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Zacks Industry Outlook Highlights Stanley Black & Decker, Lincoln Electric and Enerpac Tool

For Immediate Release

Chicago, IL – May 16, 2024 – Today, Zacks Equity Research discusses Stanley Black & Decker, Inc. SWK, Lincoln Electric Holdings, Inc. LECO and Enerpac Tool Group Corp. EPAC.

Industry: Manufacturing Tools

Link: https://www.zacks.com/commentary/2273900/3-manufacturing-tools-stocks-to-watch-on-robust-industry-trends

The Zacks Manufacturing-Tools & Related Products industry stands to benefit from strong demand for machine tools in industrial and automotive end-markets. Higher usage of electrical devices these days should drive demand for manufacturing tools in the power market. With rapid urbanization and the associated investments in product development and upgrades, the industry is poised for growth in the near term.

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Strength in end markets, along with improvement in the supply chain, is expected to foster the industry’s growth. Stanley Black & Decker, Inc., Lincoln Electric Holdings, Inc. and Enerpac Tool Group Corp. are a few industry participants that can capitalize on these opportunities.

About the Industry

The Zacks Manufacturing-Tools & Related Products industry comprises companies that develop and distribute hand and mechanics tools, hydraulic tools, engineered fastening systems and heavy-lifting technology solutions. Arc-welding products, robotic-welding packages, fume-extraction equipment, oxy-fuel cutting equipment, plasma cutters, healthcare solutions, electronic security solutions and other products are also produced by some tool-makers.

The highly advanced tools are used in industrial, commercial, oil & gas, mining, automotive and other industries. The providers of electronic security solutions cater to commercial, retail, government, financial and healthcare markets. Talking about international operations, some industry players provide products and services to customers in North and South America, Japan, Europe, Canada, Asia and the Middle East.

3 Trends Shaping the Future of the Manufacturing Tools Industry

Strength Across End-Markets: The growing adoption of machine tools to manufacture parts and components in several end markets, including industrial, automotive and packaging, should fuel the growth of the industry. With people relying more on electrical devices these days to carry out day-to-day tasks, demand for manufacturing tools is likely to increase.

Increased focus on improving the speed, efficiency, and quality of production across the industries has been driving the demand for manufacturing tools. However, a slowdown in manufacturing activities has been a concern for the industry of late.

In April 2024, the Institute for Supply Management’s (ISM) manufacturing index registered 49.2%, indicating a contraction in manufacturing activity. Nevertheless, stable orders, in conjunction with the slowdown in inflation, augur well for industry participants.

Easing Supply Chain Disruptions: While supply-chain disruptions persist, primarily related to the availability of electronic components, the situation has improved, as evident from the ISM report’s Supplier Deliveries Index, which reflected faster deliveries for the second consecutive month in April. Easing supply chain issues should support companies’ growth in 2024. Additionally, an anticipated reduction in raw material costs should aid the bottom line of the industry participants.

Investments in Product Development & Innovation: The industry participants’ constant focus on innovation, product upgrades and the development of new products to stay competitive in the market should drive growth. While this augurs well for the industry’s long-term growth, hefty investments in research and development often leave companies with highly leveraged balance sheets.

Zacks Industry Rank Indicates Solid Prospects

The Zacks Manufacturing-Tools & Related Products industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #65. This rank places it in the top 26% 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 strong 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 2 to 1.

We will present a few stocks from the industry that you may want to retain in your portfolios. But it is worth taking a look at the industry’s shareholder returns and its current valuation first.

Industry Underperforms Sector & S&P 500

The Zacks Manufacturing-Tools & Related Products industry has underperformed the sector and the S&P 500 composite index in the past year.

Over this period, the industry has appreciated 25.2% compared with the sector and the S&P 500 index’s growth of 30.2% and 27.1%, respectively.

Industry's Current Valuation

On the basis of forward P/E (F12M), which is a commonly used multiple for valuing manufacturing tools and related product stocks, the industry is currently trading at 20.10X compared with the S&P 500’s 20.88X. It is above the sector’s P/E (F12M) ratio of 18.59X.

Over the past five years, the industry has traded as high as 25.05X and as low as 10.98X, with a median of 17.73X.

3 Manufacturing Tool Stocks to Keep a Tab On

Enerpac Tool: Based in Menomonee Falls, WI, Enerpac Tool is a manufacturer, marketer and distributor of various industrial tools, including high-pressure hydraulic tools and controlled force products. Its exposure is notable in the industrial, production automation, mining and energy markets. A solid product line, innovation capabilities, healthy demand for products and commercial efficiency add to this Zacks Rank #1 (Strong Buy) company’s growth prospects. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Enerpac Tool’s fiscal 2024 (ending August 2024) earnings has been stable in the past 60 days, while the same for fiscal 2025 (ending August 2025) has been revised upward by 7.3%. The stock has gained 53.1% in the past year.

Stanley Black: Headquartered in New Britain, CT, Stanley Black manufactures tools (power and hand tools) and related accessories and engineered fastening systems, among other items. Solid momentum in the engineered fastening business, driven by strength in aerospace and auto end markets, is expected to fuel SWK’s growth. Cost-reduction efforts are also expected to support this Zacks Rank #3 (Hold) company’s margin performance and drive the bottom line.

The Zacks Consensus Estimate for Stanley Black’s 2024 earnings has been revised upward by 0.2% in the past 60 days. The stock has gained 16.6% in the past year.

Lincoln Electric: Headquartered in Cleveland, OH, Lincoln Electric is a full-line manufacturer and reseller of welding and cutting products. The company has been witnessing improving orders, strong quoting activity and high backlogs for equipment systems and automation solutions. Product launches in the automation solutions market and investments in new technologies, like additives, are expected to bolster the company’s growth.

The Zacks Consensus Estimate for Lincoln Electric’s 2024 and 2025 earnings have been revised upward by 0.3% and 1.1%, respectively, in the past 60 days. This Zacks Rank #3 stock has surged 37.7% in a year.

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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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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report

Lincoln Electric Holdings, Inc. (LECO) : Free Stock Analysis Report

Enerpac Tool Group Corp. (EPAC) : Free Stock Analysis Report

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