Dj Esab Corp Com, Inst Holders, 3Q 2024 (Esab)

The Zacks Metal Products - Procurement and Fabrication industry is poised to gain from diverse end-market demand. As inflation continues to ease, order volumes are anticipated to rise. Signs of improving supply-chain conditions add to the positive outlook.

Players like Norsk Hydro ASA NHYDY, ESAB Corporation ESAB, Century Aluminum CENX and Northwest Pipe Company NWPX have witnessed order growth and delivered improved performances. Solid end-market demand, efforts to gain market share and investment in automation should aid growth for these companies. Their focus on cost management and improving efficiency will boost margins.

About the Industry

The Zacks Metal Products - Procurement and Fabrication industry primarily comprises metal processing and fabrication service providers that transform metal into metal parts, machinery or components used across various other industries. Their processes include forging, stamping, bending, forming and machining, which are used to shape individual pieces of metal, and welding and assembling to join parts. The companies either use one of these processes or a combination of these. The most common raw materials utilized by metal fabrication companies include plate metal, formed or expanded metal, tube stock, welding wire or rod, and casting. The industry players serve an array of markets, including construction, mining, aerospace and defense, automotive, agriculture, oil and gas, electronics/electrical components, industrial equipment, and general consumer.

What's Shaping the Future of Metal Products - Procurement and Fabrication Industry

Expected Pickup in Order Levels as Inflationary Pressures Abate: Per the Fed’s latest industrial production report, the aggregate production of fabricated metal products in the United States edged down 0.2% in October 2024, same as in September. It marks an improvement from the 1.1% decline in August. Overall, industrial production decreased 0.3% in October after declining 0.5% in September. Hurricane Milton and the lingering effects of Hurricane Helene, and a strike at Boeing led to the decline. The Institute for Supply Management’s Manufacturing Index has been in the contraction territory for seven consecutive months, with a reading of 46.5% in October. Orders have been impacted, reflecting lower customer spending amid inflationary trends. Even though the New Orders index contracted for the seventh consecutive month, it was 47.1% in October, a tad higher than September’s 46.1%. With the inflation metrics showing signs of slowing down, orders will pick up. The industry was affected by supply-chain issues, although some improvement has been noted recently. Once the situation normalizes, demand in the metal Products - Procurement and Fabrication industry’s diverse end markets will drive growth.

Pricing Actions to Combat High Costs: The industry had been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. The industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency, and the diversification of supplier bases to mitigate some of these headwinds.

Automation & End-Market Growth to Act as Catalysts: The industry’s customer-focused approach to providing cost-effective technical solutions and automation to increase efficiency and lower labor costs bodes well. Also, focus on developing the latest and innovative products should drive growth in the days ahead. Growth in the end-use sectors, such as manufacturing, aerospace and automotive, is anticipated to benefit the metal fabrication market over the next few years. Developing countries hold promise due to rapid industrialization. This, in turn, is likely to create demand.

Zacks Industry Rank Indicates Bright Prospects

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates upbeat prospects in the near term. The Zacks Metal Products - Procurement and Fabrication industry, which is a 12-stock group within the broader Industrial Products Sector, currently carries a Zacks Industry Rank #82, which places it at the top 33% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks that you may want to consider for your portfolio, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Versus Broader Sector

The Zacks Metal Products - Procurement and Fabrication industry has outperformed its sector and the Zacks S&P 500 composite over the past year.

Over this period, the industry has gained 66% compared with the sector’s growth of 30%. Meanwhile, the Zacks S&P 500 composite has also risen 30%.

One-Year Price Performance

Investors with an interest in Metal Products - Procurement and Fabrication stocks have likely encountered both Norsk Hydro ASA (NHYDY) and Esab (ESAB). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Norsk Hydro ASA has a Zacks Rank of #2 (Buy), while Esab has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NHYDY has an improving earnings outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

NHYDY currently has a forward P/E ratio of 9.80, while ESAB has a forward P/E of 26.12. We also note that NHYDY has a PEG ratio of 0.19. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ESAB currently has a PEG ratio of 2.25.

Another notable valuation metric for NHYDY is its P/B ratio of 1.09. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, ESAB has a P/B of 4.15.

These are just a few of the metrics contributing to NHYDY's Value grade of A and ESAB's Value grade of D.

NHYDY stands above ESAB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that NHYDY is the superior value option right now.

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