The industrial sector is poised to benefit significantly from the ongoing manufacturing resurgence, driven by factors like reshoring, increased investments in automation, and technological advancements. Given this backdrop, it could be wise to add fundamentally strong industrial stocks, such as The Gorman-Rupp Company (GRC), Franklin Electric Co., Inc. (FELE), and TE Connectivity plc (TEL).

The rising emphasis on adopting industry 4.0 solutions and services that help in using modern technology in everyday manufacturing is estimated to favor the growth of the global smart manufacturing market. The smart manufacturing market is estimated to grow at a CAGR of 21.3% by 2037.

Moreover, major infrastructure spending programs, like the U.S. Infrastructure Investment and Jobs Act and the Inflation Reduction Act, are driving industrial expansion.

Additionally, the U.S. manufacturing sector contributes $2.65 trillion to the U.S. economy, employs nearly 13 million American workers, and accounts for 10.3 percent of the nation’s GDP. This further bolsters the outlook for the industrial stocks.

So, let us dive deep into the fundamentals of three industrial stocks, starting with #3.

Stock #3: The Gorman-Rupp Company (GRC)

GRC designs, manufactures, and sells pumps and related equipment for their use in water, wastewater, construction, dewatering, industrial, petroleum, original equipment, agriculture, fire suppression, heating, ventilation, air conditioning, military, and other liquid-handling applications.

The stock’s trailing-12-month EBITDA margin of 17.85% is 27.7% higher than the industry average of 13.98%. Similarly, its 13.55% trailing-12-month EBIT margin is 29.3% above the industry average of 10.48%. 

GRC’s net sales increased marginally year-over-year to $168.18 million during the third quarter that ended September 30, 2024. Its gross profit grew 9.4% from the year-ago value to $52.66 million. The company’s operating income of $23.88 million indicates an improvement of 9.2% from the prior year’s quarter.

In addition, the company’s non-GAAP adjusted earnings amounted to $12.92 million or $0.49 per share, reflecting growth of 43.9% and 44.1% from the previous year’s quarter, respectively. Its adjusted EBITDA increased 5.1% from the year-ago value to $30.03 million.

Street expects GRC’s revenue and EPS for the fiscal fourth quarter (ending December 2024) to increase 1.4% and 32.4% year-over-year to $162.84 million and $0.45, respectively.

The stock has gained 7.3% over the past year to close the last trading session at $38.50.

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

GRC has an A grade for Sentiment and a B for Momentum, Value, and Stability. It is ranked #5 out of 79 stocks in the A-rated Industrial – Machinery industry. Click here to access the other GRC ratings for Growth and Quality.

Stock #2: Franklin Electric Co., Inc. (FELE)

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

The stock’s trailing-12-month EBITDA margin of 15.29% is 9.4% higher than the industry average of 13.98%. Similarly, its 9.22% trailing-12-month net income margin is 40.9% above the industry average of 6.55%.

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. The consensus EPS estimate of $0.81 for the same period indicates an increase of 16.3% year-over-year.

The stock has gained 1.2% over the past year to close the last trading session at $97.85.

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

FELE has a B grade for Quality, Momentum, Growth, and Stability. It is ranked #4 out of 35 stocks in the same industry.

In addition to the POWR Ratings we’ve stated above, we also have FELE ratings for Value and Sentiment. Get all FELE ratings here.

Stock #1: TE Connectivity plc (TEL)

Based in Ballybrit, Ireland, TEL manufactures and sells connectivity and sensor solutions. The company has three segments: Transportation Solutions; Industrial Solutions; and Communications Solutions. It offers antennas, application tooling, cable assemblies, connectors, energy and power, fiber optics, heat shrink tubing, and more.

The stock’s trailing-12-month EBIT margin of 18.53% is 243.9% higher than the industry average of 5.39%. Similarly, its 10.95% trailing-12-month ROTC is 251.1% above the industry average of 3.12%.

For the fiscal 2024 fourth quarter that ended September 27, TEL’s net sales increased marginally year-over-year to $4.07 billion. Its adjusted operating income grew 8% from the year-ago value to $755 million.

The company’s adjusted income from continuing operations increased by 5.5%, reaching $595 million, while adjusted EPS from continuing operations rose 9.6% to $1.95 compared to the same quarter last year.

Street expects TEL’s revenue and EPS for the fiscal 2025 first quarter ending December 2024 to increase 2.1% and 2.6% year-over-year to $3.91 billion and $1.89, respectively. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.

Shares of TEL have surged 2.2% over the past month, closing the last trading session at $144.11.

TEL’s POWR Ratings reflect its bright outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. 

TEL has a B grade for Value, Stability, Quality, and Sentiment. It is ranked #2 in the same industry. Click here to see the additional ratings for TEL (Growth and Momentum).

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TEL shares were trading at $145.50 per share on Tuesday afternoon, up $1.39 (+0.96%). Year-to-date, TEL has gained 5.34%, versus a 27.70% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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