SPECIAL REPORT The Top 7 Stocks for 2024

Comeback Candidates: 3 Industrial Stocks Set to Rebound

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  • Contrarians may have a counterintuitive opportunity with rebounding industrial stocks.
  • Honeywell (HON): Multinational conglomerate with diverse services, showcasing resilience with recent positive momentum, offers a forward dividend yield of 2.22%.
  • Union Pacific (UNP): Railroad holding company, integral to national infrastructure, demonstrating positive movement, forward yield of 2.35%.
  • Dover (DOV): Conglomerate manufacturer of industrial products, modestly positive return in recent weeks, presents a value proposition with a forward yield of 1.46%.
industrial stocks - Comeback Candidates: 3 Industrial Stocks Set to Rebound

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With concerns rising about the possibility of a global recession, the idea of targeting industrial stocks for investment seems risky. While the U.S. may offer the most insulation against financial headwinds, the global economy is incredibly interconnected. A slowdown in major markets could easily negatively impact our own standard of living.

At the same time, a contrarian argument can be made. Targeting the sector subject at hand – especially rebounding industrial stocks – may offer a shrewd investing narrative. Essentially, these enterprises represent the backbone of our economy. So, while headwinds may affect our finances, society must keep moving. In their own way, the below companies keep us all marching forward.

In addition, because so many investors are focused on the hype train of artificial intelligence, the blockchain and other innovative arenas, industrial stocks often go ignored. But when you’re searching for proven value, targeting ideas away from the spotlight can turn out to be lucrative over the long run.

If you have the patience, these are the rebounding industrial stocks to consider.

Honeywell (HON)

An image of a futuristic aerospace engine rendering
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An applied sciences juggernaut, multinational conglomerate Honeywell (NASDAQ:HON) arguably represents a no-brainer. Offering a range of services in aerospace, building technologies, performance materials and technologies and safety and productivity solutions, Honeywell can keep the lights on short of an apocalyptic event. Since the start of the year, HON did lose more than 9%. However, in the trailing month, it’s up 8%.

Right off the bat, HON makes an appropriate case for rebounding industrial stocks. On the financial front, it must be stated that Honeywell isn’t exactly a bargain. Right now, shares trade at a little over 27X trailing-year earnings. That’s more than a tad bit higher than the sector median of 12.05X. That said, the company commands strong margins, especially its net margin of 14.87%.

In turn, it’s posted at least 10 consecutive years of net income. That enables Honeywell to offer a forward dividend yield of 2.22%. Not, it’s not the highest rate of passive income ever. Still, the payout ratio is reasonable at 43.35%. And with revenue steadily marching toward pre-pandemic norms, HON is worth consideration.

Union Pacific (UNP)

United Pacific (UNP) switch on tracks near Kansas City.
Source: Michael Rosebrock / Shutterstock.com

Speaking of the backbone of the economy, Union Pacific (NYSE:UNP) may offer a contrarian take for rebounding industrial stocks. A railroad holding company, Union Pacific is a critical component of our overall infrastructure. Per its website, its railways connect 23 states in western two-thirds of the country. From 2013 to last year, the enterprise also invested about $34 billion in its networks and operations.

Since the start of the year, UNP returned almost 7% of value to its shareholders. It’s also been on the move recently, swinging up roughly 8% in the trailing month. That’s encouraging as UNP makes its way back toward its 52-week high posted in late July. Financially, it’s on a similar boat with Honeywell. On paper, it trades at 21.2x trailing earnings, which isn’t really a bargain.

However, the company enjoys strong and predictable margins, leading to consistent profitability. Subsequently, UNP pays back its stakeholders with a forward yield of 2.35%. Again, it’s not particularly high but the firm also enjoys 16 years of dividend increases. As well, analysts peg shares as a moderate buy with a $244.38 price target.

Dover (DOV)

The logo for Dover (DOV) displayed on a smartphone screen.
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A conglomerate manufacturer of industrial products, Dover (NYSE:DOV) divides its business into five segments: engineered products, clean energy and fueling, imaging and identification, pumps and process solutions and climate and sustainability technologies. Per its public profile, Dover came in at number 433 in the 2022 Fortune 500. Since the January opener, DOV gained less than 4%, a modestly positive return.

Still, it’s fair to call DOV a candidate for rebounding industrial stocks. Since hitting a 52-week high in early February, DOV has charted a series of lower highs. However, the bulls are trying to pivot this dubious narrative. In the trailing one-month period, shares gained slightly over 9%. Financially, DOV may appeal to traditional contrarians for its value proposition. Currently, it trades at 14.66X forward earnings, below 60% of sector rivals.

To be sure, its growth trajectory is stable, which is to say flat. However, the business itself offers predictability. And Dover is consistently profitable, benefiting from strong margins. Subsequently, the company offers a forward yield of 1.46%. It’s not remarkable but the payout ratio sits at a comfortable 21.67%.

Finally, analysts rate DOV a moderate buy with a $156.82 price target.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2023/11/comeback-candidates-3-industrial-stocks-set-to-rebound/.

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