Even though the economy is gradually recovering, high material prices and supply chain issues continue to impact the manufacturing industry. According to Trading Economics, the IHS Markit US Manufacturing PMI came in at 59.2 in October 2021, down slightly from 60.7 in September 2021.
However, rapid vaccinations are helping manufacturers return to full operational capacity. Ryan Sweet, a senior economist at Moody’s Corporation’s (MCO) Moody’s Analytics, said, “Factory orders continue to climb, a good sign for manufacturing.”
Against this backdrop, we think it could be wise to scoop quality manufacturing stocks The Timken Company (TKR), Hillenbrand, Inc. (HI), Johnson Electric Holdings Limited (JEHLY), and Vishay Precision Group, Inc. (VPG). They are currently trading below their 52-week price highs but have significant upside potential.
The Timken Company (TKR)
TKR is a global leader in engineered bearings and power transmission products. It is based in North Canton, Ohio, and operates in two segments, Mobile Industries, and Process Industries. The company also offers aftermarket sales and service needs through a network of authorized industrial distributors and provides repair and service for bearings and gearboxes.
On August 20, TKR acquired Intelligent Machine Solutions, an industrial robotics and automation solutions manufacturer. The acquisition expands and complements TKR’s Rollon linear motion product range with larger and heavy-duty applications, such as seventh-axis robotic transfer units (RTUs) and gantry systems.
TKR’s net sales increased 32% year-over-year to $1.06 billion in the second quarter, ended June 30, 2021. The company’s non-GAAP adjusted net income increased 37.8% year-over-year to $106.10 million. Also, its adjusted EPS rose 34.3% year-over-year to $1.37.
For its fiscal year 2021, analysts expect TKR’s EPS and revenue to be $4.94 and $4.09 billion, respectively, representing a20.5% and 16.5% increase year-over-year. The stock has gained 25.8% in price over the past year to close yesterday’s trading session at $71.16. It is currently trading 23% below its 52-week high of $92.39, which it hit on May 10, 2021.
TKR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
TKR has a B grade for Value, Momentum, and Quality. In the 41-stock, A-rated Industrial -Manufacturing industry, it is ranked #11. In addition to the POWR Rating grades we’ve stated above, one can see TKR’s ratings for Growth, Stability, and Sentiment here.
Hillenbrand Inc. (HI)
Batesville, Ind.-based diversified industrial company HI operates through three segments: Advanced Process Solutions; Molding Technology Solutions; and Batesville. Its Advanced Process Solutions segment designs, engineers, manufactures, markets, and services process and material handling equipment and systems. Its Molding Technology Solutions segment offers injection molding and extrusion equipment, hot runner systems, and mold bases.
On October 5, HI completed its divestiture of its TerraSource Global business. The company’s President and CEO, Joe Raver, said, “We are pleased to announce this transaction, which, in combination with two other divestitures earlier this year, represents a key strategic milestone achieved. Last year we announced our intention to streamline our portfolio, and we have executed our plan, enabling greater focus on growing our platforms and delivering shareholder value.”
For its fiscal third quarter, ended June 30, 2021, HI’s revenue increased 14% year-over-year to $695 million. Its adjusted net income increased 5.9% year-over-year to $65 million, while its adjusted EBITDA increased 4% to $126 million. Also, its adjusted EPS increased 5% year-over-year to $0.85.
Analysts expect HI’s EPS and revenue to be $3.69 and $2.84 billion, respectively, in fiscal 2021, representing a 43% and 12.9% year-over-year rise. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 54.34% in price to close yesterday’s trading session at $45.02. It is now trading 14.8% below its 52-week high of $52.84, which it hit on March 18, 2021.
It’s no surprise that HI has an overall A rating, which translates to a Strong Buy in our POWR Rating system. HI has an A grade for Value and a B grade for Sentiment and Quality.
Johnson Electric Holdings Limited (JEHLY)
Headquartered in Sha Tin, Hong Kong, JEHLY is a global leader in electric motors, actuators, motion subsystems, and related electro-mechanical components. It serves a broad range of industries, including automotive, building automation, home technologies, medical devices, power tools, and lawn & garden.
On May 31, JEHLY acquired E. Zimmermann GmbH through its subsidiary Stackpole International. With the acquisition, JEHLY intends to broaden its product offering in the niche market of automotive differential housings and add unique machining expertise to its operations.
JEHLY’s sales increased 70% year-over-year to $877 million in its fiscal first quarter, ended June 30, 2021. Excluding currency movements and acquisitions, JEHLY’s sales increased 61% year-over-year to $831 million. Positive foreign exchange rate movements accounted for $45 million addition to its sales for the quarter.
Over the past year, the stock has gained 21.2% in price to close yesterday’s trading session at $22.91. It is trading 26% below its 52-week high of $28.87, which it hit on February 25, 2021.
JEHLY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. It has a B grade for Value and Stability.
Vishay Precision Group Inc. (VPG)
VPG is a designer, manufacturer, and marketer of resistive foil technology, sensors, and sensor-based systems to niche industrial applications. The Malvern, Pa., company operates through three segments: Foil Technology Products; Force Sensors; and Weighing and Control Systems.
On June 1, 2021, VPG acquired Diversified Technical Systems. VPG’s CEO, Ziv Shoshani, said, “DTS not only adds complementary technology to our platform, but it brings unique engineering capabilities centered on miniaturized data acquisition and systems integration with sensor technology for critical testing applications.”
VPG’s revenues increased 27.4% year-over-year to $75.30 million in the second quarter, ended July 3, 2021. The company’s non-GAAP adjusted net earnings increased 86% year-over-year to $6.70 million. Its non-GAAP adjusted EPS rose 81.5% year-over-year to $0.49, while its adjusted operating income increased 85.3% year-over-year to $9.20 million.
For fiscal 2021, analysts expect VPG’s EPS and revenue to increase 40.9% and 16.6% year-over-year to $1.86 and $314.67 million, respectively. In addition, it surpassed Street EPS estimates in three of the trailing four quarters. The stock has gained 42.1% in price over the past year to close yesterday’s trading session at $34. It is trading 16.8% below its 52-week high of $39.71, which it hit on August 18, 2021.
VPG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has an A grade for Sentiment, and a B grade for Value and Stability. It is ranked #10 in the Industrial -Manufacturing industry. Click here to see the additional POWR ratings for VPG (Growth, Momentum, and Quality).
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TKR shares were trading at $71.16 per share on Friday morning, down $0.00 (0.00%). Year-to-date, TKR has declined -6.95%, versus a 23.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...
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