Dj Zurn Elkay Water Solutions Corp Co, Inst Holders, 3Q 2024 (Zws)

Stanley Black & Decker, Inc. SWK has been benefiting from its cost-reduction program, which is expected to aid the bottom line and drive margins. The program comprises a series of initiatives to resize the organization, reduce inventory and optimize the supply chain for pursuing sustainable long-term growth.

Since its inception in mid-2022, this program has generated roughly $1.4 billion in pre-tax run-rate savings and reduced inventory by more than $2 billion. SWK expects to generate pre-tax run rate savings of $2 billion by the end of 2025, with an adjusted gross margin of more than 35% in the long term.

Stanley Black has been divesting non-core operations to drive growth. In April 2024, the company divested its STANLEY Infrastructure business to Epiroc AB for a cash consideration of $760 million. The divestment will help the company focus on its core businesses, reduce debt and support capital-allocation priorities.

SWK remains focused on rewarding its shareholders through dividend payments and share buybacks. In the first nine months of 2024, the firm paid dividends of $367.2 million, up 1.8% year over year. Also, in July 2024, SWK hiked its quarterly dividend by a penny to 82 cents per share.

SWK Stock’s Price Performance

Powell Industries, Inc.’s POWL fourth-quarter fiscal 2024 (ended September 2024) adjusted earnings of $3.77 per share surpassed the Zacks Consensus Estimate of $3.49. The bottom line increased 74% year over year. Results benefited primarily from higher revenues generated in the quarter. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

Powell’s total revenues of $275.1 million missed the consensus estimate of $277 million. The top line increased 32% year over year. The year-over-year increase was primarily driven by strength across all sectors, including petrochemical, oil & gas and commercial & other industrial sectors.

In fiscal 2024, its revenues totaled $1 billion, reflecting an increase of 45% year over year. Adjusted earnings were $12.29 per share, up 175% year over year.

Inside the Headlines

In the fiscal fourth quarter, it generated revenues of $50.4 million from the petrochemical sector, up 112% year over year. Revenues from the oil & gas sector amounted to $115.4 million, up 23% year over year. The commercial & other industrial sector’s revenues increased 66% to $48.3 million.

In the fiscal fourth quarter, new orders totaled $267 million compared with $171 million in the year-ago quarter. Exiting the quarter, its backlog totaled $1.3 billion, relatively flat on a sequential as well as year-over-year basis.

Powell Industries, Inc. Price, Consensus and EPS Surprise

Powell Industries, Inc. price-consensus-eps-surprise-chart | Powell Industries, Inc. Quote

Margin Profile of POWL

In the fiscal fourth quarter, Powell’s cost of sales increased 24.2% year over year to $194.6 million. Gross profit increased 54.6% year over year to $80.4 million and the margin increased 430 basis points (bps) to 29.2%. Selling, general and administrative expenses were $21.6 million, up 5.9% year over year.

Operating income increased 89% year over year to $56.1 million. The operating margin was 20.4%, up 610 bps year over year.

Powell’s Balance Sheet and Cash Flow

Exiting fiscal 2024, Powell had cash equivalents and short-term investments of $358.4 million compared with $279 million at the end of fiscal 2023. Current liabilities were $428 million compared with $395.7 million at the end of fiscal 2023.

Stockholders’ equity totaled $483.1 million. In fiscal 2024, capital expenditure totaled $12 million, up 53.8% year over year.

In the same period, the company used $12.7 million for distributing dividends, relatively stable on a year-over-year basis.

2025 Guidance

Powell expects to witness continued strength across most of the end markets across all geographies. Given the company’s robust backlog, solid liquidity and a strong balance sheet, it looks forward to witnessing strong financial results in fiscal 2025 (ending September 2025).

Zacks Rank & Stocks to Consider

POWL currently carries a Zacks Rank #3 (Hold). Here are some better-ranked stocks from the same space:

Kadant Inc. KAI presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It has a trailing four-quarter average earnings surprise of 17.2%. The Zacks Consensus Estimate for KAI’s 2024 earnings has improved 1.8% in the past 60 days.

Atmus Filtration Technologies Inc. ATMU presently has a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 13.8%, on average. The consensus estimate for ATMU’s 2024 earnings has increased 1.3% in the past 60 days.

Zurn Elkay Water Solutions Corporation ZWS presently carries a Zacks Rank of 2. ZWS delivered a trailing four-quarter earnings surprise of 8.5%, on average. The Zacks Consensus Estimate for Zurn Elkay’s 2024 earnings has increased 2.5% in the past 60 days.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 20, 2024 – Today, Zacks Equity Research discusses Zurn Elkay Water Solutions Corp. ZWS, Eaton Corp. plc ETN, Emerson Electric Co. EMR and Powell Industries, Inc. POWL.

Industry: Electronics Manufacturing

Link: https://www.zacks.com/commentary/2371962/4-manufacturing-electronics-stocks-to-watch-despite-industry-headwinds

The Zacks Manufacturing - Electronics industry has been grappling with persistent weakness in the manufacturing sector, slowdown in new orders and supply-chain disruptions. Rising input costs, restructuring expenses and a tough labor market also create concerns for the industry.

However, the industry is benefiting from steady demand across the electronic services end market and increased adoption of advanced manufacturing technologies. Zurn Elkay Water Solutions Corp., Eaton Corp. plc, Emerson Electric Co. and Powell Industries, Inc. appear well-poised to capitalize on the opportunities.

Industry Description

The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery chargers, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls and motive power devices. Some industry players also provide water-treatment products, engineered flow components, process equipment and turn-key systems.

These companies offer state-of-the-art customer support and after-market services to end users. The firms are increasing investments in developing innovative technologies, boosting customer and employee experience, and supply-chain modernization programs. The manufacturing electronic companies sell products and services in various end markets, including robotics, semiconductor, defense, aerospace, medical equipment and satellite communications.

Major Trends Shaping the Future of the Manufacturing Electronics Industry

Weakness in the Manufacturing Sector: Persistent weakness in the manufacturing sector has been denting demand in the industry. After breaking a 16-month contraction streak by growing in March 2024, the manufacturing sector contracted for the seventh consecutive month in October. Per the Institute for Supply Management’s (ISM) report, the Manufacturing Purchasing Manager’s Index touched 46.5% in October, lower than the 47.2% recorded in both September and August. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index remained in the contraction territory for seven consecutive months, registering 47.1% in the previous month.

Supply-Chain Disruptions: Supply-chain disruptions, especially related to the availability of electrical and electronic components, have been concerning for industry participants recently. This is evident from the latest ISM report’s Supplier Deliveries Index, which reflected slower deliveries for the fourth successive month in October. Supply-chain issues, if not controlled, may continue to raise warehouse and other logistics expenses.

Rising Costs Hurt Margins: Industry participants have been encountering input cost inflation and other expenses, denting profitability. A few industry players have been incurring higher restructuring expenses and headcount-related costs. The rise in expenses, along with a tough labor market, poses a threat to margins. However, companies have been focused on cost management initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and implementing effective pricing strategies.

Strength in the Electronics Services Market: Despite a slowdown in manufacturing activities, demand across key end markets has been stable. Electronics manufacturers are steadily benefiting from the higher adoption of advanced manufacturing technologies and processes by original equipment manufacturers.

The requirement for integrating advanced electronic components into machinery and electronic devices has been supporting the electronics manufacturing services market. In addition, a few industry players with wide exposure to the booming medical and life science markets are witnessing a positive momentum across their businesses due to sturdy demand for their products and solutions.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Manufacturing – Electronics industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #163. This rank places it in the bottom 35% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are putting less faith in this group's earnings growth potential. The industry’s earnings estimates for 2024 have decreased 11.3% over the past year.

Despite bleak near-term prospects, we will present a few stocks that you may want to retain in your portfolios. However, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Lags Sector & the S&P 500

The Zacks Manufacturing – Electronics industry has underperformed the broader sector and the Zacks S&P 500 composite index in the past year.

Over this period, the industry has gained 28.5% compared with the sector’s and S&P 500 Index’s growth of 28.9% and 29.2%, respectively.

Industry's Current Valuation

On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 26.48X compared with the S&P 500’s 22.13X. It is also above the sector’s P/E ratio of 21.03X.

Over the past five years, the industry has traded as high as 28.43X and as low as 14.78X, with the median being 22.48X.

4 Manufacturing - Electronics Stocks to Keep a Tab On

Zurn Elkay Water Solutions: Based in Milwaukee, WI, the company is a designer, manufacturer and marketer of water management solutions primarily in the United States and Canada. ZWS is poised to gain from the growing awareness of the need for clean, filtered drinking water, solid demand for its products and solutions, and its focus on operational execution.

In the past year, shares of Zurn Elkay Water Solutions have gained 32.9%. The company delivered an earnings surprise of 8.5%, on average, beating estimates in the trailing four quarters. The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s 2024 earnings has been revised upward by 2.5% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Eaton: Based in Dublin, Ireland, Eaton is a diversified power management company and a global technology leader in electrical components and systems. It is benefiting from rising demand from the new AI data center and contributions from its organic assets. Reindustrialization and megatrends will create more opportunities for Eaton in the near term. ETN currently carries a Zacks Rank #3 (Hold).

The company’s shares have rallied 57.6% in the past year. ETN reported better-than-expected results in each of the last four quarters, the average being 3.6%. The Zacks Consensus Estimate for its 2024 earnings has been revised upward by 0.4% in the past 60 days.

Emerson: Headquartered in St. Louis, MO, Emerson is a diversified global engineering and technology company. It offers a wide range of products and services to customers in consumer, commercial and industrial markets. EMR is benefiting from solid momentum in the Intelligent Devices and Software and Control segments. Strength in the energy and power end markets is aiding the final control business. A strong backlog conversion level is aiding the Measurement & Analytical business’ revenues. The successive acquisitions of Afag and Flexim spark optimism in the stock.

This Zacks Rank #3 company’s shares have rallied 45.9% in the past year. It reported better-than-expected results in each of the last four quarters, the average being 6.7%.

Powell Industries: Headquartered in Houston, TX, the company is engaged in designing, manufacturing and distributing custom-engineered equipment and systems. It has been witnessing several favorable trends across its strong growth across the oil & gas, and petrochemical sectors. Also, solid momentum in the commercial and other industrial sectors is likely to drive its performance in the quarters ahead.

Shares of this Zacks Rank #3-rated company have soared 245.9% in the past year. POWL reported better-than-expected results in the trailing four quarters, the average being 69.9%. The Zacks Consensus Estimate for the company’s fiscal 2025 (ending September 2025) earnings has remained steady in the past 60 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

Investors interested in Industrial Products stocks should always be looking to find the best-performing companies in the group. Has ScanSource (SCSC) been one of those stocks this year? By taking a look at the stock's year-to-date performance in comparison to its Industrial Products peers, we might be able to answer that question.

ScanSource is a member of the Industrial Products sector. This group includes 213 individual stocks and currently holds a Zacks Sector Rank of #12. The Zacks Sector Rank gauges the strength of our 16 individual sector groups by measuring the average Zacks Rank of the individual stocks within the groups.

The Zacks Rank emphasizes earnings estimates and estimate revisions to find stocks with improving earnings outlooks. This system has a long record of success, and these stocks tend to be on track to beat the market over the next one to three months. ScanSource is currently sporting a Zacks Rank of #1 (Strong Buy).

The Zacks Consensus Estimate for SCSC's full-year earnings has moved 3.7% higher within the past quarter. This is a sign of improving analyst sentiment and a positive earnings outlook trend.

Our latest available data shows that SCSC has returned about 24.7% since the start of the calendar year. Meanwhile, the Industrial Products sector has returned an average of 17.8% on a year-to-date basis. This means that ScanSource is outperforming the sector as a whole this year.

One other Industrial Products stock that has outperformed the sector so far this year is Zurn Water (ZWS). The stock is up 33.2% year-to-date.

For Zurn Water, the consensus EPS estimate for the current year has increased 2.5% over the past three months. The stock currently has a Zacks Rank #2 (Buy).

Breaking things down more, ScanSource is a member of the Industrial Services industry, which includes 20 individual companies and currently sits at #170 in the Zacks Industry Rank. Stocks in this group have gained about 15% so far this year, so SCSC is performing better this group in terms of year-to-date returns.

In contrast, Zurn Water falls under the Manufacturing - Electronics industry. Currently, this industry has 16 stocks and is ranked #163. Since the beginning of the year, the industry has moved +20.3%.

Going forward, investors interested in Industrial Products stocks should continue to pay close attention to ScanSource and Zurn Water as they could maintain their solid performance.

Zacks Investment Research

The Zacks Manufacturing - Electronics industry has been grappling with persistent weakness in the manufacturing sector, slowdown in new orders and supply-chain disruptions. Rising input costs, restructuring expenses and a tough labor market also create concerns for the industry.

However, the industry is benefiting from steady demand across the electronic services end market and increased adoption of advanced manufacturing technologies. Zurn Elkay Water Solutions Corporation ZWS, Eaton Corporation plc ETN, Emerson Electric Co. EMR and Powell Industries, Inc. POWL appear well-poised to capitalize on the opportunities.

Industry Description

The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery chargers, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls and motive power devices. Some industry players also provide water-treatment products, engineered flow components, process equipment and turn-key systems. These companies offer state-of-the-art customer support and after-market services to end users. The firms are increasing investments in developing innovative technologies, boosting customer and employee experience, and supply-chain modernization programs. The manufacturing electronic companies sell products and services in various end markets, including robotics, semiconductor, defense, aerospace, medical equipment and satellite communications.

Major Trends Shaping the Future of the Manufacturing Electronics Industry

Weakness in the Manufacturing Sector: Persistent weakness in the manufacturing sector has been denting demand in the industry. After breaking a 16-month contraction streak by growing in March 2024, the manufacturing sector contracted for the seventh consecutive month in October. Per the Institute for Supply Management’s (ISM) report, the Manufacturing Purchasing Manager’s Index touched 46.5% in October, lower than the 47.2% recorded in both September and August. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index remained in the contraction territory for seven consecutive months, registering 47.1% in the previous month.

Supply-Chain Disruptions: Supply-chain disruptions, especially related to the availability of electrical and electronic components, have been concerning for industry participants recently. This is evident from the latest ISM report’s Supplier Deliveries Index, which reflected slower deliveries for the fourth successive month in October. Supply-chain issues, if not controlled, may continue to raise warehouse and other logistics expenses.

Rising Costs Hurt Margins: Industry participants have been encountering input cost inflation and other expenses, denting profitability. A few industry players have been incurring higher restructuring expenses and headcount-related costs. The rise in expenses, along with a tough labor market, poses a threat to margins. However, companies have been focused on cost management initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and implementing effective pricing strategies.

Strength in the Electronics Services Market: Despite a slowdown in manufacturing activities, demand across key end markets has been stable. Electronics manufacturers are steadily benefiting from the higher adoption of advanced manufacturing technologies and processes by original equipment manufacturers. The requirement for integrating advanced electronic components into machinery and electronic devices has been supporting the electronics manufacturing services market. In addition, a few industry players with wide exposure to the booming medical and life science markets are witnessing a positive momentum across their businesses due to sturdy demand for their products and solutions.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Manufacturing – Electronics industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #163. This rank places it in the bottom 35% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak prospects in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are putting less faith in this group's earnings growth potential. The industry’s earnings estimates for 2024 have decreased 11.3% over the past year.

Despite bleak near-term prospects, we will present a few stocks that you may want to retain in your portfolios. However, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Lags Sector & the S&P 500

The Zacks Manufacturing – Electronics industry has underperformed the broader sector and the Zacks S&P 500 composite index in the past year.

Over this period, the industry has gained 28.5% compared with the sector’s and S&P 500 Index’s growth of 28.9% and 29.2%, respectively.

Price Performance

Industry's Current Valuation

On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 26.48X compared with the S&P 500’s 22.13X. It is also above the sector’s P/E ratio of 21.03X.

Over the past five years, the industry has traded as high as 28.43X and as low as 14.78X, with the median being 22.48X, as the chart below shows.

Price-to-Earnings Ratio vs SP500

Price-to-Earnings Ratio vs Sector

4 Manufacturing - Electronics Stocks to Keep a Tab on

Zurn Elkay Water Solutions: Based in Milwaukee, WI, the company is a designer, manufacturer and marketer of water management solutions primarily in the United States and Canada. ZWS is poised to gain from the growing awareness of the need for clean, filtered drinking water, solid demand for its products and solutions, and its focus on operational execution.

In the past year, shares of Zurn Elkay Water Solutions have gained 32.9%. The company delivered an earnings surprise of 8.5%, on average, beating estimates in the trailing four quarters. The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s 2024 earnings has been revised upward by 2.5% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price and Consensus: ZWS