On Jan 14, we issued an updated research report on Milacron Holdings Corp. MCRN. The company will benefit from organizational redesign and cost reduction initiatives, rising demand from plastics in many markets, and introduction of new products.
Let’s illustrate these growth factors in detail.
Rising Demand for Plastic to Sustain Results
Demand for a diverse range of finished plastic products has been on the rise in many markets, including automotive, construction and consumer products. This is being fueled by global population growth, sustained urbanization, increased purchasing power and improved lifestyle in emerging markets. Given its strong global presence, Milacron is well positioned to capture a portion of this growth.
The company has made significant investments in China and India, considering the projected growth rate of plastic business in these markets. Milacron plans to continue expanding manufacturing capabilities, while also improving its technical, marketing and sales efforts.
Poised to Deliver Both Top- & Bottom-Line Growth
Milacron’s strategy is focused on improving revenues and operating profits through selective initiatives that leverage its market position, geographic footprint and core competencies. Management expects profitability to be supported by revenue growth and margin expansion in the near term. Revenue growth will come from underlying market growth in key segments, geographic expansion of certain product lines, continued penetration of hot runners, and incremental share gain from new products. New products are focused on solidifying the current market position and expansion of addressable market through the introduction of technology that displaces other materials, primarily metal and glass.
In the Melt Delivery and Control Systems (“MDCS”) segment, the hot-runner market is likely to grow faster than the overall global economy based on macro-economic drivers involving product life cycles, demographics, technology conversion and greater use of plastic. In the fluids segment, demand for industrial fluids is closely tied to demand for metal products, which are produced on metalworking machinery through cutting, stamping and other processes. As industrial production and demand for metalworking machinery grows, manufacturers will require increased amounts of high-quality coolants, lubricants and cleaners to maximize productivity, and extend the life of equipment and tooling. Market trends indicate elevated demand for technology fluids due to environmental and health concerns, and increasing prevalence of exotic metals.
The company has undertaken a number of organizational redesign and cost-reduction initiatives over the past three years. The key actions include realigning the overall cost structure, consolidating sales offices and call centers, along with optimizing its manufacturing footprint.
Share Price Performance
Over the last year, Milacron has plunged around 30%, compared with the industry’s decline of 25%.
Zacks Rank & Other Stocks to Consider
Milacron currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the sector include Brady Corporation BRC, Enersys ENS and Alarm.com Holdings, Inc. ALRM. All three stocks carry the same rank as Milacron.
Brady has a long-term earnings growth rate of 7.5%. The company’s shares have gained around 17% over the past year.
Enersys has a long-term earnings growth rate of 10%. Its shares have gained 11%, over the past year.
Alarm.com has a long-term earnings growth rate of 17%. The stock has appreciated 51% over the past year.
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