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7 Manufacturing Stocks That Will Overcome Current Difficulties

Posted on Wednesday, January 5th, 2022 by MarketBeat Staff
7 Manufacturing Stocks That Will Overcome Current Difficulties

The manufacturing industry was one of the hardest hits in 2020. In the initial months of the coronavirus pandemic, many companies were forced to shutter operations. However, opportunistic investors kept their eye on several of these companies as recovery stocks. And at the beginning of 2021, the emergence of several vaccines allowed businesses to reopen.  Not surprisingly, manufacturing stocks were among the biggest winners.

But where are these stocks headed in 2022? In December, American manufacturers reported their slowest pace of growth in 11 months. A closely followed index of U.S.-based manufacturers dropped to 58.7% in the final month of 2021. This was slightly lower than the 61.1% in November according to the Institute for Supply Management.

Still, any number of above 50% signals expansion. And the number is only slightly below the 60% level that signifies exceptional growth.

Ironically, it’s the virus that continues to provide a headwind. Supply chains are unwinding but not nearly fast enough to prevent material shortages. The controversy surrounding vaccine mandates is causing labor shortages.

However, there’s a strong likelihood that manufacturing stocks will have a strong year in 2022. And even if they don’t, many of these stocks pay a reliable dividend. That’s why we’ve put together this special presentation on the manufacturing stocks that will overcome current difficulties.



#1 - Caterpillar (NYSE:CAT)

Caterpillar logo

Caterpillar (NYSE:CAT) stock is up 17% in the last 12 months which is easily outperforming the Industrials sector. However, the stock is 12% below its 52-week high and analysts give CAT stock a consensus price target of $235 which is an 8% increase and suggests that the stock is undervalued at this time.

Caterpillar was an unquestioned winner as construction activity picked up in 2021. That may remain a catalyst in 2022. And analysts also anticipate that Caterpillar may benefit from oil prices remaining at elevated levels. On the other hand, Caterpillar has made no secret that it has been affected by supply chain disruption as well as rising materials and commodities cost due to inflation.

Weighing all those factors may have some investors concerned about growth. However, one reason that investors buy CAT stock is for the dividend. The company is a member of the Dividend Aristocrat club having increased its dividend in each of the last 28 years.

About Caterpillar

Caterpillar, Inc engages in the manufacture of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. It operates through the following segments: Construction Industries, Resource Industries, Energy and Transportation, Financial Products, and All Other.Read More 
Current Price
$217.16
Consensus Rating
Buy
Ratings Breakdown
11 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
Consensus Price Target
$240.00 (10.5% Upside)




#2 - Deere & Company (NYSE:DE)

Deere & Company logo

If you’re looking for a stock that’s outpaced the performance of the S&P 500 Index, you can look at Deere & Company (NYSE:DE). The stock is up 38% in the last 12 months. The company has a diversified business model that makes it a market share leader across multiple large farm categories.

Despite delivering double beats in revenue and earnings for the last four quarters, continuing concerns over the coronavirus as well as supply chain difficulties have kept DE stock from breaking out of a range. That’s been particularly true since the end of September. But in the last month, the stock is looking like it’s ready to break out.

To that end, analysts give DE stock a consensus price target of $406.13 which is a 10% gain from its current level. One reason for optimism is continuing elevated commodity prices which have historically been a harbinger of capital gains growth for DE stock.

And John Deere has shown an ability to increase shareholder value with dividends and stock buybacks during strong economic times.

About Deere & Company

Deere & Co engages in the manufacture and distribution of equipment used in agriculture, construction, forestry and turf care. It operates through the following segments: Agriculture and Turf, Construction and Forestry and Financial Services. The Agriculture and Turf segment focuses on the distribution and manufacture of a full line of agriculture and turf equipment and related service parts.Read More 
Current Price
$376.72
Consensus Rating
Buy
Ratings Breakdown
11 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
Consensus Price Target
$420.87 (11.7% Upside)




#3 - Boeing (NYSE:BA)

Boeing logo

For a stock that analysts believe has more upside, you should look at Boeing (NYSE:BA). After a terrible 2019 marred by safety concerns over its 737 MAX jets, Boeing was whacked by the pandemic. And although BA stock rebounded in a big way in 2020, it struggled to gain traction in 2021. In fact, the stock gained just 4% in the last 12 months.

However, analysts view Boeing stock as being undervalued with an upside of 26.9%. A significant reason for this is that analysts believe that the worst is over. That opinion received some bullish support when Safran, the French aerospace company, announced it would be hiring 12,000 employees in expectations of a recovery in the aerospace industry.

The question will be how quickly investors should expect capital growth in the stock. The real growth isn’t forecast until 2023 when Boeing is expected to return to profitability. That also means it won’t be until sometime after that when Boeing may decide to reinstate its dividend.

About Boeing

The Boeing Co is an aerospace company, which engages in the manufacture of commercial jetliners and defense, space and security systems. It operates through the following segments: Commercial Airplanes; Defense, Space and Security; Global Services; and Boeing Capital. The Commercial Airplanes segment includes the development, production, and market of commercial jet aircraft and provides fleet support services, principally to the commercial airline industry worldwide.Read More 
Current Price
$198.45
Consensus Rating
Buy
Ratings Breakdown
12 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
Consensus Price Target
$265.11 (33.6% Upside)




#4 - International Business Machines (NYSE:IBM)

International Business Machines logo

Looking at the tech sector, investors can consider, International Business Machines (NYSE:IBM). IBM posted 11% growth in the last 12 months and has largely recovered from the sharp sell-off it suffered in mid-October. The reason for the sell-off was a decline in revenue after the company completed its sell-off of Kyndryl.

The revival in IBM has been largely due to its pivot towards the cloud and artificial intelligence (AI). However, the company is launching some new hardware solutions that are expected to drive revenue growth in the first half of 2022. This doesn’t mean that IBM is abandoning its shift to become less reliant on these low margin businesses. But it does mean that, at least for this year, IBM may be able to capitalize on the reopening trade.

Analysts suggest that IBM stock has a nearly 10% upside from its current level. And IBM is a Dividend Aristocrat having increased its dividend in each of the last 27 years.

About International Business Machines

International Business Machines Corp. is an information technology company, which provides integrated solutions that leverage information technology and knowledge of business processes. It operates through the following segments: Cloud and Cognitive Software, Global Business Services, Global Technology Services, Systems, and Global Financing.Read More 
Current Price
$136.36
Consensus Rating
Hold
Ratings Breakdown
4 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
Consensus Price Target
$147.90 (8.5% Upside)




#5 - Builder’s FirstSource (NYSE:BLDR)

Builders FirstSource logo

A decision to invest in Builder’s FirstSource (NYSE:BLDR) will depend on how you feel about the continued strength in the housing market. In November 2021, the U.S. Census Bureau reported that housing starts increased by 11.8%, the highest level since March. This is part of what is being considered a secular uptrend. And despite housing starts increasing, most estimates say the United States is short millions of single-family homes.

And that’s good news for Builder’s FirstSource that manufacturers and supplies building materials, manufactured components, and provides other services to homebuilders, contractors, remodelers, and consumers throughout the United States.

The company was originally a lumber provider but has expanded far beyond that through a series of acquisitions. And those acquisitions have boosted the company’s margins and profits.

However, investors may want to wait to get a clear buying signal. BLDR stock is up 115% in the last 12 months which puts it at the ceiling of analysts’ estimates.

About Builders FirstSource

Builders FirstSource, Inc engages in the supply and manufacture of building materials, manufactured components and construction services to professional homebuilders, sub-contractors, remodelers and consumers. The firm operates through the following segments: Northeast, Southeast, South and West. Its products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows, custom millwork and trim, as well as engineered wood.Read More 
Current Price
$69.06
Consensus Rating
Buy
Ratings Breakdown
11 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
Consensus Price Target
$90.10 (30.5% Upside)




#6 - 3M (NYSE:MMM)

3M logo

3M (NYSE:MMM) was a pandemic winner as the company’s products and services were in high demand.  However, since hitting its 52-week high in the Spring of 2021, MMM stock price is down 14%. In fact, shareholders who bought 3M stock five years ago, are seeing very little share price growth. But with the stock near its 52-week low, is the stock a buy?

Investors have concerns about how the company can respond to supply chain disruptions and an increase in costs. And that is being reflected in the company’s top and bottom lines which continue to increase on a year-over-year (YOY) basis, but at a slower rate.

That’s a legitimate concern, but it isn’t likely to affect the company’s ability to pay its dividend. And that’s the real reason many investors buy 3M stock. The company is a Dividend King that has increased its dividend in each of the last 63 years.

Investors who don’t already have a position in MMM stock may want to wait until the company reports earnings in late January.

About 3M

3M Co is a technology company, which manufactures industrial, safety and consumer products. It operates through the following segments: Safety and Industrial, Transportation and Electronics, Health Care, and Consumer. The Safety and Industrial segment consists of personal safety, industrial adhesives and tapes, abrasives, closure and masking systems, electrical markets, automotive aftermarket, and roofing granules.Read More 
Current Price
$171.64
Consensus Rating
Hold
Ratings Breakdown
2 Buy Ratings, 8 Hold Ratings, 4 Sell Ratings.
Consensus Price Target
$186.00 (8.4% Upside)




#7 - Plug Power (NASDAQ:PLUG)

Plug Power logo

If you’re more of a speculative investor, you can consider Plug Power (NASDAQ:PLUG). The company is involved in the manufacturing and development of hydrogen fuel cells that are designed primarily for the material handling and stationary power markets.

PLUG stock has seen two spikes in the last 12 months. The first occurred in the first month of the year. This was due to excitement regarding the incoming Biden administration’s focus on clean energy and also likely a bit of FOMO from the meme stock movement. It also surged later in the year on hopes of passage for the Biden administration’s infrastructure bill.

In both cases, the stock has failed to hold those gains. And with the stock trading near its 52-week low there are two schools of thought. One is to look at the analysts which suggest PLUG stock has an upside of over 60%. The other is the reality that hydrogen is still a nascent technology in the clean energy game.

About Plug Power

Plug Power, Inc provides alternative energy technology, which focuses on the design, development, commercialization, and manufacture of hydrogen and fuel cell systems used primarily for the material handling and stationary power markets. Its fuel cell system solution is designed to replace lead-acid batteries in electric material handling vehicles and industrial trucks for some distribution and manufacturing businesses.Read More 
Current Price
$20.47
Consensus Rating
Buy
Ratings Breakdown
20 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
Consensus Price Target
$41.18 (101.2% Upside)



 

Strong demand will remain a catalyst for the manufacturing sector. However, ongoing supply chain disruption along with the surge of Covid-19 cases due to the omicron variant will continue to weigh on the sector as some manufacturers may find it hard to keep manufacturing operating at full tilt.

That’s why it’s important to be selective about the manufacturing stocks to add to your portfolio. If investors are looking for a different way to invest in the sector, they can select one of the many mutual funds or exchange-traded funds (ETFs) that focus on the sector.

A great example is the iShares U.S. Infrastructure ETF (BATS:IFRA) which is up 29.8% in the last 12 months. If investors are looking for an ETF that pays a dividend, a solid choice is the JPMorgan Equity Premium Income ETF (NYSEARA:JEPI) that has a dividend yield that is currently over 6.5%.

 

15 Stocks that Insiders Love

An insider trade occurs when a corporate executive (such as a CEO, CFO or COO) that has non-public information about a company buys or sells shares of that company's stock. Company insiders are required by law to regularly report their stock purchases and sales to the SEC.

Tracking a company's insider trades is a metric that can be used to identify the direction that the company's executives believes that the company is headed. If a number of insiders purchase more shares of their company, they may believe that the company will have strong future earnings and that the share price will increase in the near future.

For example, if Microsoft's CEO, CFO and COO all recently purchased additional shares of Microsoft stock, that would be an indication that there could be unreported news that may positively effect Microsoft's stock price in the near future.

This slideshow lists the 15 companies that have had the highest levels of insider buying within the last 180 days.

View the "15 Stocks that Insiders Love" Here.





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