Despite labor shortages, supply chain constraints, and rising inflation, total industrial production grew 3.3% year-over-year in October 2022. Moreover, manufacturing output edged up 0.1%.

One year into the implementation of the Bipartisan Infrastructure Law, the Biden administration announced more than $185 billion in funding and more than 6,900 specific projects across all 50 states, boosting the industrial sector.

Furthermore, the global construction equipment market size is projected to grow at a CAGR of 4.6% from 2022 to 2030 amid rising investments, government support, and growing infrastructure.

Given this backdrop, we think quality industrial stocks Hillenbrand, Inc. (HI), Myers Industries, Inc. (MYE), and LSI Industries Inc. (LYTS) are solid buys now.

However, considering the anticipated rate hikes and recessionary concerns, the fundamentally weak industrial stock Plug Power Inc. (PLUG) might be best avoided.

Stocks to Buy:

Hillenbrand, Inc. (HI)

HI is a diversified industrial company that operates internationally under three segments: Advanced Process Solutions (APS); Molding Technology Solutions; and Batesville.

On October 6, HI announced the acquisition of LINXIS Group. HI’s president and CEO, Kim Ryan, said, “The completion of the LINXIS Group acquisition marks a clear step forward in the execution of our strategy to grow as a world-class industrial company and deliver long-term value to our shareholders.”

On August 31, HI announced the completion of the acquisition of Herbold Meckesheim GmbH (Herbold). This acquisition is expected to expand the company’s offerings across the recycling value chain.

HI’s income before income taxes increased 18.7% year-over-year to $82.50 million for the fiscal fourth quarter ended September 30, 2022. Its gross profit grew marginally to $242.70 million. The company’s adjusted EPS increased 5% from its year-ago value to $1.05.

The consensus EPS estimate of $1.08 for the fiscal second quarter ending March 2023 represents a 6.6% improvement year-over-year. Its revenue for the same period is expected to grow 10.2% year-over-year to $817.33 million. The company has surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.

Over the past three months, HI gained 8.6% to close the last trading session at $48.88. Moreover, it has gained 21.8% over the past month.

HI’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

HI is also rated a B in Value, Sentiment, and Quality. Within the A-rated Industrial – Manufacturing industry, it is ranked #4 of 36 stocks.

Click here to see the additional POWR Ratings of HI for Growth, Momentum, and Stability.

Myers Industries, Inc. (MYE)

MYE is a manufacturing and distribution company engaged in the distribution of tire service supplies. It operates through The Material Handling and Distribution segments and sells its products under the Akro-Mils, Jamco, Ameri-Kart, and Trilogy Plastics brands, among others.

On October 20, MYE declared a quarterly cash dividend of $0.135 per share, payable to shareholders on January 4, 2023. This reflects the company’s cash generation ability.

In the third quarter ended September 30, 2022, MYE’s net sales increased 14% year-over-year to $228.07 million. The company’s adjusted net income increased 76.9% year-over-year to $15.02 million. In addition, its adjusted net income per share came in at $0.41, representing an increase of 78.3% year-over-year.

For fiscal 2022, the company expects net sales growth in the high teens' range. The growth is expected to be driven by the acquisitions of Trilogy Plastics and Mohawk Rubber. Its adjusted EPS is expected to be between $1.50 and $1.70.

Analysts expect MYE’s revenue and EPS for the fiscal fourth quarter ending December 2022 to increase 10.6% and 26.1% year-over-year to $220.63 million and $0.29, respectively. In addition, MYE shows an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.

MYE has gained 12.4% year-to-date to close the last trading session at $22.49. It has gained 27.6% over the past month.

MYE’s promising outlook is reflected in its POWR Ratings. MYE has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

It has a B grade for Growth, Stability, and Quality. It is ranked #3 in the Industrial – Manufacturing industry.

We have also given MYE grades for Momentum, Value, and Sentiment. Get all MYE ratings here.

LSI Industries Inc. (LYTS)

LYTS produces and sells non-residential lighting and retail display solutions in the United States, Canada, Mexico, Australia, and Latin America. It operates in two segments, Lighting and Display Solutions.

On November 2, LYTS declared a regular cash dividend of $0.05 per share for the first quarter of fiscal 2023, payable to shareholders on November 22, 2022. This reflects the company’s ability to pay back its shareholders.

On October 18, LYTS announced the official launch of REDiMount, a new lighting solution for refueling station canopies. This should add to the revenue stream of the company.

LYTS’ net sales increased 19.4% year-over-year to $127.07 million for the first quarter ended September 30. The company’s adjusted net income increased 99.9% year-over-year to $7.08 million, while its adjusted EPS came in at $0.25, representing a 92.3% increase from the prior-year quarter.

The consensus EPS estimate of $0.17 for the second fiscal quarter ending December 2022 represents a 54.6% improvement year-over-year. The consensus revenue estimate of $118.44 million for the same quarter indicates 6.6% year-over-year growth. The company surpassed the consensus EPS estimates in each of the trailing four quarters.

The stock has gained 62.8% over the past six months to close the last trading session at $10.99. It has gained 51.4% over the past month.

It is no surprise that LYTS has an overall A rating, which equates to Strong Buy in our POWR Ratings system.

It has an A grade for Sentiment and a B for Growth, Value, and Quality. LYTS is ranked first out of 89 stocks in the B-rated Industrial – Equipment industry.

Click here to see the additional POWR Ratings for LYTS (Momentum and Stability).

Stock to Avoid:

Plug Power Inc. (PLUG)

PLUG offers end-to-end clean hydrogen and zero-emissions fuel cell solutions for supply chain and logistics applications, on-road electric vehicles, the stationary power market, and more.

On October 19, PLUG and Olin Corporation (OLN) announced the launch of a joint venture to begin the construction of a 15-ton-per-day hydrogen plant in St. Gabriel, Louisiana. However, the gains from the joint venture might not be realized anytime soon.

During the third quarter that ended September 30, PLUG’s total operating expenses increased 68.2% year-over-year to $113.68 million. The company’s operating loss rose 61.9% from the year-ago value to $159.75 million. Its net loss increased 60.1% year-over-year to $170.76 million. Net loss per share came in at $0.30, representing a 57.9% year-over-year rise.

Street estimates PLUG’s EPS to decline 26.2% year-over-year to negative $1.03 for the fiscal year ending December 2022. Moreover, the company has failed to surpass the consensus EPS estimates in each of the trailing four quarters.

Over the past year, PLUG has plunged 64.5% to close the last trading session at $15.18. The stock has declined 42.5% over the past three months.

PLUG’s POWR Ratings are consistent with this bleak outlook. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.

It also has an F grade for Stability, Sentiment, and Quality and a D for Value. It is ranked #84 in the Industrial – Equipment industry.

To see PLUG’s POWR Ratings for Growth and Momentum, click here.

PLUG shares were trading at $15.44 per share on Wednesday afternoon, up $0.26 (+1.71%). Year-to-date, PLUG has declined -45.31%, versus a -14.27% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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