In this article, we will discuss: 10 Best Industrial Machinery Stocks to Buy Now.
Industrial stocks form the backbone of the American economy, encompassing companies that manufacture and maintain equipment used in the construction and manufacturing markets, such as compressors, turbines, and hydraulic systems. Their presence in the Dow Jones highlights their significance in the market.
According to Global Market Insights, the industrial machinery market, which was valued at $693.7 billion in 2023, is projected to grow at a compound annual growth rate of 7.5% between 2024 and 2032 as a result of the increasing application of automation and smart technologies, which significantly boost efficiency and production. Material handling and robotics are two important industries driving this expansion since they are essential to contemporary industrial operations.
Regionally, the Asia-Pacific area is driving this expansion as per the aforementioned research, with growing industrialization in countries like China and India. In terms of country, the United States is leading the North American industrial machinery market in terms of revenue, with an estimated 2023 revenue of $246.5 billion and a projected 2032 revenue of $402.9 billion. Moreover, North America accounted for 45% of the industrial machinery market in 2023.
Looking ahead, according to Deloitte’s Manufacturing Industry 2024 Outlook, the manufacturing sector is utilizing the Infrastructure Investment and Jobs Act, CHIPS Act, and Inflation Reduction Act to boost growth through improved semiconductor manufacturing and construction. Digital transformation is still essential in spite of economic challenges and a lack of skilled workers. Industrial metaverse capabilities are being integrated into smart factory systems, which are 12% more productive and cited by 86% of manufacturing leaders as essential for competitiveness. A game-changer, generative AI reduces labor restrictions while improving supply chain efficiency and product design.
That said, according to Interact Analysis’s Manufacturing Industry Output Tracker (MIO), which Industrial Machinery Digest released on May 30, 2024, the global manufacturing industry is predicted to grow by just 0.6% in 2024, showing stagnation or minor decline in the majority of regions. The study mentioned that China’s growth estimate was reduced from 2.8% to 2.4%, pointing out economic issues that may affect its 50% global manufacturing share. Although a slight decline is predicted in 2026 before a consistent rise through 2028, a recovery is projected in 2025 as global conditions improve. While Taiwan, South Korea, and Singapore benefit from the semiconductor resurgence, the United States exhibits stronger manufacturing fueled by rising consumer expenditure and moderating inflation. Challenges include the slowdown in European manufacturing and pressures on the machinery market caused by high loan rates, which increase costs and reduce order intake. High living expenses still limit demand even though post-Covid supply chain problems have decreased.
Adrian Lloyd, CEO of Interact Analysis, made the following comment in Manufacturing Industry Output Tracker (MIO):
“The global outlook for manufacturing output is mixed to say the least. Our projections are holding but there are no clear signs of where recovery will come from and how strong it will be. As a result, we will be watching closely to see how constrained consumer spending in China, a strengthening US economy and global events will affect conditions.”
He further added:
“The machinery market appears to be experiencing more challenging conditions than manufacturing overall, as global uncertainty leads to caution around investment in equipment.”
Data from the Federal Reserve in October revealed that U.S. industrial production dropped in September, largely due to reduced factory output influenced by a strike at Boeing Co. and the impact of two hurricanes. Production across factories, mines, and utilities declined by 0.3%, following a revised 0.3% increase in the previous month. However, the industrial sector of the broader market has risen by 22.4% since the beginning of the year.
With that said, here are the 10 Best Industrial Machinery Stocks to Buy Now.
A close-up of a large industrial compressor in the oil and gas industry.
Methodology:
We sifted through holdings of Industrial Machinery ETFs and online rankings to form an initial list of 20 industrial machinery stocks. Then we selected the 10 stocks that were the most popular among institutional investors. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024, according to Insider Monkey’s database. We have used the stock’s revenue growth (year-over-year) as a tiebreaker in case two or more stocks have the same number of hedge funds invested.
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10. Pentair plc (NYSE:PNR)
Number of Hedge Fund Holders: 40
Pentair plc (NYSE:PNR), which employs 10,000 employees and has operations in 25 countries, is a major player in the water treatment industry worldwide. Pentair is divided into three business segments: flow, water technology, and pools. The company provides a variety of water solutions, such as commercial and industrial pumps, filtration solutions, and energy-efficient swimming pool equipment. Over 75% of the company’s products are replacements, and it benefits from a large installed base of equipment.
Since the start of 2024, the stock has surged by nearly 50%. Pentair plc (NYSE:PNR) has constantly exceeded EPS and revenue estimates, with a share price growth of more than 68% over the last year, beating the broader market. Given that cash reserves rose dramatically over the past year and net debt dropped by $545 million, the company’s debt strategy is impressive.
Pentair plc (NYSE:PNR) delivered a strong Q3 2024 and created record-free cash flow so far this year. For Q3 2024, its operating cash flow came in at $249 million, up $86 million YoY, and $234 million in free cash flow, up $90 million YoY. Moreover, the company raised its adjusted EPS outlook to around $4.27 and updated its full-year 2024 GAAP EPS guidance to about $3.70.
The company has shown its strong commitment to providing value to shareholders by increasing dividends for 48 years in a row and is on its way to becoming a dividend king.
On October 3, 2024, Scott Graham, an analyst at Seaport Research, raised the company’s price objective from $110 to $120 while sticking to a buy recommendation for the shares. The analyst informs investors that the company’s Q3 2024 adjusted EPS exceeded the estimate and was higher year over year. According to the company, it is “rolling along,” generating robust earnings growth, meeting EPS guidance, and doing so with minimal assistance from its primary verticals.
Pentair plc’s (NYSE:PNR) strategic emphasis on its water portfolio, along with excellent cost management and transformation operations, positions the company well for future growth.
Ian Simm’s Impax Asset Management was the largest shareholder in the company among the funds in Insider Monkey’s database, with 7,618,725 shares worth $743.46 million.
9. AMETEK, Inc. (NYSE:AME)
Number of Hedge Fund Investors: 41
AMETEK, Inc. (NYSE:AME) is a diverse industrial giant that generates over $6 billion in revenue annually. EIG makes significant profits by designing and producing unique and cutting-edge instruments for the process, aerospace, power, and industrial end sectors. Among its many products, EMG is a specialized and targeted supplier of electrical interconnects, specialty metals, thermal management systems, and highly developed automation solutions.
The United States accounts for the majority of the company’s sales. The AMETEK, Inc. (NYSE:AME)’s asset-light strategy, which has been in effect for about 20 years, places a strong emphasis on expanding globally and in new markets, generating new products through research and development, and growing through acquisitions.
AMETEK, Inc. (NYSE:AME) stated on October 31, 2024, that it has paid an undisclosed sum to buy Virtek Vision International, a Canadian supplier of innovative laser-based projection and inspection equipment.
AMETEK, Inc. (NYSE:AME)’s operational efficiency and margin performance are its strongest points. In Q3 2024, the firm showed solid results, including double-digit order growth, exceptional operating performance, remarkable cash flow conversion, and earnings that exceeded projections. AMETEK reported a 5% YoY increase in sales during the third quarter of 2024. During the quarter, operating margins were 26.1%, while operating income rose by 2% to $445.9 million. The quarter’s operating cash flow was $487.2 million, up 3% from the previous year, and the free cash flow to net income conversion was 135%.
Following the Q3 release, Brett Linzey, an analyst at Mizuho on November 1, 2024, maintained an Outperform rating on AMETEK, Inc. (NYSE:AME) and increased the firm’s price objective from $190 to $200. The firm cites higher estimate revisions and balance sheet deployment credit as the company’s “deal engine chugs on” to achieve the target rise.
Seth Cogswell’s Running Oak Capital owned the largest stake in the company, according to Insider Monkey’s database. It owns 74,291 shares worth $12.76 million as of Q2.
8. PACCAR Inc (NASDAQ:PCAR)
Number of Hedge Fund Investors: 42
PACCAR Inc (NASDAQ:PCAR) is a prominent producer of medium- and heavy-duty trucks under the high-end brands DAF (sold in Europe and South America) and Kenworth and Peterbilt (mostly sold in the NAFTA region and Australia). Globally, the firm sells its trucks through over 2,300 independent dealers. Paccar Financial Services offers dealers and consumers retail and wholesale finance, respectively. The company holds about 17% of the heavy-duty market share in Europe and 30% of the Class 8 market share in North America.
Trucks from PACCAR Inc (NASDAQ:PCAR) are among the best-performing, longest-lasting, and most fuel-efficient vehicles available. These elements have contributed to the company’s solid image as a brand among truck drivers and fleet owners. The company benefits from a large vocational truck market share and infrastructure developments, as well as no industrial debt and a constant, increasing dividend return.
On October 23, 2024, Truist raised its price target on PACCAR Inc (NASDAQ:PCAR) from $103 to $107. Although the company’s Q3 earnings exceeded consensus projections, the analyst informs that its gross margins were low at 16.6% compared to the management’s guidance of 17.0% due to improved truck deliveries of 44.9K versus its forecast of 43K-44K. Price costs are still hurting Truck and Parts margins, just like they were in the previous quarter, the company stated.
Nonetheless, according to analysts, during periods of strong freight demand and profitability, fleet owners can replace older vehicles, increasing PACCAR Inc (NASDAQ:PCAR)’s new truck orders and revenues.
John Murphy’s Levin Easterly Partners was the company’s leading stakeholder among the funds in Insider Monkey’s database. It owns 7,275 shares worth $717,897 as of Q2.
7. Illinois Tool Works Inc. (NYSE:ITW)
Number of Hedge Fund Investors: 43
Illinois Tool Works Inc. (NYSE:ITW) produces and markets industrial equipment and goods both domestically and abroad. Automotive OEM, Food Equipment, Test & Measurement and Electronics, Welding, Polymers & Fluids, Construction Products, and Specialty Products are its seven business segments. The company was established in 1912 and, through innovations and acquisitions, has grown into a diversified industrial firm that responds to consumer demands.
Illinois Tool Works Inc. (NYSE:ITW) has a long history of providing investors with healthy returns. The company has respectable financial metrics, including a growing revenue per share figure, a stable gross profit margin, and a growing return on invested capital. Dividend growth has slowed recently but is still high enough to outpace inflation, as per analysts.
Barclays raised its price target on Illinois Tool Works Inc. (NYSE:ITW) from $215 to $230. In a research note, the analyst informed investors that the company “is hitting its stride again on Enterprise Initiatives, while CBI may be showing some signs of life,” based on the earnings performance and outlook.
In Q3 2024, Illinois Tool Works Inc. (NYSE:ITW) raised its dividend by 7% to $6.00 per share annually and repurchased $375 million worth of shares. Moreover, the company raised its full-year GAAP EPS outlook by $1.33 to a range of $11.63 to $11.73 per share.
Tom Gayner’s Markel Gayner Asset Management was the company’s largest stakeholder at the end of Q2 2024, as per Insider Monkey’s database. It owns 327,500 shares worth $85.828 million as of Q2.
6. Caterpillar Inc. (NYSE:CAT)
Number of Hedge Fund Holders: 49
Caterpillar Inc. (NYSE:CAT) is a leading producer of locomotives, power solutions, and heavy machinery. It is currently the biggest heavy equipment producer in the world. The company is divided into four reportable segments: resource industries, energy and transportation, construction industries, and Cat Financial. Its products are sold through a global dealer network that consists of 160 dealers and over 2,700 outlets. In addition to providing wholesale finance for dealers, Cat Financial offers retail financing for engines and machines to its clients, boosting the possibility that Caterpillar products will be sold.
Caterpillar Inc. (NYSE:CAT)’s broad range of mining, construction, energy, and transportation products keeps it at the top of the global heavy machinery industry. As a reputable manufacturer of mission-critical heavy machinery for almost a century, the firm has become one of the most valuable brands in the world. The strong brand is supported by incredibly dependable, effective, and high-quality items. Additionally, Caterpillar’s capacity to reduce the total cost of ownership is valued by customers.
Caterpillar Inc. (NYSE:CAT) maintained a strong operating profit margin and cash flow in Q3 2024, despite a 4% YoY decline in revenue that was primarily driven by lower sales volume in the construction and resource segments. The firm showed good financial management by ending Q3 2024 with $5.6 billion in enterprise cash. The management views the varied end markets as a stabilizing element despite fluctuating segment performance.
Ric Dillon’s Diamond Hill Capital owned the largest stake in Caterpillar Inc. (NYSE:CAT) at the end of Q2 2024, as per Insider Monkey’s database. It owns 1,349,608 shares worth $527.86 million as of Q2.
5. Deere & Company (NYSE:DE)
Number of Hedge Fund Investors: 50
Revenue Growth Rate (year-over-year): 16.47%
Deere & Company (NYSE:DE) is the world’s largest producer of agricultural equipment, manufacturing some of the most recognizable machines in the heavy machinery business in green and yellow. John Deere Capital, small agriculture and turf, construction and forestry, and production and precision agriculture are the company’s four reportable segments. More than 2,000 dealer sites in North America and over 3,700 dealer locations worldwide contribute to its vast dealer network, which makes its products accessible. John Deere Capital offers retail financing for machinery to its clients as well as wholesale finance for dealers, which raises the potential for Deere product sales.
Deere & Company (NYSE:DE) provides a wide range of construction and agricultural equipment to its customers. According to analysts, it will remain the industry leader in agriculture and a major force in construction. The company’s dominant brand recognition stems from its more than 100 years as the leading producer of mission-critical agricultural equipment. Deere’s superior, incredibly long-lasting, and effective goods are the foundation of its powerful brand. Its ability to reduce total costs of ownership through productivity and other efficiency improvements is highly valued by customers in developed markets.
Following a discussion with management, JPMorgan analyst Tami Zakaria increased the company’s price target from $360 to $420 on October 11, 2024, and maintained a Neutral rating on the shares. Deere & Company (NYSE:DE) is expected to release fiscal 2025 guidance bracketing consensus, which is higher than the bear’s estimate of mid-teen earnings per share, according to the firm. It believes that if retail sales in Brazil stabilize and North America doesn’t continue to deteriorate, the current consensus predictions for fiscal 2025 would be attainable.
Parnassus Core Equity Fund stated the following regarding Deere & Company (NYSE:DE) in its Q2 2024 investor letter:
“Deere & Company (NYSE:DE) stock dropped after the company released underwhelming fiscal second-quarter earnings and lowered its 2024 guidance. Although the company is going through an equipment demand downturn, we believe it will demonstrate better-than-expected through-cycle performance.”
Tom Gayner’s Markel Gayner Asset Management was the company’s largest stakeholder at the end of Q2 2024, as per Insider Monkey’s database. It owns 869,100 shares worth $362.70 million as of Q2.
4. Xylem Inc. (NYSE:XYL)
Number of Hedge Fund Holders: 50
Revenue Growth Rate (year-over-year): 33.36%
Xylem Inc. (NYSE:XYL) is one of the world’s top water technology firms. Its broad portfolio includes a variety of water industry equipment and solutions for the transportation, treatment, testing, and effective use of water for public utilities as well as commercial, residential, and industrial clients. The four business segments of Xylem are water solutions and services, measurement and control solutions, applied water, and water infrastructure. With its headquarters in Rye Brook, New York, Xylem employs 16,200 people and is present in more than 150 countries. In 2023, the business brought in $7.4 billion.
Xylem Inc. (NYSE:XYL) achieved solid performance in Q3 2024, with sales of $2.1 billion, up 1% YoY on a reported and organic basis, as a result of an 8% rise in orders, which shows strong demand across the segments. Evoqua’s integration is moving more quickly than expected, which is helping to increase margins and surpass projections. It is anticipated that this calculated action will further support the company’s earnings and growth prospects. Additionally, Xylem Inc. (NYSE:XYL) reported $217 million in net income, with a net income margin that grew to 10.3% due to cost-effectiveness and solid operational performance.
According to Xylem Inc. (NYSE:XYL)’s revised full-year earnings expectations, the company expects to generate $8.5 billion in revenue, a 15% increase over the previous year, with organic revenue growth of roughly 5%. For the entire year, the business anticipates an adjusted EBITDA margin of about 20.5% and a free cash flow conversion to net income of at least 120%.
The company remains confident in its strategic plan, which focuses on long-term and profitable growth.
According to Insider Monkey’s database, Ian Simm’s Impax Asset Management was the company’s largest stakeholder in Q2. It owns 1,677,816 shares worth $226.56 million as of Q2.
3. Emerson Electric Co. (NYSE:EMR)
Number of Hedge Fund Holders: 51
Since its founding in 1890 as the first electric fan maker in North America, Emerson Electric Co. (NYSE:EMR) has grown to become a major force in industrial automation by acquiring well-known brands. Emerson makes and sells a variety of automation gear, including switches, gauges, and valves, as well as power tools and software. The company is divided into seven business groups. To become a pure-play industrial automation company, Emerson recently sold off its consumer and climate technology divisions. For manufacturers, factory automation is an attractive long-term solution since it lowers accident rates and increases uptime and productivity.
Furthermore, Emerson Electric Co. (NYSE:EMR) operates in North America, Europe, China, and other regions. This enables it to protect its business performance against an economic downturn in one location, such as China’s industrial slowdown, which has lingered since the coronavirus outbreak.
Emerson Electric Co. (NYSE:EMR) had a solid fiscal fourth quarter of 2024, with revenue up 13% YoY due to strong underlying sales growth. The gross margin for fiscal 2024 also increased dramatically, reaching 50% for the first time. Additionally, the business has successfully integrated Test & Measurement, achieving $100 million in synergies in the first year.
On November 6, 2024, Ken Newman, a KeyBanc analyst, kept an Overweight rating on Emerson Electric Co. (NYSE:EMR) shares and raised its price target from $125 to $140. Following the company’s Q4 earnings and announcement of portfolio transformation activities, the firm observes that shares outperformed. The rise in FY24 was driven by process and hybrid businesses, according to management, while discrete end markets continued to show challenges. However, discrete orders improved in Q4, and KeyBanc was pleased by management’s remarks that these end markets had likely bottomed.
Lee Munder’s Lee Munder Capital Group was the company’s largest stakeholder at the end of Q2 2024, as per Insider Monkey’s database. It owns 111,654 shares worth $12.21 million as of Q2.
2. Parker-Hannifin Corporation (NYSE:PH)
Number of Hedge Fund Holders: 67
Parker-Hannifin Corporation (NYSE:PH) is an industrial company that operates in two segments: aerospace systems, which provide engine and actuation components, and diversified industrial, which serves a range of end markets.
Parker-Hannifin Corporation (NYSE:PH) offers an exposure to a wide range of end markets. Following its most recent Win Strategy and major acquisitions of Clarcor, Lord, Exotic Metals, and Meggitt, Morningstar analysts think that the company can eventually surpass industrial production and increase its margin. Pneumatics and hydraulics, fluid and gas handling, and sealing are just a few of the many uses for Parker’s extensive range of motion and control technologies. Parker claims that around 85% of the revenue from these technologies is protected by intellectual property, which experts feel helps to solidify its competitive position given the business’s extended product lifecycles and low reinvestment demands.
Through its acquisitions, Parker-Hannifin Corporation (NYSE:PH) was able to add innovations in areas like vibration, tailored materials, and filtration that significantly complemented its current offering. The company doubles down on long-cycle operations and strengthens its position in the very desirable higher-margin aftermarket with these purchases.
The company announced solid results in its fiscal 2025 first quarter due to strong aerospace demand. The revenue grew by 1.17% YoY. Notably, with an adjusted margin of 25.7%, the segment operating margin hit a record high. Furthermore, operating cash flow increased 14% YoY to $744 million.
Parker-Hannifin Corporation (NYSE:PH) anticipates that overall sales growth in fiscal 2025 will be between 0.5% and 3.5%, with organic growth falling between 1.5% and 4.5%. Earnings per share are expected to increase, showing the company’s confidence in its strategic direction and market position.
Madison Investors Fund stated the following regarding Parker-Hannifin Corporation (NYSE:PH) in its Q3 2024 investor letter:
“In the third quarter, the top five individual contributors to performance relative to the benchmark were Parker-Hannifin Corporation (NYSE:PH), Fiserv, Lowe’s Companies, Brookfield Corporation, and Progressive Corporation. Parker-Hannifin is a leading diversified industrial manufacturer. Despite the unfavorable backdrop of a slowing industrial economy, the company continues to execute well with respect to improving margins and integrating the recent acquisition of Meggitt.”
Ric Dillon’s Diamond Hill Capital is the largest stakeholder in the company among the funds in Insider Monkey’s database. It owns 803,843 shares worth $507.88 million as of Q2.
1. Eaton Corporation plc (NYSE:ETN)
Number of Hedge Fund Holders: 93
Joseph Eaton founded the company in 1911, first selling truck axles in New Jersey. Since then, Eaton Corporation plc (NYSE:ETN) has grown into a major industrial force, primarily through acquisitions in several end sectors. The two main categories of Eaton’s portfolio are its industrial and electrical operations. About 70% of the company’s revenue comes from its electrical portfolio, which offers parts for data centers, utilities, and residential and commercial structures. The remaining 30% comes from its industrial sector, which provides parts for passenger and commercial cars as well as airplanes.
Eaton Corporation plc (NYSE:ETN) produces highly engineered, mission-critical components that address client concerns in key infrastructure areas worldwide. Since a large percentage of Eaton Corporation plc (NYSE:ETN)’s products are integrated into client operations and require periodic maintenance or replacement, their profit margins are typically higher than those of the equipment’s sale. The company has one of the biggest installed bases of electrical equipment in the world, and its expansion is being fueled by factors like higher safety and efficiency regulations, reshoring supply chains in the US, and the explosion of data generation and energy use.
In Q3 2024, Eaton Corporation plc (NYSE:ETN) reported revenue of $6.3 billion, up 8% on both a total and organic basis. The company’s operating cash flow in Q3 2024 was $1.3 billion, up 15% from the year before, and its free cash flow was $1.1 billion, up 23% from the year before.
Eaton Corporation plc (NYSE:ETN) has given positive outlooks for the future, predicting an 18% increase in adjusted EPS to $10.75 to $10.81 in 2024. The business also anticipates double-digit market growth in 2025 for electric vehicles, data centers, and commercial aerospace.
To meet this demand, Eaton Corporation plc (NYSE:ETN) is making significant expenditures; production capacity investments now total $1.5 billion, up $500 million from earlier projections. A growing backlog, record financial performance, and targeted investments in high-growth industries position Eaton Corporation plc (NYSE:ETN) for solid expansion.
Thomas Bailard’s Bailard Inc. was the largest shareholder in the company among the funds in Insider Monkey’s database. It owns 56,541 shares worth $1.74 million as of Q2.
While we acknowledge the potential of Eaton Corporation plc (NYSE:ETN) as the best industrial stock, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ETN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. 10 Best Industrial Machinery Stocks to Buy Now is originally published on Insider Monkey. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
