Despite macroeconomic challenges, the industrial sector remained stable thanks to consistent demand. This ongoing demand is due to the sector’s ability to adapt and innovate.
Therefore, it could be wise for investors to buy fundamentally sound industrial stocks Keysight Technologies, Inc. (KEYS) and Konica Minolta, Inc. (KNCAY) this month. However, Plug Power Inc. (PLUG) could be best avoided, given its weak financials.
In August, industrial production increased by 0.4%, while manufacturing output increased by only 0.1%. Total industrial production in August was 103.5% of its 2017 baseline, up 0.2% from the previous year.
The global industrial machinery market is estimated to reach $708.30 billion by 2027 at a CAGR of 6.7%. This expansion might be due to rising demand for automation and technical developments in various industries. Also, the growing demand for efficient and cost-effective machinery solutions is propelling market expansion.
In addition, the global industrial automation services market is expected to grow at an 8.8% CAGR until 2032 to $464.15 billion. Government initiatives promoting the use of industrial automation are a significant factor fuelling the expansion of the global market for industrial automation services.
However, the global industrial sector is dealing with issues such as the economic slowdown and trade tensions, rising competition from emerging countries, and the need to adapt to quickly advancing technology.
With these trends in mind, let’s delve into the fundamentals of the three Industrial - Equipment stocks, beginning with number 3.
Stock #3: Plug Power Inc. (PLUG)
PLUG delivers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, stationary power markets, and others worldwide.
PLUG’s forward EV/Sales multiple of 3.39 is 107.4% higher than the 1.63 industry average. Also, its forward Price/Sales multiple is trading at 3.48, 163% higher than the industry average of 1.32.
PLUG’s trailing-12-month ROCE of negative 20.73% is lower than the industry average of 13.60%, while its trailing-12-month negative ROTA of 14.99% is lower than the industry average of 5.05%.
PLUG’s gross loss came in at $78.14 million for the second quarter that ended June 30, 2023, up 140.7% year-over-year. Its operating loss came in at $233.84 million, up 59.2% year-over-year. Moreover, the company’s net loss and loss per share came in at $236.40 million and $0.40, up 36.5% and 33.3% year-over-year, respectively.
Analysts expect PLUG’s EPS to come in at negative $1.18 for the year ending December 2023. Over the past year, the stock has lost 65.2% to close the last trading session at $7.55.
PLUG’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of F, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PLUG also has an F grade for Stability, Sentiment and Quality and a B grade for Value and Momentum. It is ranked #90 out of 92 stocks in the Industrial - Equipment industry. Click here for the additional POWR Ratings for Growth for PLUG.
Stock #2: Keysight Technologies, Inc. (KEYS)
KEYS provides electronic design and test solutions to companies in the Americas, Europe, and the Asia Pacific. The company also offers customization, consulting, and optimization services throughout the product development lifecycle. It operates through two segments: Communications Solutions Group (CSG); and Electronics Industrial Solutions Group (EISG).
On September 21, 2023, KEYS and Synopsys, Inc. (SNPS) have partnered to offer internet of things (IoT) device producers a comprehensive cybersecurity assessment solution to ensure customers are protected when devices are brought to market. The Synopsys Defensics® fuzzing tool will be integrated as an option into the Keysight IoT Security Assessment solution under the terms of the agreement.
KEYS’ forward EV/EBIT of 13.80x is 20.6% lower than the industry average of 17.38x. Its forward non-GAAP P/E of 15.83x is 25.6% lower than the industry average of 21.28x.
KEYS’ trailing-12-month ROCE of 25.63% is significantly higher than the industry average of 1.01%. Its trailing-12-month ROTC of 13.97% is 556.5% higher than the industry average of 2.13%.
For the third quarter that ended July 31, 2023, KEYS’ revenue amounted to $1.38 billion increased marginally year-over-year, while its income from operationa stood at $365 million, up 2.2% year-over-year.
In addition, its non-GAAP net income and EPS came in at $393 million and $2.19, representing increases of 7.6% and 9%, respectively, from the prior-year quarter.
The consensus revenue estimate of $5.45 billion for the fiscal year ending October 2023 represents a marginal increase year-over-year. Its EPS is expected to grow 7.6% year-over-year to $8.21 for the same year. It has surpassed the EPS estimates in all the four trailing quarters. KEYS’ shares have gained marginally over the past month to close the last trading session at $130.03.
KEYS overall B rating equates to a Buy in our POWR Ratings system. It also has an A grade for Quality.
It is ranked #44 in the same industry. Beyond what is stated above, we’ve also rated KEYS for Growth, Value, Stability, Sentiment and Momentum. Get all KEYS ratings here.
Stock #1: Konica Minolta, Inc. (KNCAY)
Headquartered in Tokyo, Japan., KNCAY engages in digital workplace, professional print, healthcare, and industrial businesses in Japan, China, other Asian countries, the United States, Europe, and internationally.
KNCAY’s forward EV/Sales multiple of 0.58 is 77.5% lower than the industry average of 2.57. Its forward EV/EBITDA multiple of 7.48% is 45.4% lower than the industry average of 13.71.
KNCAY’s trailing-12-month ROTC of 2.20% is 3.2% higher than the industry average of 2.13%, while its trailing-12-month asset turnover ratio of 0.82x is 33.5% higher than the industry average of 0.62x.
KNCAY’s revenue for the quarter ended June 30, 2023, increased 7.5% year-over-year to ¥266.41 billion ($1.79 million). Its gross profit increased 6.8% year-over-year to ¥111.90 billion ($0.75 million).
Also, its total liabilities came in at ¥859.10 billion ($5.76 million) for the period that ended June 30, 2023, compared to ¥913.80 billion ($6.13 million) for the period that ended March 31, 2023.
Street expects KNCAY’s revenue to increase 124.7% year-over-year to $7.72 billion for the year ending March 2024. Shares of KNCAY has gained 11.3% over the past month to close the last trading session at $6.71.
KNCAY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It is ranked #10 in the same industry. It has a B grade for Value, Stability, and Quality. To see additional KNCAY’s ratings for Sentiment, Growth, and Momentum, click here.
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KEYS shares were trading at $130.40 per share on Wednesday afternoon, up $0.37 (+0.28%). Year-to-date, KEYS has declined -23.77%, versus a 12.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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