The Zacks Analyst Blog Highlights: Harsco, HD Supply, Aggreko and DMC Global
For Immediate Release
Chicago, IL – December 13, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Harsco Corporation HSC, HD Supply Holdings, Inc. HDS, Aggreko PLC ARGKF and DMC Global Inc. BOOM.
Here are highlights from Wednesday’s Analyst Blog:
Industrial Services Industry on a Roll: 4 Stocks to Bet On
The Zacks Industrial Services industry is riding on an improving overall economy. Increased investments in e-commerce and digital capabilities, and growth in end markets will further boost the industry.
Rising Demand a Boon
Industrial Services primarily includes providers of industrial equipment products and MRO (maintenance, repair and operations) services. These items (repair components, cutting fluids, lubricants, safety supplies and other consumables) are utilized in production and plant maintenance but are not directly related to customer’s core products or services.
Customers of this industry primarily belong to commercial, government, healthcare and manufacturing space. Given that MRO inventory accounts for as much as 40% of their annual budget, improved outlook and increased customer spending bode well for Industrial Services. Further, the evolution of e-commerce has significantly impacted MRO demand with every passing year. In the United States, business investment and exports are two major indicators of MRO spending. Business investment is likely to grow supported by favorable financial conditions, expanding global markets, lower capital costs and an improving regulatory climate.
Improvement in end markets like recovery in manufacturing activity, residential and non-residential construction; ongoing revival in the oil and gas industry and economic growth will continue to drive the industry. The recent tax reform is likely to lead to higher capital spending and attract incremental foreign capital to the United States, in turn, bolstering exports.
Inflation Remains a Headwind
Inflation has hit Industrial Services hard, particularly metal-based products. In fact, the recent heightened trade tariffs resulted in the industry dealing with higher costs of raw material and threat of undercutting business spending. Also, distributors continue to pass along higher prices to customers. However, it may not always be possible or adequate to cover rising product inflation in an intensely competitive environment, consequently limiting margins. With United States and China coming to a truce over the trade war, this will provide a relief to the industry.
Industry Outperforms S&P 500, Valuation Inexpensive
The Industrial Services industry, which is a 17-stock group within the Zacks Industrial Products Sector, has outperformed its own sector and the S&P 500 over the past year. Notably, the industry has gained 10.2%, while the S&P 500 dipped 0.9%. Meanwhile, the Industrial Products sector declined 16.8%.
The industry's valuation looks really cheap now. One might get a good sense of the industry’s relative valuation by looking at its enterprise value to earnings before interest depreciation and amortization (EV/EBITDA).
The industry currently has a forward 12-month EV/EBITDA ratio of 10.2, which looks inexpensive when compared with the market at large. The trailing 12-month EV/EBITDA ratio for the S&P 500 is 11.0. A comparison of the industry’s EV/EBITDA ratio with that of its broader sector ensures that the industry is trading at a decent discount. The Industrial Products sector’s forward 12-month EV/EBITDA ratio of 12.3 is above the Industrial Services industry’s 10.2.
How to Play the Industry?
We suggest a few Industrial Services stocks that have a favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) and are witnessing upward estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimate revisions is the most crucial factor impacting stock prices. Stocks with rising earnings estimates have a tendency to perform better than other stocks in the group, even if the industry fundamentals remain sluggish. We have zeroed in on four such stocks below:
Harsco Corporation:The Zacks Consensus Estimate for fiscal 2018 earnings per share has moved 2% up over the past 90 days. In a year’s time, this Zacks Rank #1 stock has gained 26%. Furthermore, this Camp Hill, PA-based company delivered average four-quarter positive earnings surprise of 13.58%.
HD Supply Holdings, Inc.: The Zacks Consensus Estimate for fiscal 2019 earnings per share has moved 1% up over the past 90 days. Currently, this Atlanta, GA-based company has a Zacks Rank #2 and average four-quarter positive earnings surprise of 6.91%.
Aggreko PLC: This Glasgow, U.K-based company carries a Zacks Rank #2. The Zacks Consensus Estimate for fiscal 2018 earnings has climbed 2% over the past 90 days.
DMC Global Inc.: The Zacks Consensus Estimate for fiscal 2018 earnings per share has moved 4% north over the past 90 days. In a year’s time, this Zacks Rank #2 stock has surged 59%. Moreover, this Boulder, CO-based company delivered average four-quarter positive earnings surprise of 42.16%.
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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.
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DMC Global Inc. (BOOM) : Free Stock Analysis Report
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Harsco Corporation (HSC) : Free Stock Analysis Report
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