According to J.P.Morgan Global Manufacturing PMI data, manufacturing production and new orders rose for the fourteenth successive month in August, indicating improved health in the manufacturing sector. Moreover, as material and labor shortages and supply chain disruptions start to ease with a drop in COVID-19 cases, production capacities should start improving. The manufacturing production in the United States increased 5.9% year-over-year in August 2021.
A substantial increase in new orders as economies worldwide recover, and continued investments in digital initiatives across production processes and supply networks should help the manufacturing industry regain momentum.
Therefore, fundamentally sound manufacturing stocks such as TE Connectivity Ltd. (TEL), Mueller Industries, Inc. (MLI), and Tredegar Corporation (TG) could be solid bets now. They have solid growth attributes and are expected to continue gaining in the coming months.
TE Connectivity Ltd. (TEL)
Based in Schaffhausen, Switzerland, TEL is a connectivity and sensor solutions provider. The company provides solutions to power electric vehicles, aircraft, digital factories, and smart homes. It operates through three segments, Transportation Solutions; Industrial Solutions; and Communications Solutions.
Last month, TEL announced that its subsidiary, Tyco Electronics Group S.A., has called for par call redemption of all of its outstanding Senior Notes due February 3, 2022. The redemption price for the Notes will be equal to 100% of the principal amount of the Notes to be redeemed.
TEL’s net sales increased 50.9% year-over-year to $3.85 billion for the fiscal third quarter that ended June 25, 2021. The company’s gross margin grew 79.3% from the year-ago value to $1.27 billion. Its operating income rose 432.8% from the prior-year quarter to $714 million. Also, the company’s net income came in at $580 million, compared to a net loss of $41 million in the fiscal third quarter of 2020.
Analysts expect TEL’s revenue for the fiscal year 2022 to be $15.74 billion, representing a 5.6% growth year-over-year. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. Also, its EPS is expected to grow 8.2% next year. Its stock price has increased 17.1% over the past nine months and 43.8% over the past year.
TEL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Value and Growth. We’ve also graded TEL for Sentiment, Stability, Momentum, and Quality. Click here to access all of TEL’s ratings. TEL is ranked #5 out of 44 stocks in the A-rated Industrial - Manufacturing industry.
Click here to check out our Industrial Sector Report for 2021
Mueller Industries, Inc. (MLI)
MLI is a manufacturer of copper, brass, aluminum, and plastic products. The company's products include copper tube and fittings, line sets, brass and copper alloy rod, bar, refrigeration valves, and fittings, fabricated tubular products, and various other plumbing specialty products. Its principal business segments include Piping Systems; Climate Products; and Industrial Metals.
During the second quarter that ended June 26, 2021, MLI’s net sales increased 102.5% year-over-year to $1.01 billion. The company’s operating income grew 201.8% from the year-ago value to $157.81 million. Its net income rose 289.3% from the prior-year quarter to $108.83 million. Also, the company’s EPS increased 284% year-over-year to $1.92.
MLI’s revenue is expected to increase 55.6% year-over-year to $3.73 billion in the fiscal year 2021. The company’s EPS is expected to increase 120.1% in the current year. Moreover, the stock has gained 18.7% over the past nine months and 54.1% over the past year.
MLI’s POWR Ratings reflect this promising outlook. The stock has an overall grade of B, which equates to a Buy rating in our proprietary ratings system. Also, the stock has an A grade for Momentum, and a B for Growth and Sentiment.
In addition to the POWR Rating grades I’ve just highlighted, one can see MLI’s grades for Value, Stability, and Quality here. The stock is ranked #4 in the same industry.
Tredegar Corporation (TG)
Incorporated in 1955, TG is a global manufacturer of plastic films, polyester films, and aluminum extrusions. The company's operating segments include PE Films, Flexible Packaging Films, and Aluminum Extrusions. It offers optical lighting applications, single and multi-layer surface protection films, polyethylene terephthalate-based films and mill (unfinished), anodized (coated), and painted and fabricated aluminum extrusions.
In June, a subsidiary of TG, Tredegar Surface Protection, implemented a resin index-based pricing plan, applied to all products and customers. Due to cost inflation in many areas and supply issues for polyethylene and polypropylene resin, this bilateral pricing model should allow the company to adopt a cost-control measure to tackle situations if resins prices fall in the future.
TG’s sales increased 13.4% year-over-year to $211.13 million for the second quarter that ended June 30, 2021. The company’s net income grew 89.7% from the year-ago value to $21.24 million. Its EPS rose 90.9% from the prior-year quarter to $0.63. Also, the company’s cash and cash equivalents grew 54.5% from $11.85 million as of December 31, 2020, to $18.3 million as of June 30, 2021.
TG’s EPS is expected to increase at the rate of 21.9% per annum over the next five years. TG’s stock price has surged 0.6% over the past five days.
It’s no surprise that TG has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. Also, the stock has an A grade for Momentum, and a B for Value and Quality.
Click here to see additional grades for TG (Growth, Stability, and Sentiment). TG is ranked #6 in the same industry.
TEL shares were trading at $141.10 per share on Monday morning, down $0.63 (-0.44%). Year-to-date, TEL has gained 17.81%, versus a 15.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research.
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