3 Industrial Stocks Cashing In on the Onshoring Trend
On-shoring trends are gaining significant momentum as the government looks to companies to build more resilient supply chains closer to home. With this in mind, I think it is a good time to invest in industrial stocks before this trend accelerates more. The government is throwing substantial stimulus into on-shoring programs via a range of funding mechanisms. The Infrastructure Investment and Jobs Act, the CHIPS Act, and the Inflation Reduction Act were all meant to boost on-shoring, at least in part.
Many companies are moving back to the U.S. now. Plus, with these infrastructure and industrial stimulus packages funding many industries for years to come, on-shoring is not going to be a temporary fad. This is why I believe infrastructure and industrial stocks are primed to perform over the long-run.
With these catalysts in place, here are three industrial stocks to consider right now.
Westinghouse Air Brake Technologies (WAB)
Westinghouse Air Brake Technologies (NYSE:WAB), also known as Wabtec, provides equipment and services for freight rail and passenger transit networks worldwide. I believe the company is well-positioned to benefit from re-shoring trends, as the company supports the rail infrastructure needed for domestic transportation.
In Q1, sales grew 13.8% to $2.5 billion, and adjusted earnings per share surged an impressive 47.7%, driven by strong performance in the company’s freight segment. Wabtec’s order backlog for the next year also expanded 11% to $7.7 billion, while the company’s total backlog sits at $22 billion. I think this is a company with plenty of tailwinds to ride to sustain this positive momentum.
Wabtec is capturing significant global opportunities, including a recent large locomotive order valued at $270 million in Africa and over $250 million in orders related to mining operations. As businesses look to build more resilient supply networks closer to home, I expect demand for Wabtec’s rail solutions to see strong growth. Much of its sales are outside the U.S., but the company importantly manufactures domestically.
This is a stock that’s definitely worth keeping an eye on going forward.
Crane Co (CR)
Crane Company (NYSE:CR) makes various products for industries such as aerospace, national security, payments technology, and more. This earnings season was solid for Crane. Its Q1 EPS of $1.22 came in 8.4% higher than Wall Street expected. Also, core sales, which don’t include acquisitions, grew 5% compared to last year. Total revenue grew over 10%, beating estimates by 3.5%.
An 11% jump in the company’s core orders and backlog signals that demand will likely remain robust going forward. Management’s confidence is reflected in their higher financial projection for $4.75 to $5.05 in earnings per share for the full year. These numbers reflect conservative estimates from key sectors such as aerospace and manufacturing. There’s a chance things could turn out even better if industry trends improve more than expected.
I’m especially optimistic about Crane’s purchase of CryoWorks, which expands its offerings for cutting-edge technologies in fast-growing markets for hydrogen, space exploration, and electronics. That deal should boost Crane’s results immediately. Given that Crane has little debt on its balance sheet, I expect more acquisitions to materialize in the future, supercharging their already impressive projected annual sales growth rate of 4%-6% over the long-run.
I believe Crane is well positioned to deliver double-digit percentage growth in profits year after year for the foreseeable future.
STAG Industrial (STAG)
STAG Industrial (NYSE:STAG) owns and operates industrial real estate across the United States. The company delivered strong Q1 results, with core funds from operations (FFO) per share rising 7.3% YOY to 59 cents. This company has solid cash flow and retained nearly $30 million this past quarter, after paying out dividends.
While management noted some softening in certain markets due to supply cost increases, they still expect solid mid-single-digit rent growth for their portfolio in 2024. The volatile rate environment is actually helping temper new warehouse supply going forward. Same property revenue has also been rising considerably.
I like that STAG is staying disciplined on the acquisition front, buying a well-located Cincinnati warehouse at an attractive 6.1% cash cap rate. The company’s in-place rents are also 13% below market. With 6.8 years of term and 4.1% annual rent bumps, this property should provide durable cash flow growth over the medium-term.
STAG is also busy on the development side, with 1.2 million square feet underway across several projects in the booming Southeastern markets. In my view, this industrial real estate company seems well-positioned to continue benefiting from on-shoring trends.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
