Technological advancements and the rising demand in commercial and residential markets should keep the industrial sector buoyed in the upcoming times. Therefore, quality industrial stocks Holcim Ltd (HCMLY), CRH plc (CRH), and CEMEX (CX) could be wise portfolio additions this month. Read on….
Despite macroeconomic headwinds and associated recessionary fears, the industrial sector is poised to maintain its resilience with the rising adoption of cutting-edge technology and innovative machines.
Given this backdrop, let us explore some industrial stocks, Holcim Ltd (HCMLY), CRH plc (CRH), and CEMEX, S.A.B. de C.V. (CX), which are expected to maintain their upward trajectory in the near term.
Geopolitical turmoil, sky-high prices, supply-chain issues, and banking system failures have impacted the industrial sector. However, with the rising adoption of modernized technology, the industrial sector could thrive in the near term. Despite all odds, the engineering and construction industry has stepped out and set new standards.
To meet customer requirements, construction firms are raising their capital investments and focusing more on research & development (R&D) operations and higher-quality products. As per a report by JLL, construction deliveries in the United States in 2023 are projected to show a 5.9% increase. JLL also projects a 5% gain in construction activity.
Moreover, due to the increase in demand for predictive maintenance services and the rise in the complexity of equipment, the industrial services market is projected to reach $45.34 billion by 2028, growing at a CAGR of 5.5%.
Furthermore, the global construction materials market is projected to hit around $3.52 trillion by 2032, poised to grow at a CAGR of 11% from 2023 to 2032, driven mainly by the increasing use of construction materials in the commercial and residential sectors.
Given this backdrop, fundamentally strong industrial stocks HCMLY, CRH, and CX could be solid buys now.
Holcim Ltd (HCMLY)
Headquartered in Zug, Switzerland, HCMLY operates as a building materials and solutions company worldwide. The company also engages in retail activities and waste management services.
Earlier this month, HCMLY acquired PASA, a leading producer of roofing and waterproofing solutions in Mexico and Central America, with pro forma net sales of $38 million.
This acquisition should expand HCMLY’s roofing and waterproofing portfolio and strengthen its business footprint in the region. Furthermore, it is expected to deliver more value for its customers from an innovation, performance, and sustainability perspective.
In addition, HCMLY’s successful transformation is evident from the five acquisitions that were added to the solutions & products business segment and seven other acquisitions in the aggregates and ready-mix concrete segment for the quarter.
HCMLY’s annual dividend translates to a 3.39% dividend yield on the current price level. Its four-year average dividend yield is 4.07%. Its dividends have grown at 2.5% and 2.1% CAGRs over the past three and five years, respectively.
HCMLY’s trailing-12-month gross profit margin of 41.78% is 47.2% higher than the industry average of 28.39%. Similarly, its trailing-12-month ROCE and ROTA of 11.68% and 5.74% are 8.8% and 22.6% higher than industry averages of 10.74% and 4.68%, respectively.
For the fiscal first quarter of 2023, HCMLY’s net sales stood at CHF5.73 billion ($6.35 billion), having an organic growth of 8%. Its recurring EBITDA stood at CHF970 million ($1.08 billion), while recurring EBIT stood at CHF493 million ($546.56 million), having an over-proportional organic growth of 12% for the same quarter.
For the fiscal year 2022, HCMLY’s net sales and recurring EBIT stood at CHF29.19 billion ($32.50 billion) and CHF4.75 billion ($5.29 billion), up 8.8% and 3% year-over-year, respectively. Moreover, its EPS came in at CHF5.48, up 46.9% from the prior-year period.
For the fiscal year 2023, the company expects its organic net sales growth to be above 6% and organic recurring EBIT growth above 10%. Its free cash flow is expected to come in at around CHF3 billion.
Analysts expect HCMLY’s EPS for the fiscal year ending 2023 to increase 59.9% year-over-year to come in at $1.25. Analysts expect its revenue for the same period to come in at $31.02 billion. Moreover, HCMLY surpassed its consensus revenue estimate in three of the four trailing quarters.
HCMLY has gained 37.4% over the past year and 29.3% over the past six months to close its last trading session at $12.96.
HCMLY’s strong fundamentals are reflected in POWR Ratings. It has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
HCMLY has an A grade for Momentum and Stability and a B for Quality. HCMLY ranks second of 45 stocks in the A-rated Industrial – Building Materials industry.
Click here to see HCMLY’s additional POWR Ratings (Growth, Value, and Sentiment).
CRH plc (CRH)
CRH is a building materials company based in Dublin, Ireland. The company operates through three segments: Americas Materials; Europe Materials; and Building Products.
On March 31, CRH announced that it had completed the latest phase of its share buyback program with the repurchase of 5.9 million ordinary shares on Euronext Dublin, thereby returning a further $0.3 billion cash to its shareholders. Since the commencement of its ongoing share buyback program in May 2018, CRH has returned a total cash of $4.3 billion to its shareholders.
CRH also announced the commencement of the next phase of the repurchase of ordinary shares worth up to $750 million. This tranche is the initial stage of the wider $3 billion program announced on March 2, 2023. CRH’s extensive stock repurchase program would also enhance the intrinsic value of the holdings of existing shareholders.
CRH spent $0.2 billion on four acquisitions year-to-date, the largest of which was the acquisition of Ulricehamns Betong AB in Sweden by Europe Building Solutions, expanding our precast concrete solutions offering in an attractive market.
Since its formation in 1970, CRH has consistently paid dividends to its shareholders, a track record spanning over 50 years. A dividend of $1.03 per ordinary share was paid to the shareholders on May 2, 2023.
Its annual dividend of $2.06 translates to a 4.15% dividend yield on the current price level. Its four-year average dividend yield is 2.58%. Its dividends have grown at 11.8% and 9.6% CAGRs over the past three and five years, respectively.
CRH’s trailing-12-month gross profit margin of 33.25% is 17.1% above the industry average of 28.39%. Its trailing-12-month ROCE, ROTC, and ROTA of 12.68%, 7.38%, and 8.51% are 18.1%, 19.4%, and 81.8% higher than industry averages of 10.74%, 6.18%, and 4.68%, respectively.
For the fiscal year that ended December 31, 2022, CRH’s revenue increased by 12% year-over-year to $32.72 billion, while its gross profit increased 10.4% year-over-year to $10.88 billion. During the same quarter, the group’s EBITDA and operating profit from continuing operations increased by 12.5% and 16.9% year-over-year to $5.62 billion and $3.89 billion, respectively.
CRH’s profit for the financial year increased by 47.8% year-over-year to $3.87 billion. The company’s earnings per ordinary share from continuing operations came in at $3.48, up 14.9% year-over-year.
Analysts expect CRH’s revenue for the fiscal year ending December 2023 to increase 2.7% year-over-year to come in at $33.37 billion, while its EPS is expected to come in at $3.55.
CRH’s stock has gained 28.1% over the past year and 26.2% over the past six months to close the last trading session at $50.04.
It is no surprise that CRH has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
CRH has an A grade for Momentum and a B for Growth, Value, Stability, and Sentiment. CRH tops the list within the same industry.
To see additional ratings for CRH, click here.
CEMEX, S.A.B. de C.V. (CX)
Based in Mexico, CX produces, distributes, and sells cement, ready-mix concrete, aggregates, clinker, and other construction materials worldwide. The company provides building solutions for housing projects, pavement projects, green building consultancy services, cement trade maritime services, and information technology solutions.
Recently, CX acquired a mortar plant near Madrid, Spain, as part of its ongoing strategy to increase EBITDA through bolt-on acquisitions, focusing on providing more sustainable alternatives to growing urban centers.
The acquisition of the new plant, equipped with the latest technology to enable the production of traditional and specialty mortars, would aid CX in expanding into the Madrid market and provide it with innovative building solutions for more sustainable construction.
CX’ trailing-12-month gross profit margin of 30.7% is 8.2% higher than the industry average of 28.39%. Its trailing-12-month levered FCF margin of 3.62% is 2.4% higher than the industry average of 3.54%.
CEO of CX, Fernando A. González, said, “I believe this quarter marks an important inflection point in our mission to recover 2021 margins and compensate for the steep cost inflation we’ve experienced over the past two years. Importantly, our pipeline of growth investments and our Urbanization Solutions business were a significant contributor to EBITDA growth.”
For its fiscal first quarter that ended March 31, 2023, CX’s net sales increased 9% year-over-year to $4.04 billion. The company’s operating EBITDA was $733 million for the quarter, indicating a 6% rise from the prior-year quarter. CX’s operation in the United States reported record EBITDA with a growth of 15%, despite significant weather challenges impacting most markets.
For the fiscal year that ended December 31, 2022, CX’s revenues stood at $15.58 billion, up 8.3% year-over-year. Its gross profit for the period grew 4% year-over-year to $4.83 billion. Moreover, its controlling interest net income stood at $858 million.
Analysts expect CX’s EPS to grow 5.6% year-over-year to $0.19 for its fiscal second quarter ending June 2023. The consensus revenue estimate of $4.37 billion for the same fiscal quarter represents a 7% rise from the prior-year quarter. Moreover, CX topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 53.3% to close its last trading session at $6.59. It has also gained 46.4% over the past six months.
CX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth and Value. CX is ranked #3 within the same industry.
Click here to see the additional ratings for CX’s Stability, Sentiment, and Quality,
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HCMLY shares were trading at $13.15 per share on Friday morning, up $0.19 (+1.47%). Year-to-date, HCMLY has gained 27.79%, versus a 10.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi’s interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy.Having earned a master’s degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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