The Biden administration is likely to emphasize infrastructure spending in the years ahead. This means investors have even more reason to add industrials to their portfolio. As long as the economy gets back on track, industrial stocks should have a solid 2021.
Take a look at the list of publicly traded industrials, and you might be a bit overwhelmed. However, some of these stocks are clearly superior to the rest.
Let's take a look at five of the most intriguing industrials as we segue to a new year: Union Pacific Corporation (UNP), Honeywell International (HON), Caterpillar (CAT), Waste Management (WM), and Emerson Electric Company (EMR).
Union Pacific Corporation (UNP)
The majority of the western portion of the United States' railway system is operated by UNP. In fact, UNP operates one of the country's largest two railway networks. According to the Association of American Railroads, rail traffic is up 2.5% on a year-over-year basis. Furthermore, intermodal unit traffic is up an impressive 10.3%.
It is encouraging that UNP's gradual implementation of precision scheduled railroading is improving its operating margins. Analysts view UNP in a favorable light, setting an average price target of $219.40. Of the 16 analysts who cover the stock, eleven recommend buying it, five recommend holding, and none advise selling.
Honeywell International (HON)
HON is a manufacturing and tech business that serves customers across the globe. Examples of HON offerings include security technologies for homes/businesses, aerospace products, sporting goods, and safety products. HON is merely $8 away from its 52-week high of $216.70, yet the stock has a reasonable forward P/E ratio of 26.49.
Of the 15 analysts who cover the stock, nine rate it a "Buy", six recommend holding, and none recommend selling. The POWR Ratings reveal HON has "A" grades in the Buy & Hold Grade, Trade Grade, and Industry Rank components. HON is ranked first out of 50 stocks in the Industrial - Manufacturing industry.
HON has a nearly flawless balance sheet and a history of surpassing guidance. The combination of secular tailwinds and the recovering aerospace industry has the potential to send HON to new heights.
CAT's business is picking back up now that the economy is building momentum. CAT's three main business lines are Engines, Machinery, and Financial Products. If the Biden administration pushes an infrastructure rebuild, CAT will undoubtedly benefit.
CAT is currently trading merely pennies below its 52-week high, yet its forward P/E ratio is only 25.76, indicating it might still have some room to run higher. CAT is the top-ranked stock in the Industrial - Machinery industry. It has "A" grades in the Peer Grade, Industry Rank, Trade Grade, and Buy & Hold Grade components.
Waste Management (WM)
Waste must be picked up, disposed of, and recycled regardless of the state of the economy. WM provides these services for residential, municipal, industrial, and commercial customers across North America.
Analysts are bullish on WM, setting an average price target of $125.33 for the stock, indicating a potential 7.5% upside. Of the nine analysts who cover the stock, four recommend buying, four recommend holding, and only one advises selling.
The POWR Ratings reveal WM has "A" grades in the Buy & Hold Grade and Trade Grade components along with "B" grades in the Industry Rank and Peer Grade components. WM is ranked fifth out of 18 stocks in the Waste Disposal industry. Though 70% of WM's commercial volume was suspended during the pandemic, these operations are nearly back to normal. Add in the fact that WM serves clients of all types as opposed to strictly businesses, and investors have all the more reason to consider this stock.
Emerson Electric Company (EMR)
EMR designs and provides product technology. The company also provides engineering services for consumer, commercial, and industrial markets. EMR is a couple of cents away from its 52-week high of $84.25, yet the stock still has an attractive forward P/E ratio o of 23.72. EMR also has an intriguing 2.44% dividend to boot. The stock has an "A" grade in the Buy & Hold Grade and Trade Grade POWR Rating components. Out of 87 publicly traded companies in the Industrial - Equipment industry, EMR is ranked second.
More than half of EMR's earnings stem from automation solutions. Though one-quarter of EMR sales are tied to the oil and gas industry, the company's renewables and clean fuels business expanded by 10% in 2020, meaning the company has the potential to redefine its identity as we transition to a greener future.
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UNP shares were trading at $215.56 per share on Friday morning, down $0.60 (-0.28%). Year-to-date, UNP has gained 3.53%, versus a 0.93% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.5 Top-Notch Industrial Stocks for 2021 appeared first on StockNews.com