The industrial market is well-positioned for continued growth with increasing infrastructure spending owing to supportive government initiatives and the adoption of advanced technologies like AI, machine learning, and smart devices.

Amid this backdrop, investors could consider investing in quality industrial stocks Honeywell International Inc. (HON), Illinois Tool Works Inc. (ITW), and Cummins Inc. (CMI) to invest in the infrastructure boom.

The industrial sector is undergoing a transformative phase with easing inflation, recent 50-basis points cut by the Federal Reserve, sound economic growth, and the adoption of digital technologies. The reducing interest rates will positively impact the long-duration infrastructure spending outlook by easing borrowing costs and could support its long-term growth.

Further, the Infrastructure Investment and Jobs Act- IIJA or the Bipartisan Infrastructure Law has embarked upon various revolutionizing funding and projects that are significantly changing the shape of the U.S. economy. In a recent round of funding, the administration announced more than $4.2 billion in funding to improve safety, mobility, and economic competitiveness.

With this, infrastructure spending continues to rise through 2024 as nearly $1.80 trillion was assigned to the U.S. economy through federal grants, loans, incentives, tax credits, and other financial assistance works.

The global industrial machinery market is anticipated to register a CAGR of 7.5%, resulting in a market volume of $1.30 trillion by 2032. The market in expected to grow with the increasing adoption of automation and smart technologies, and modern industrial processes.

Also, the global industry 4.0 market size is revolutionizing the operations and processes. The market is expected to reach around $482 billion by 2032, growing at a CAGR of 20.7%.

Considering these favorable market trends, let’s look at the fundamentals of the top three Industrial - Machinery stocks, beginning with the third choice.

Stock #3: Honeywell International Inc. (HON)

HON engages in aerospace technologies, building automation, energy and sustainable solutions, and industrial automation businesses internationally. The company operates in Aerospace; Honeywell Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions segments.

On October 21, HON and Google Cloud announced a collaboration to connect artificial intelligence (AI) agents with assets, people, and processes to accelerate safer, autonomous operations for the industrial sector. The strategic partnership will enhance HON's product offerings and help it upskill the industrial workforce.

The partnership will bring together the multimodality and natural language capabilities of Gemini on Vertex AI, a Google Cloud's AI platform, and the massive data set on Honeywell Forge, a leading Internet of Things (IoT) platform for industrials.

On October 14, HON was awarded a $103 million contract by the U.S. Army through the Defense Logistics Agency to offer its Next-Generation APN-209 Radar Altimeter (Next Gen APN-209) system on a wide variety of Army aircraft. The award reflects HON's commitment to delivering advanced, reliable technology to support U.S. Army missions.

HON reported net sales of $9.73 billion for the third quarter that ended September 30, 2024, up 5.6% year-over-year. Its segment profit grew 5.8% from the year-ago value to $2.30 billion. The company’s net income came in at $1.42 billion for the quarter, while its adjusted EPS was $2.58, up 8.4% from the prior-year quarter, respectively.

Furthermore, the company’s free cash flow rose 10.1% year-over-year to $1.72 billion.

The company updated its full-year 2024 guidance. HON projects its sales between $38.60 billion and $38.80 billion, whereas its adjusted EPS is expected to be $10.15 - $10.25. Also, the company’s free cash flow is set to range from $5.10 billion to $5.40 billion.

Street expects HON’s revenue and EPS for the fourth quarter (ending December 2024) to increase 8.5% and 6.9% year-over-year to $10.24 billion and $2.78, respectively. Also, the company has topped the consensus EPS estimate in each of the trailing four quarters.

Shares of HON have increased 11.8% over the past six months and 20.8% over the past year to close the last trading session at $228.85.

HON’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Momentum, Stability, and Growth. Within the A-rated Industrial - Machinery industry, HON is ranked #26 out of 80 stocks.

Click here to access additional ratings of HON for Quality, Sentiment, and Value.

Stock #2: Illinois Tool Works Inc. (ITW)

ITW manufactures and sells industrial products and equipment worldwide. The company operates in seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.

On October 24, ITW’s Board of Directors declared a dividend on its common stock of $1.50 per share in respect of the fourth quarter of 2024. The dividend is payable on January 10, 2025, to shareholders of record as of December 31, 2024.

ITW pays an annual dividend of $6, which translates to a yield of 2.22% at the current share price. Its four-year average dividend yield is 2.20%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.1% over the past three years. ITW has raised its dividends for 28 consecutive years.

For the third quarter that ended September 30, 2024, ITW reported operating revenue of $3.97 billion, and its operating income totaled $1.05 billion for the quarter. The company’s net income amounted to $1.16 billion or $3.91 per share, indicating growth of 50.3% and 53.3% from the prior year’s quarter, respectively.

The company raised its full-year EPS guidance by $1.33 to a range of $11.63 to $11.73 per share from the previous range of $10.30 to $10.40.

Analysts expect the company’s EPS for the fourth quarter (ending December 2024) to increase 3.9% year-over-year to $2.51, and its revenue is expected to grow marginally year-over-year to $4 billion for the same period. Moreover, ITW has topped the consensus EPS estimates in all of the trailing four quarters.

ITW’s shares have gained 7.8% over the past six months and 12.7% over the past year to close the last trading session at $270.06.

ITW’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Quality. It also has a B grade for Stability and Momentum. Within the A-rated Industrial - Machinery industry, ITW is ranked #23 out of 80 stocks.

In addition to the POWR Ratings we’ve stated above, we also have ITW ratings for Value, Growth, and Sentiment. Get all ITW ratings here.

Stock #1: Cummins Inc. (CMI)

CMI designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components globally. The company operates in five segments: Engine; Distribution; Components; Power Systems; and Accelera.

On October 15, CMI’s Board of Directors declared a quarterly dividend on its common stock of $1.82 per share. The dividend will be paid on December 5, 2024, to shareholders of record on November 22, 2024.

CMI pays an annual dividend of $7.28, which translates to a yield of 2% at the current share price. Its four-year average dividend yield is 2.49%. Moreover, the company’s dividend payouts have increased at a CAGR of 7.7% over the past five years. CMI has raised its dividends for eight consecutive years.

On July 11, CMI was awarded $75 million to convert approximately 360,000 sq. ft. of existing manufacturing space at its Columbus Engine Plant for zero-emissions components and electric powertrain systems. This grant marked the biggest federal grant ever awarded to CMI solely.

For the third quarter that ended September 30, 2024, CMI’s net sales rose marginally from the prior-year quarter to $8.46 billion. Its operating income grew 10.5% year-over-year to $1.05 billion. Net income and EPS attributable to CMI came in at $809 million and $5.86, up 23.3% and 27.7% from the prior year’s quarter, respectively.

Also, the company’s EBITDA stood at $1.39 billion, indicating growth of 12.9% year-over-year.

The consensus revenue estimate of $34.76 billion for the fiscal year (ending December 2025) represents a 3.2% increase year-over-year. The consensus EPS estimate of $22.09 for the same year indicates a 6.9% improvement year-over-year. The company has an impressive earnings surprise history; it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

CMI’s stock has increased 27.8% over the past six months and 62.4% over the past year to close the last trading session at $364.02.

CMI’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

CMI has a B grade for Stability, Sentiment, and Quality. It is ranked #7 out of 80 stocks in the same industry.

In addition to the POWR Ratings we’ve stated above, we also have CMI ratings for Value, Momentum, and Growth. Get all CMI ratings here.

What To Do Next?

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HON shares were trading at $227.98 per share on Tuesday afternoon, down $0.87 (-0.38%). Year-to-date, HON has gained 11.03%, versus a 25.18% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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