Are Industrial Stocks The Best Stocks To Invest In Right Now?
The proposed U.S. infrastructure spending in 2021 could mean upside potential for industrial stocks. The proposal would include $621 billion in transportation, such as bridges, roads, airports, and electric vehicles. Given that a great deal of infrastructure across the U.S. has been in need of revitalization, the proposed plan appears to be welcomed by many. Investors know that. And they are seizing the opportunities looking for the best industrial stocks to buy in the stock market today.
Industrials stocks have handily outperformed the S&P 500 over the last three months. And they could be set for even more gains, according to top industry analyst Nick Heymann. Take machinery company Caterpillar (NYSE: CAT) for instance, the company’s stock price has doubled over the past year. Considering that the Democrats look to pass the package in the months ahead, should investors jump on to the industrial bandwagon today?
Now, with vaccines on the way, analysts’ outlook for a strong economic recovery in 2021 is much more optimistic. The reason is that the industrial sector’s performance strongly correlates with the economy. Especially so when there’s a hot flush of money coming into the industrial sector. Therefore, industrial stocks could be looking at major tailwinds ahead. With all that in mind, are you putting up a list of top industrial stocks to buy right now?
Top Industrial Stocks To Buy This Week
- General Electric (NYSE: GE)
- Lockheed Martin (NYSE: LMT)
- Raytheon Technologies (NYSE: RTX)
- Nucor (NYSE: NUE)
First up, we have General Electric. The multinational conglomerate operates in the fields of healthcare, energy, additive manufacturing, and aviation to name a few. Of its numerous divisions, the company’s aviation arm would be amongst the hardest hit due to the pandemic. But when it comes to today’s General Electric, GE stock may be ready to bring more good things to life for bullish investors. The company recently received a new price target of $17 from Markus Mittermaier, an analyst from UBS. This represents a 22% potential upside from its existing level of $13.6.
The new price hike came amid the ongoing turnaround for the industrial giant under CEO Larry Culp. Culp told investors last month that the company’s transformation into a “more focused, simpler, and stronger industrial company” will mean industrial revenues will grow “organically in the low-single-digit range” over the current fiscal year. Free cash flow forecasts are in the range of $2.5 billion to $4.5 billion. As recoveries in GE’s key aviation and healthcare units continue to pick up, it will set up the company’s transformation into one owning long-term, profitable growth. With so many tailwinds working in favor of the industrial giant’s businesses, will you bet on GE stock today?
Next up, Lockheed Martin is one of the industrial companies that has benefited from the economic rebound. Not only does it have revenue, but it also has profits. After all, if you are looking for a pure-play defense stock, LMT stock may just be what you are looking for. Its portfolio of products has essentially been the leader in the industry. But LMT stock is not your ticket to a get-rich-quick kind of stock. The company’s stock price appreciation may be slow, but it sure is a steady winner.
Looking at its financial performance, Lockheed is coming off its best year ever. That is at a time when many of its industrial peers had lower revenue and earnings. Revenue for its fourth quarter of 2020 came in at $17 billion. That was a respectable increase from $15.9 billion in the same period in the previous year.
To top it all off, the company also recorded a high backlog of $147 billion. It’s worth pointing out the company’s strong guidance credibility with the U.S. government as its customer. LMT stock may not be the best performing industrial stock, but its dividend is about as solid as they come.
The bullish case for RTX stock is simple. Its space and defense businesses are exposed to favorable spending trends in the global defense budget. That said, the defense business is likely going to be the key revenue driver while its commercial aerospace unit continues to embark on a multi-year recovery. For the uninitiated, the company currently competes with General Electric on the Airbus A320 NEO. Investors looking for long-term growth in the commercial aerospace sector can compare and see how RTX stock and GE stock stack up against each other.
Investors could take a hint of the company’s growth potential through the comment of Greg Hayes, the CEO of Raytheon Technologies. He said Raytheon’s free cash flow would continue to grow over the next several years back to that $8 billion to $9 billion that we had forecast.
Sure, it will take some time to get there, and investors will need to be patient. If and when air traffic does get back to the pre-pandemic level, investors are likely to benefit from the long-term growth prospects of Raytheon’s commercial aerospace business. That said, will all these make RTX stock an attractive proposition for long-term investors?
With such a massive infrastructure bill pending approval, it’s hard not to include steel giant Nucor. In my personal opinion, NUE stock is probably one of the under-the-radar industrial stocks in the stock market today. The company’s stock prices are up more than 50% year-to-date. That handily beats the S&P 500’s 12%. The company is involved in every phase of steelmaking. From collecting and processing scrap to manufacturing, Nucor does it all. As a result, NUE stock has been in the limelight as we are nearer to the passage of the infrastructure bill.
From the company’s fourth-quarter result, its top-line rose by 2.5% year over year to $5.26 billion. CEO Leon Topalian said, “Looking ahead, we are confident that Nucor is poised for continued growth, and we anticipate earnings in the first quarter of 2021 to significantly increase from the fourth quarter of 2020.” The strong guidance could instill some confidence in investors who are looking to buy NUE stock as one of their long-term investments.
After all, NUE stock could also be considered as a top cyclical stock to buy. If you’re expecting a strong economic recovery in the U.S. this year, it’s time to put NUE stock on your watchlist.