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The industrial sector has continued to expand despite persistent supply chain problems due to high consumer demand for goods. In July, the total industrial output at American manufacturers climbed by 0.6%. Additionally, August saw a steady rise in U.S. manufacturing thanks to a pickup in employment and new orders. Additionally, it is anticipated that faster adoption of digital technology and improved environmental standards will support sector growth.

However, a backlog of lawsuits has caused the shares of the industrial conglomerate 3M Company (MMM) to drop 20.9% during the previous month. Two veterans filed a lawsuit against the corporation in late August to prevent the spinoff of its healthcare division due to the company’s defective earplugs, which damaged the hearing.

The earplugs have already been the subject of more than 2,20,2000 lawsuits, which has made U.S. District Judge M. Casey Rodgers very scathing of 3M’s legal tactics. As its legal problems intensify, the corporation also intends to lay off employees as part of its cost-cutting push.

Therefore, we believe that Tennant Company (TNC) and Caterpillar Inc. (CAT), two industrial stocks with strong fundamentals, could currently represent stronger buys than MMM.

Caterpillar Inc. (CAT)

Construction and mining equipment, diesel and natural gas engines, and industrial gas turbines are all produced and sold by CAT. Construction industries, resource industries, energy & transportation, financial products, and all other make up the company’s five business segments.

As part of their strategic equipment renewal process, CAT, BHP Group Limited (BHP), and Finning International Inc. (FINGF) announced an agreement on August 30, 2022, to replace BHP’s complete haul truck fleet at the Escondida mine, the largest copper producer in the world.

The new Caterpillar 798 AC electric drive trucks are expected to produce notable enhancements in terms of capacity, efficiency, reliability, and safety as well as have a favourable impact on the economy. This long-term partnership with BHP ought to be advantageous for CAT strategically.

Total sales and revenues for the second fiscal quarter ending June 30 rose 10.5% year over year to $14.25 billion for CAT. Profit increased 18.4% from the same quarter last year to $1.67 billion, while adjusted profit per share increased 22.3% to $3.18. Operating profit increased by 8.7% over the same time last year to $1.94 billion.

A 20% year-over-year rise is indicated by the consensus EPS forecast of $3.19 for the fiscal quarter ending September 2022. The $14.28 billion consensus revenue projection for the same time period reflects a year-over-year growth of 15.2%. Additionally, CAT has a strong track record of exceeding consensus earnings projections, having done so in three of the previous four quarters.

The price of CAT stock dropped 6.4% in the previous month to conclude the most recent trade.

The POWR Ratings for CAT reflect the company’s solid fundamentals. The stock gets an overall rating of B, which in our in-house rating system translates to Buy. The POWR Ratings are determined by taking into account 118 different variables, each of which is given the ideal amount of weight. CAT is the number 24 company in the 79-stock, B-rated Industrial – Machinery sector.

To view the Growth, Value, Momentum, Stability, Sentiment, and Quality POWR Ratings for CAT, click here.

Tennant Company (TNC)

The Americas, Europe, the Middle East, Africa, and the Asia Pacific are the regions where TNC creates, produces, and sells floor cleaning equipment.

TNC’s net sales for the fiscal quarter that ended on June 30, 2022, grew just a little bit from the previous year to $280.20 million. Its operational income for the quarter was $22.80 million, up 69.4% from the same period last year, while net income increased to $16.60 million. In addition, its net income per share increased from the same period last year by 74.5% to $0.89.

In the three months ending in September 2022, Street anticipates TNC’s revenue to be $286.90 million, up 5.5% from the same period last year. The company’s revenue for the current fiscal year is forecast to increase 3.9% from the previous year to $1.13 billion.

TNC has gained 4% over the past three months to close the last trading session at $59.78.

TNC’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our POWR Ratings system.

The company also has a B grade in Value, Stability, and Quality. It is ranked #16 in the same industry. To get TNC’s ratings for Growth, Momentum, and Sentiment, click here.


Please do your own research before investing in any of the above-mentioned stocks.

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