5 Industrial Stocks That Popped More Than 50% In 2017

In terms of market performance, 2017 has been a significantly good year for the United States. Major stock indexes of the world’s largest economy performed well including the S&P 500, Nasdaq Composite and NYSE Composite, yielding healthy year-to-date (YTD) returns of 19.8%, 29.4% and 15.3%, respectively. Also, the country’s GDP improved 3% in the third quarter of 2017.

We believe that the Trump government’s promised growth policies, especially the proposed $1 trillion spending on infrastructure improvement, has been one of the primary forces behind the rally. Other tailwinds include a strengthening housing and commercial construction markets as well as steady growth in new job additions. Moreover, the Federal Reserve hiking the interest rate three times this year — with the latest hike of 0.25% in December — points toward a strengthening economy.

On the global front, the picture looks quite promising as well. In October, the International Monetary Fund raised its outlook for the global economy by 10 basis points (bps), anticipating the world output to grow 3.6% in 2017. The improvement will be supported by 2.2% rise in advanced economies and 4.6% growth in emerging nations. Global output is projected to increase 3.7% in 2018, roughly 10 bps above the previous projection.

How Industrial Companies Fared YTD?

Industrial Products — one of the 16 Zacks sectors — has yielded 23% return year to date, outperforming the S&P 500 and NYSE Composite. It is currently at the top 6%, holding the first position among all other sectors.

In the third quarter of 2017, Industrial Products companies collectively recorded 19.6% year-over-year growth in earnings and 4.8% increase in revenues. Margins for these stocks grew 1.2% in the quarter.

Notably, earnings for the S&P 500 companies grew 6.7% year over year in the third quarter while revenues improved 5.9%.

Machinery stocks are broadly grouped under this sector.

Stocks Yielding >50% Return YTD

We have zeroed in on five industrial machinery stocks that popped more than 50% so far in 2017. In addition to the share price performance, other factors that were used for picking our choices were favorable Zacks Rank Zacks Rank of #1 (Strong Buy) and market capitalization of more than $1 billion. You can see the complete list of today’s Zacks #1 Rank stocks here.

H&E Equipment Services, Inc. (NASDAQ:HEES) : The company, with a $1.4 billion market capitalization, is an integrated equipment services company in the United States. It is engaged in renting and providing construction and industrial equipments as well as related parts and services. The company is poised to gain traction from healthy end-market demand, especially from the non-residential construction markets. Also, acquisitions and other expansionary initiatives will support growth.

The company has yielded roughly 70.9% return year to date.

It delivered better-than-expected results in two of the first three quarters of 2017. The stock’s Zacks Consensus Estimate is currently pegged at $1.61 for 2017, representing year-over-year growth of 53.3%. Earnings in the next three to five years are projected to grow 15.6%.

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The Manitowoc Company, Inc. (NYSE:MTW) : The company, with a $1.4 billion market capitalization, designs, manufactures, markets and supports a comprehensive line of crawler cranes, mobile telescopic cranes, tower cranes and boom trucks. Its major markets include commercial and residential construction, infrastructure, power & utilities, industrial, petrochemical and manufacturing. In the years ahead, the company is anticipated to benefit from its restructuring initiatives, product innovation and strengthening of distribution network.

Its shares have rallied roughly 68.3% year to date.

Financial results were better-than-expected in two of the first three quarters of 2017. Bottom-line expectations are anticipated to grow 89.6% year over year in 2017.

Caterpillar Inc. (NYSE:CAT) : The company, with market capitalization of $89.8 billion, primarily serves customers in the construction, road building, mining, forestry, energy, transportation and material-handling industries. It stands to benefit from the strengthening U.S. construction market, improved international demand and order activities and strict cost discipline.

Year to date, its shares have gained 61.5%.

It delivered better-than-expected results in two of the first three quarters of 2017. The stock’s Zacks Consensus Estimate is currently pegged at $1.61 for 2017, representing year-over-year growth of 53.3%. Earnings in the next three to five years are projected to grow 15.6%.

Kennametal Inc. (NYSE:KMT) : The company, with a $3.9 billion market capitalization, is a manufacturer, marketer and distributor of high-speed metal cutting tools, tooling systems and wear-resistant parts. Its products are used in the aerospace, automotive, machine tool and farm machinery industries, construction, coal mining, quarrying and oil and gas exploration industries. Its cost-saving initiatives, along with a diversified customer base and its commitment toward rewarding its shareholders, give it a competitive edge.

Year to date, its shares have rallied 53.7%.

It came up with better-than-expected results in first-quarter fiscal 2018 (ended September 2017). The Zacks Consensus Estimate of $2.54 for fiscal 2018 (ending June 2018) is predicted to grow 67.4% year over year. Earnings in the next three to five years are predicted to expand 8.3%.

Sun Hydraulics Corp. (NASDAQ:SNHY) : The company, with $1.6 billion market capitalization, caters to customers in the industrial, mobile hydraulics markets and fluid power industry. It is poised to gain from its existing product portfolio, new product launches, improving operational efficiency and promotional activities. Per its Vision 2025 plan, it aims to generate more than $1 billion in revenues and achieve high profitability.

Year to date, the company’s shares have yielded 51.5% return.

Its financial performance exceeded expectations in the first three quarters of 2017. The Zacks Consensus Estimate of $1.65 for 2017 is projected to grow 89.7%.

Seeing the performance of these stocks so far in 2017 and their growth potential, we can deduce that these companies still have lots to deliver and hence, can be of interest to investors seeking exposure to the industrial sector.

What’s in Store for Industrial Machinery Stocks Going Forward?

We believe that industrial machinery stocks in the United States will gain traction from a strengthening domestic economy and healthy global growth backdrop. Continuous advancements in technologies applied in agriculture and mining industries will keep demand strong for farming and mining machineries.

Moreover, healthy growth in demand for packaged foods and beverages across nations, especially in emerging countries, will require the use of highly sophisticated food processing and packaging equipments. Further, rise in demand for better infrastructure and residential and non-residential spaces will need heavy construction machineries.

Some indicators, as discussed below, point toward favorable conditions for industrial machinery companies in the United States.

Industrial production — one of the leading economic indicators for industrial machinery stocks measuring the level of output of manufacturing, mining and utilities sectors in the United States — increased 3.4% year over year in November. The improvement was driven by impressive growth in mining, manufacturing and utilities output.

Also, per the U.S. Census Bureau report, new orders for U.S.-manufactured machinery increased 7.1% in the first 10 months of 2017 led by growth in orders for construction, mining, industrial, material handling and other machineries.

Per the Zacks Earnings Trends report dated Dec 19, earnings for the Industrial Products sector will likely grow 21.8% year over year in the fourth quarter. Revenues are predicted to increase 11.7% and margins will likely improve 0.7%.

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Kennametal Inc. (KMT): Free Stock Analysis Report

Caterpillar, Inc. (CAT): Free Stock Analysis Report

Manitowoc Company, Inc. (The) (MTW): Free Stock Analysis Report

H&E Equipment Services, Inc. (HEES): Free Stock Analysis Report

Sun Hydraulics Corporation (SNHY): Free Stock Analysis Report

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