Machinery Masters: 3 Industrial Stocks to Buy for Robust Returns


  • Discover three industrial stocks set to deliver robust returns despite economic uncertainty.
  • United Rentals (URI): Strong broad-based demand and strategic acquisitions power record revenue and earnings growth.
  • Waste Management (WM): Excellence in core operations and smart investments in emerging sectors underpin its future growth potential.
  • Copart (CPRT): Dominance of a lucrative niche, rock-solid balance sheet, and high returns on capital make it an attractive pick.
Industrial Stocks - Machinery Masters: 3 Industrial Stocks to Buy for Robust Returns

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Some investors may hesitate to invest in the industrial sector due to the economic uncertainty of 2024. Certain industrial companies will inevitably face challenges in the coming year. However, the right industrial stocks can deliver strong returns over the long run.

Quality industrial stocks have wide economic moats, efficient operations and shareholder-friendly management teams. These stocks will prosper, regardless of market environments. Industrial companies, in particular, are poised to outperform. This is because they have the pricing power to pass on inflationary costs and a commitment to returning cash to shareholders. Near-term industrial demand may fluctuate with the economic cycle.

Patient investors who select the highest quality companies in the sector stand to be rewarded. Investors can earn healthy returns in 2024 and beyond through industrial stocks with strong fundamentals and competitive advantages. This is true regardless of broader economic conditions.

United Rentals (URI)

A magnifying glass zooms in on the website for United Rentals (URI).
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United Rentals (NYSE:URI) is one of the world’s biggest equipment rental firms. It presents a compelling investment case as one of the industrial stocks set to deliver robust returns. The company recently posted remarkable financials. Strong broad-market demand trends and key acquisitions fueled these results.

In the third quarter of 2023, United Rentals achieved all-time-high revenues of $3.7 billion. This represents an eye-catching 23% increase year-over-year. It was powered by rising demand across all the company’s end markets. Strategic takeovers like Ahern Rentals have also boosted United Rentals’ growth. A closer look shows strong performance in specific segments — specialty rentals revenue expanded 16.1% to $917 million.

The company’s operational execution also shined through this quarter, with higher volumes and margins driving a 16% rise in net income to $703 million. Considering such remarkable financial performance recently, United Rentals issued a promising full-year 2023 outlook. Total annual revenues are projected to be between $14.1 billion and $14.3 billion, while adjusted EBITDA could reach $6.775 billion to $6.875 billion.

With United Rentals leveraging robust equipment rental demand and value-adding acquisitions to achieve record results, it makes for one of the more attractive industrial stocks. The company’s dominant industry position and continued growth pave the way for strong investor returns.

Waste Management (WM)

Image of green Waste Management (WM) branded truck in the foreground and building with Waste Management flag in the background.
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Waste Management (NYSE:WM) is one of the industrial stocks to buy for robust returns ahead. The company is North America’s leading waste management environmental services provider. It partners with more than 20 million commercial, industrial and municipal customers.

Recent financial results showcase Waste Management’s stellar performance. In Q3 2023, the company delivered over 6% growth in adjusted operating EBITDA and 100 basis points of margin expansion. Impressively, operating EBITDA in the core collection and disposal business surged by approximately $105 million to $1.7 billion, with a 32.6% margin.

Waste Management is also directing capital into substantive sustainability growth investments in renewable energy and recycling. These are forecasted to deliver approximately $740 million in extra annual adjusted operating EBITDA by 2026. Specifically, renewable energy projects should contribute $500 million, while recycling automation will add $240 million.

With disciplined pricing power, optimized costs and smart reinvestment, Waste Management offers investors robust total return potential ahead. This is another of the industrial stocks that is firing on all cylinders.

Copart (CPRT)

the front wheels of a series of cars in a line
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Copart (NASDAQ:CPRT) is a global leader in online vehicle auctions. It provides services to process and sell mainly salvage and clean-title vehicles over the internet. With operations at over 200 locations in 11 countries, Copart has more than 250,000 vehicles available online every day.

Recently, Copart announced a new strategic investment and partnership with Purple Wave, an online offsite heavy equipment auction company. This move expands Copart’s capabilities in the equipment auction industry. By leveraging the expertise of both companies, Copart becomes one of the more interesting industrial stocks.

Copart is a strong pick for industrial investors due to its extremely high returns on equity and capital. Over the past 10 years, Copart has maintained a median ROE of 21.46% and a median ROIC of 28.61%. As of October 2023, its ROE stands at 31.11%, while its ROIC is 30.13%. This demonstrates the company’s ability to efficiently deploy capital and generate significant profits.

Additionally, Copart has very low capital expenditures, making it an ideal industrial stock for the current high inflation and interest rate environment. Copart owns 90% of its real estate outright. It operates with near zero debt. This means it faces limited expenses and constraints. This lack of debt and low capex contributes to its high margins, which were 31.1% over the last 12 months.

With a strong competitive advantage in a lucrative niche, institutional ownership of 80%, a projected 23%+ upside to its stock price, and a focus on used vehicles to withstand economic conditions, Copart offers investors a relatively safe stock that can deliver healthy returns.

On the date of publication, Andrea van Schalkwyk did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Andrea van Schalkwyk is a value investor who adheres to the principles of the renowned Warren Buffett and his mentor Benjamin Graham. He holds a Master of Engineering (MEng) from the University of Padua and an Executive MBA from the CUOA Business School.

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