Industrial production rebounded strongly with the easing of COVID-19 restrictions. While industrial production advanced at an annual rate of 6.1% during the second quarter, it fell 0.2% in June due to labor shortages, supply chain disruptions, and rising costs.
The July Manufacturing PMI declined 0.2 percentage points from the June reading to 52.8%. But this reading marked the 26th consecutive month of growth. Strong demand for industrial goods and favorable government policies to support domestic production should drive the performance of industrial goods manufacturers.
The government has been focusing on ramping up domestic production, with President Biden’s $1 trillion Infrastructure Investment and Jobs Act being a step in that direction. Investors’ interest in industrial stocks is evident from the SPDR Select Sector Fund – Industrial’s (XLI) 8.9% return over the past month.
Given this backdrop, we think it could be wise to add industrial stocks Axon Enterprise, Inc. (AXON), W.W. Grainger, Inc. (GWW), and LSI Industries Inc. (LYTS) to your portfolio, given their solid growth potential.
Axon Enterprise, Inc. (AXON)
AXON develops, manufactures, and sells conducted energy devices (CEDs) under the TASER brand in the United States and internationally. It operates through two segments, TASER and Software, and Sensors. The company also offers hardware and cloud-based software solutions that enable law enforcement to capture, securely store, manage, share, and analyze video and other digital evidence.
On July 18, 2022, AXON announced that major agencies across Canada would deploy TASER 7 devices to officers across the country. This represents AXON’s demand for its products.
AXON’s net sales increased 31.4% year-over-year to $256.42 million for the first quarter ended March 31, 2022. The company’s adjusted EBITDA increased 6.6% year-over-year to $48.86 million. Its non-GAAP net income increased 54.6% year-over-year to $32.53 million. Also, its non-GAAP EPS came in at $0.45, representing an increase of 45.1% year-over-year.
Analysts expect AXON’s EPS and revenue for the quarter ended June 30, 2022, to increase 2.3% and 18.3% year-over-year to $0.39 and $258.96 million, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 25% to close the last trading session at $116.60.
AXON’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Growth and a B grade for Sentiment and Quality. It is ranked #37 out of 91 stocks in the Industrial – Equipment industry. Click here to see the other ratings of AXON for Value, Momentum, and Stability.
W.W. Grainger, Inc. (GWW)
GWW distributes maintenance, repair, and operating (MRO) products and services. The company operates through two segments, High-Touch Solutions N.A. and Endless Assortment. It offers safety and security supplies, material handling and storage equipment, pumps and plumbing equipment, cleaning and maintenance supplies, and metalworking and hand tools. It also offers inventory management and technical support services.
On July 27, 2022, GWW announced that it would pay a quarterly dividend of $1.72 per share on September 1, 2022.
For the fiscal second quarter ended June 30, 2022, GWW’s net sales increased 19.6% year-over-year to $3.83 billion. Its net earnings increased 60% year-over-year to $389 million. Also, its EPS came in at $7.19, representing an increase of 68.3% year-over-year.
For the quarter ending September 30, 2022, GWW’s EPS and revenue are expected to increase 25.8% and 14.6% year-over-year to $7.11 and $3.86 billion, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 23.6% to close the last trading session at $543.34.
GWW’s POWR Ratings reflect solid prospects. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, Stability, Sentiment, and Quality. Within the same industry, it is ranked #13. To see the rating of GWW for Value, click here.
LSI Industries Inc. (LYTS)
LYTS is a producer of American-made lighting and graphics solutions. The company operates through two segments: Lighting and Graphics. The Lighting segment manufactures, markets, and sells outdoor and indoor lighting solutions. The Graphics segment manufactures, sells, and installs exterior and interior visual image elements.
On April 13, 2022, LYTS announced that it had expanded its presence in the quick service restaurant (QSR) market after it partnered with a brand focused on the chicken segment. LYTS’ President and CEO of LYTS, James A. Clark, said, “The success of our recent programs demonstrates the value we provide and the trust we cultivate within this market.”
LYTS’ net sales increased 52.5% year-over-year to $110.11 million for the third quarter ended March 31, 2022. The company’s adjusted net income increased 130.2% year-over-year to $4.21 million. Also, its adjusted EPS came in at $0.15, representing an increase of 114.2% year-over-year.
Analysts expect LYTS’ EPS and revenue for the quarter ended June 30, 2022, to increase 11.1% and 12.3% year-over-year to $0.13 and $109 million, respectively. It has surpassed its Street EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 1.8% to close the last trading session at $6.14.
LYTS’ strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Sentiment and a B grade for Value. It is ranked #3 in the Industrial – Equipment industry. Click here to see the other ratings of LYTS for Momentum, Stability, and Quality.
AXON shares were trading at $114.74 per share on Friday afternoon, down $1.86 (-1.60%). Year-to-date, AXON has declined -26.92%, versus a -12.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More…
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