have increased at CAGRs of 5.7% and 4.5% over the past five and three years, respectively.

On August 28, GRC introduced Gorman-Rupp 6400 Series™ end suction centrifugal pumps for flooded suction applications. This launch is cost-effective and durable with maximum versatility.

During the third quarter that ended on September 30, 2024, GRC’s net sales increased marginally year-over-year to $168.18 million. The company’s gross profit came in at $52.66 million, reflecting an increase of 9.4% from the prior year’s quarter. Moreover, its non-GAAP adjusted earnings came in at $12.92 million and $0.49 per share, up 43.9% and 44.1% year-over-year, respectively.

The consensus revenue estimate of $162.84 million for the fiscal fourth quarter (ending December 2024) represents a marginal increase year-over-year. The consensus EPS estimate of $0.45 for the same quarter indicates a 32.4% improvement year-over-year.

Over the past year, the stock has surged 35.7%, closing the last trading session at $43.09.

GRC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

It has an A grade for Sentiment and a B for Momentum and Stability. The stock is ranked #7 out of 79 stocks in the A-rated Industrial – Machinery industry. Click here to access the additional GRC ratings (Growth, Value, and Quality).

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HON shares were trading at $230.46 per share on Tuesday afternoon, down $0.14 (-0.06%). Year-to-date, HON has gained 12.24%, versus a 27.28% rise in the benchmark S&P 500 index during the same period.