A recent Federal Reserve report says that total industrial production advanced 0.9% in March 2022. It rose at an 8.1% annual rate for the first quarter, while factory output grew at a 5.4% annual rate for the quarter. In addition, capacity utilization for manufacturing increased by 0.6 percentage points in March to 78.7%. The factory operating rate was above its long-run average of 78.1% for the first time since August 2018. This demonstrates a solid recovery from pandemic-induced operational disruptions.
Furthermore, President Biden’s trillion-dollar infrastructure spending aimed at rebuilding America’s roads, bridges, and rails, ensuring every American has access to high-speed internet, strengthening supply chains, and building a national network of electric vehicle (EV) chargers to fight the climate crisis is expected to bring new opportunities in the U.S. industrial market.
Given this backdrop, we believe industrial stocks Raytheon Technologies Corporation (RTX), Cintas Corporation (CTAS), Waste Management, Inc. (WM), Fastenal Company (FAST), and Robert Half International Inc. (RHI) could be ideal investments now. These stocks have outperformed the benchmark S&P 500 index’s 9.9% decline year-to-date.
Click here to check out our Industrial Sector Report for 2022
Raytheon Technologies Corporation (RTX)
RTX in Waltham, Mass., is an aerospace and defense company that provides systems and services for commercial, military, and government customers worldwide. It operates through four segments Collins Aerospace Systems; Pratt & Whitney; Raytheon Intelligence & Space; and Raytheon Missiles & Defense.
On April 26, 2022, RTX’s board of directors declared a dividend of 55 cents per outstanding share of its common stock, which is payable on June 16, 2022. The dividend represents an increase of 7.8% from the prior quarter.
On March 31, 2022, Raytheon Missiles & Defense, a business of RTX, was awarded $651 million to produce the AN/SPY-6(V) family of radars, which could equip up to 31 U.S. navy ships. Under the contract, RMD would provide the most advanced naval radar that will deliver unprecedented air and missile defense capabilities to the U.S. military over the next 40 years. Also, Raytheon Missiles & Defense was awarded an activation, sustainment, and modernization contract for $483 million with options, totaling $1.68 billion for five years by the U.S. Navy to provide it with development services and professionals to complete the activation and fleet introduction of three Zumwalt-class destroyers. These contracts demonstrate the company’s solid positioning in the industry and should add significantly to the company’s revenues.
RTX’s sales increased 2.8% year-over-year to $17.04 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its non-GAAP net income grew 43.9% from its year-ago value to $1.61 billion, while its non-GAAP EPS improved 45.9% year-over-year to $1.08.
The $1.15 consensus EPS estimate for the fiscal second quarter ending June 30, 2022, represents an 11.5% improvement year-over-year. The $16.97 billion consensus revenue estimate for the same quarter represents a 6.9% increase from the same period last year. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
RTX has gained 23.7% over the past year and 15.7% year-to-date to close the last trading session at $99.61.
RTX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
RTX has an A grade in Growth and a B in Stability and Sentiment. It is ranked #8 of 76 stocks in the Air/Defense Services industry.
Beyond what is stated above, we have also rated RTX for Value, Momentum, and Quality. Get all the RTX ratings here.
Cintas Corporation (CTAS)
CTAS provides corporate identity uniforms and related business services primarily in the United States, Canada, and Latin America. The Cincinnati, Ohio-based concern operates through Uniform Rental and Facility Services; First Aid and Safety Services; and All Other segments.
On April 13, 2022, CTAS announced a quarterly cash dividend of $0.95 per share of common stock payable on June 15, 2022. CTAS holds a strong record of consistently raising its dividend each year.
CTAS’ total revenue increased 10.3% from the prior-year quarter to $1.96 billion in its fiscal third quarter, ended Feb. 28, 2022. Its operating income for the quarter came in at $407.61 million, reflecting a 24.9% increase year-over-year, while its net income stood at $315.45 million, up 22.1% year-over-year. The company’s EPS increased 25.3% from the prior-year quarter to $2.97.
The Street expects CTAS’ EPS for its fiscal quarter ending May 31, 2022, to improve 8.8% year-over-year to $2.69. The $2 billion consensus revenue estimate for the same period represents an 8.7% increase year-over-year. The company also surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 15.9% in price over the past year to close the last trading session at $409.96.
It is no surprise that CTAS has an overall rating of B, which equates to Buy in our POWR Ratings system.
CTAS has an A grade in Sentiment and Quality and a B in Stability. Among the 44 stocks in the B-rated Outsourcing - Business Services industry, CTAS is ranked #11.
In addition to the POWR Rating grades I have just highlighted, one can see the CTAS ratings for Growth and Momentum here.
Waste Management, Inc. (WM)
Houston, Tex.-based WM provides waste management environmental facilities to residential, commercial, industrial, and municipal customers in North America. It offers waste collection and transportation services, material recovery facility (MRF), and owns and operates landfill gas-to-energy facilities and transfer stations.
In January 2022, WM Organic Growth, a wholly owned subsidiary of WM and Tailwater Capital LLC, announced the closing of a joint venture to assist Continuus Materials in scaling its production facilities within the waste-to-product industry. Continuus Materials upcycles plastic and fiber materials into Everboard, a proprietary, high-performance, low-slope roof cover board. This is in line with the company’s goal of providing impactful, sustainable solutions to reduce waste.
WM’s revenue increased 15% year-over-year to $4.68 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its non-GAAP operating EBITDA grew 9.4% from its year-ago value to $1.25 billion. The company’s non-GAAP net income increased 9.8% year-over-year to $528 million. Also, its non-GAAP EPS came in at $1.26, up 11.5% from the prior-year quarter.
Analysts expect WM’s revenue for its fiscal quarter, ended March 31, 2022, to be $4.45 billion, indicating an increase of 8.3% year-over-year. Also, the company’s EPS is expected to grow 7.6% year-over-year to $1.14 billion in the same quarter.
Over the past year, the stock has gained 15.1% in price to close yesterday’s trading session at $155.96. It has gained 5.3% over the past three months.
The company has an overall B rating, which translates to Buy in our proprietary ratings system.
WM is also rated B in Stability and Quality. Within the A-rated Waste Disposal industry, it is ranked #5 of 17 stocks.
Click here to see additional POWR Ratings for Growth, Value, Momentum, and Sentiment for WM.
Fastenal Company (FAST)
FAST in Winona. Minn., is engaged in the wholesale distribution of industrial and construction supplies, including threaded fasteners, bolts, nuts, screws, studs, related washers, as well as miscellaneous hardware.
For its fiscal first quarter, ended March 31, 2022, FAST’s net sales increased 20.3% year-over-year to $1.70 billion. Its gross profit grew 23.3% from its year-ago value to $793.30 million. Its net earnings for the quarter stood at $269.60 million, reflecting a 28% increase year-over-year, while its EPS was $0.47, up 27.8% from the prior-year quarter.
FAST’s revenue for the quarter ending June 30, 2022, is expected to come in at $1.77 billion, indicating 17.7% year-over-year growth. The company’s EPS is expected to increase 17.1% year-over-year to $0.49 for the same quarter. FAST also beat the consensus EPS estimates in the trailing four quarters.
FAST has gained 9.1% in price over the past year and 4.2% over the past nine months to close the last trading session at $56.64.
FAST’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
FAST is also rated B in Growth, Momentum, Stability, and Quality. It is ranked #20 of 92 stocks in the Industrial - Equipment industry.
To see additional POWR Ratings for Value and Sentiment for FAST, click here.
Robert Half International Inc. (RHI)
RHI provides staffing and risk consulting services in the Americas, Europe, Asia, and Australia. The Menlo Park, Calif., company operates through three segments: Temporary and Consultant Staffing; Permanent Placement Staffing; Risk Consulting and Internal Audit Services.
RHI’s service revenues increased 35.7% year-over-year to $1.77 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its gross margin improved 44.7% year-over-year to $744.12 million, while its net income increased 77.9% from its year-ago value to $167.94 million. Its net income per share increased 79.8% from its year-ago value to $1.51.
RHI’s $1.46 consensus EPS estimate for its fiscal quarter ended March 31, 2022, represents a 48.8% improvement year-over-year. The $1.80 billion consensus revenue estimate for the same quarter represents a 29% increase from the same period last year. Also, it surpassed the consensus EPS estimates in each of the trailing four quarters.
RHI has gained 28.9% in price over the past year to close the last trading session at $112.18. It has gained 20.8% over the past nine months.
RHI’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The company has an A grade in Quality and a B in Growth. Among the 18 stocks in the A-rated Outsourcing - Staffing Services industry, the stock is ranked #6.
To get RHI’s ratings for Value, Momentum, Stability, and Sentiment, click here.
Click here to check out our Industrial Sector Report for 2022
RTX shares were trading at $99.68 per share on Tuesday morning, up $0.07 (+0.07%). Year-to-date, RTX has gained 16.47%, versus a -10.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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