Industrial stocks have multiple, strong, positive catalysts at this point. Among these catalysts are falling interest rates, the continued resilience of consumers and economic and high government spending on infrastructure.
Moreover, the energy transition, the electric-vehicle revolution and even the proliferation of AI are helping industrial stocks. The first two changes are spurring increased mining activity, while a significant number of other industrial companies have benefited from the EV Revolution because they sell products that are incorporated into EVs.
Finally, many factories are being built to facilitate the energy transition and EV revolution, while a high number of data centers are under construction to enable the proliferation of AI. In fact, total spending on the construction of factories in the U.S. continues to set records, reaching a monthly total of $206.8 million in October, way up from $87.5 million in October of 2021.
Since many industrial companies sell products used in construction, a multitude of industrial stocks are getting a big lift from this important trend.
Aptiv (APTV)
Aptiv (NYSE:APTV) develops technical components for vehicles, and it’s benefiting from multiple strong trends within the automotive sector. Specifically, it’s getting a lift from the electrification of vehicles, including the increasing popularity of both EVs and plug-in hybrids. Additionally APTV’s financial results are being boosted by the rapid proliferation of advanced driver assistance systems.
Aptiv’s third-quarter results were meaningfully hindered by the United Auto Workers’ strike which resulted in America’s automakers significantly cutting their production. Nevertheless, the firm’s Q3 revenue advanced 11% versus the same period a year earlier to $5.1 billion, while its net income came in at $2 billion, way up from $298 million during the same period a year earlier.
Also encouragingly, CEO Kevin Clark on Nov. 2 said, “We expect continued sequential margin expansion as the headwinds related to supply chain disruptions continue to dissipate, customer recoveries are closed and the benefits from further cost structure actions take hold.”
The forward price-to-earnings (P/E) ratio of APTV is a low and attractive 13.5x.
Caterpillar (CAT)
Caterpillar (NYSE:CAT) is benefiting a great deal from increased construction of factories and data centers in the U.S., high spending by governments on infrastructure, and huge jumps in the global mining of minerals used in EVs and renewable energy.
Partly as a result of those factors, CAT stock climbed nearly 20% between Oct. 31 and Dec. 13.
Also noteworthy is that on Nov. 21, Goldman Sachs identified CAT stock as one of the best 25 “beaten down cyclical stocks” to own.
Caterpillar’s shares have a very low forward price-to-earnings ratio of 13, while analysts, on average, expect the company’s 2024 earnings per share to come in at $20.59, versus the $14.24 of EPS that it generated in 2022.
Fluor (FLR)
Fluor (NYSE:FLR) carries out the construction of large facilities. As a result, the company has benefited significantly from the huge increases in the amount of money spent on building factories in North America.
In fact, FLR recently won two multi-billion deals in Canada. Specifically, it was chosen to lead the second stage of the construction of BHP Billiton’s (NYSE:BHP) potash factory, and it was chosen to lead the “construction of the world’s first net-zero scope 1 and 2 emissions integrated ethylene cracker and derivatives complex” by Dow (NYSE:DOW).
Analysts, on average, expect Fluor’s earnings per share to jump to $2.84 next year from 82 cents in 2022. The forward P/E ration FLR stock is a very low 14x at this point.
On the date of publication, Larry Ramer did not hold (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.
