President Joe Biden has been touting the need for modern infrastructure since his election campaign. He has advocated the need for modern and sustainable infrastructure to pull the economy out of recession as well as make the country more competitive with respect to the global economy. Biden has outlined a plan to invest $1.30 trillion in the country over the next ten years, catering to affordable housing infrastructure and adaptive infrastructure for sustainable development.
With such substantial infrastructure spending, the US economy is expected to rebound quickly. The country’s gross domestic product (GDP) is expected to register a growth of 4.2% between 2020 and 2024, and 2.9% between 2020 and 2030. Hence, I expect companies like Otis Worldwide Corporation (OTIS) and Graco Inc. (GGG) to significantly benefit in the long run.
Otis Worldwide Corporation (OTIS)
Based in Connecticut, OTIS is the world’s leading elevator and escalator manufacturing, installation and servicing company. It operates through two segments — New Equipment and Service. The company sells its products directly to customers, as well as through agents and distributors globally.
Earlier this month, OTIS was selected to support Canada’s critical infrastructure segment as the country is expanding its public transportation. Otis will supply hundreds of elevators and escalators for six distinct projects across Toronto, Montreal, and Ottawa. This would substantially enhance OTIS’ revenues.
Last December, OTIS achieved a noteworthy milestone, wherein its flagship Gen2 elevator has sold over 1 million units. The Gen2 elevator has made a lasting impact on the global building industry by showcasing the company’s commitment to sustainable technology.
OTIS’ fourth quarter results reflected the resiliency of its business model and strength of the long-term strategy. The company’s net sales increased 4.2% year-over-year to $3.49 billion in the fourth quarter that ended December 31, 2020. Its adjusted operating profit increased 7.6% from the year ago value to $509 million, while net income improved 15.1% to $251 million over the same period.
Analysts expect OTIS’ revenues to rise 6% year-over-year to $3.14 billion in the current quarter ending March 31, 2021. The consensus EPS estimate of $0.62 in the current quarter indicates a 3.3% rise from the year-ago value. The company has an impressive earnings surprise history; it has beat the Street EPS estimates in each of trailing four quarters. The stock has gained 28.6% over the past nine months.
OTIS’ strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by taking into account 118 different factors with each factor weighted to an optimal degree.
The stock has an overall rating of B, which equates to Buy in our proprietary rating system. OTIS also has a Grade of B for Growth, Stability, and Quality. Of the 89 stocks in the A-rated Industrial – Machinery industry, OTIS is ranked #13.
In total, we rate OTIS on eight different levels. Beyond what we stated above, we also have given OTIS grades for Momentum, Value and Sentiment. Get all of OTIS’s ratings here.
Graco Inc. (GGG)
Based in Minneapolis, GGG supplies technology and expertise for the management of fluids in both industrial and commercial applications. The company designs, manufactures, and markets systems and equipment to move, measure, control, dispense, and spray fluid and powder materials. GGG operates through three segments: Industrial, Process, and Contractor.
Earlier this month, GGG purchased approximately 100 acres of undeveloped land in Dayton, Minnesota. The land will support GGG’s sustained growth of operations by allowing two of its three business divisions currently operating in Minneapolis to relocate.
On January 21, 2021, GGG launched the new SaniSpray HPTM 20 Cordless Electrostatic Airless Sprayer. This product has powerful airless and electrostatic spraying capabilities which provides ultimate flexibility and portability to quickly handle every disinfecting job. This product is expected to attract a large number of potential customers.
GGG’s net sales increased 14% year-over-year to $470.30 million in the fiscal fourth quarter that ended December 25, 2020. This was primarily due to improving industrial demand and continued strength in the Contractor segment. Its operating earnings increased 27% from the year ago value to $132.10 million, while net earnings improved 35% to $114.7 million over the same period.
Analysts expect GGG’s revenues to rise 14.2% year-over-year to $426.77 million in the current quarter ending March 31, 2021. The consensus EPS estimate of $0.5 in the current quarter indicates a 31.6% rise from the year-ago value. The company has an impressive earnings surprise history, as it has beat the Street EPS estimates in three out of the trailing four quarters. The stock has gained 60% over the past nine months.
It’s no surprise that GGG has an overall rating of B, which translates to Buy in our POWR Ratings system. GGG has a grade of B for Sentiment and Stability, and an A for Quality. In the same industry, it is ranked #23.
Click here to see the additional POWR Ratings for GGG (Momentum, Value, and Growth).
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OTIS shares were trading at $63.15 per share on Tuesday afternoon, down $0.78 (-1.22%). Year-to-date, OTIS has declined -6.23%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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