Industrials Shine As Ametek, Cintas, Eaton Trade At New Highs

Key Points

• A recent report from Fidelity highlights sustainability, digitization, and onshoring as driving factors for industrial sector performance.
• For investors seeking income, industrials offer higher dividend yields compared to technology stocks.
• Ametek beat top and bottom-line views in each of the past four quarters.
• Cintas posted double-digit revenue and earnings increases, with analysts expecting continued EPS growth.
• Eaton appears well-positioned to benefit from energy market shifts, including electrification and digitization.

Sure, everyone knows about the sky-high valuations of Nvidia Corp. NASDAQ: NVDA and other techs as the Technology Select Sector SPDR Fund NYSEARCA: XLK has advanced 20.99% in the past three months and 39.48% year-to-date. 

However, don’t overlook the not-so-glamorous industrials sector, which is home to some big gainers, including Ametek Inc. NYSE: AME, Cintas Corp. NASDAQ: CTAS and Eaton Corp. plc NYSE: ETN. 

All three of those stocks are trading in new high ground and are components of the Industrial Select Sector SPDR Fund NYSEARCA: XLI. 

In 2022, the XLI ETF outperformed the XLK ETF by a long shot. This year, tech is once again the glamor sector, but it’s not the only home to top-performing stocks. 

Technology is frequently the fastest-growing sector due to constant innovation, increasing demand for digital solutions, and the transformative impact on various industries. You only need to witness the fast adoption of AI technologies throughout the economy. 

Factors Driving Industrial Sector Performance

However, Industrials may be leaders during periods of economic growth. A recent report from Fidelity,  “Industrials Sector: Sustainability, digitization, and onshoring are transforming the sector,” laid out some of the factors driving performance. Those include: 

• After decades of underinvestment and recent supply-chain challenges related to the pandemic, U.S. companies and the federal government aim to boost domestic manufacturing.
• That support is likely to advance three essential industry trends: sustainability, digitization, and onshoring.
• A U.S. or global recession could dampen the short-term outlook, but according to Fidelity’s analysts, that’s unlikely to change the favorable longer-term prospects.

For income investors or those seeking portfolio stability, it should be no surprise that industrials have a higher dividend yield than techs. The XLI ETF currently has a yield of 1.6%, while the XLK ETF’s yield is half of that. 

Here’s a look at three leading large-cap industrials:

Ametek Clears Cup-With-Handle

Pennsylvania-based Ametek roke out of a cup-with-handle base in mid-May and is now up 5.3% from a buy point above $148.06. The stock rallied to a new high on June 16 before reversing lower along with the broader market. 

Ametek is a global manufacturer of electronic instruments and electromechanical devices used in aerospace, defense, and healthcare industries.

MarketBeat’s Ametek earnings data show the company beating top and bottom-line views in the past four quarters. 

It’s currently slightly extended beyond a buy point, but a pullback to even the short-term 10-day moving average could offer an opportunity to add shares. 

Ametek dividend data compiled by MarketBeat shows the company has a four-year record of boosting the shareholder payout. 

Cintas Continuing Post-Pandemic Growth

Cintas is best known for selling, renting, and cleaning work uniforms. At the end of 2022, it will have more than 1 million customers globally, primarily in the U.S., Canada, and Latin America. The company also has a fire-safety equipment unit and provides first aid and cleaning supplies. 

That last line of business allowed it to pivot during the pandemic by providing disinfectant services, hand sanitizer, scrubs, face masks, and face shields, in addition to its existing cleaning supplies. In addition, most of the jobs for which Cintas provides uniforms aren’t the work-from-home type, so demand for work clothes and related services remained. 

Growth has continued even as the pandemic fades. In recent quarters, the company has posted double-digit revenue and earnings increases. Analysts expect Cintas to earn $12.85 a share this year, up 12%. Next year, that’s rising by another 11% to $14.27 a share. 

Eaton Well-Positioned For Energy-Industry Shifts

Eaton broke out of a double-bottom base on May 2 and is now up 11% from its $172.19 buy point. 

Eaton is a multinational power management company providing gear, software and services for electrical, hydraulic, and mechanical power systems and components.

The stock could be well-positioned to benefit from worldwide shifts in the energy market, including electrification and increased digitization.  

Year-to-date, Eaton shares are up 22.96%. 

The company has a 13-year track record of increasing its shareholder payout, according to MarketBeat’s Eaton dividend data. 

Analysts see the company’s earnings growing by 12% this year, to $8.44 per share, and another 10% in 2024, to $9.26 per share. Revenue growth accelerated in the past two quarters. A faster pace of sales increases often indicates that more revenue growth is ahead.