Manufacturing stocks are considered safe investments by most investors. Companies in this sector are known for delivering stable revenue and stock price growth over time. Many of these companies also offer investors attractive dividends.
This can be a cyclical sector that frequently leads the economy into and out of recessions. But there are several megatrends that should support revenue and earnings growth over the next decade. For example, the Infrastructure Act passed by Congress in 2022 is fueling infrastructure products that will require heavy equipment and other vital resources that companies in this sector provide.
Investors should also consider the push for U.S. companies to onshore their supply chains. Made in America sentiment may come and go, but the global pandemic and subsequent supply chain disruptions are making nimble supply chains a matter of strategic, and economic, importance for companies of all sizes.
Plus, you have to consider that geopolitical concerns will likely run hot over the next several years. This will spark growth in defense stocks which tend to be less cyclical than manufacturing stocks in general. Here are seven manufacturing stocks that can form a base for every investor's portfolio.
Quick Links
- Sunrun
- Lockheed Martin
- Cummins
- Emerson Electric
- Generac
- CNH Industrial
- Mueller Industries (MLI)
#1 - Sunrun (NASDAQ:RUN)
Sunrun, Inc. (NASDAQ: RUN) is the nation’s leading provider of residential solar panels and home batteries. At the end of 2022, the company had an installed base of over 53,000 solar and storage systems. This is bringing the company’s recurring revenue to over $1 billion. And with an average remaining contract life of over 17 years, the revenue will continue to flow.
Investors should also expect to see more growth. The 2022 Infrastructure Act provides generous subsidies for consumers to consider adding solar panels. And consider that solar energy accounts for only about 3.4% of the country’s current energy supply.
Sunrun is an example of how stocks can get mispriced in a bubble. RUN stock surged to over $90 a share early in 2021. Since then, the stock price has dropped over 80%. But that simply means that investors are trying to find a fair price for the stock. And as of this writing Sunrun analyst ratings on MarketBeat show a price that is over 100% higher than its price which comes in at $18.02 per share.
About Sunrun
Sunrun Inc designs, develops, installs, sells, owns, and maintains residential solar energy systems in the United States. It also sells solar energy systems and products, such as panels and racking; and solar leads generated to customers. In addition, the company offers battery storage along with solar energy systems; and sells services to commercial developers through multi-family and new homes.
Read More - Current Price
- $9.87
- Consensus Rating
- Hold
- Ratings Breakdown
- 12 Buy Ratings, 10 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $19.21 (94.7% Upside)
#2 - Lockheed Martin (NYSE:LMT)
The defense sector is a good place to look for quality manufacturing stocks. Lockheed Martin Corporation (NYSE: LMT) is one of the best of class in that sector. And you only have to look at the 2023 debt ceiling standoff to understand why.
Investors can ignore much of what politicians do. It’s more important to look at what’s not being done. In the case of the debt ceiling standoff, the budget negotiations didn’t look at defense spending.
This isn’t the place to debate the merits of that decision. However, it is worth pointing out that defense spending makes up a significant part of the federal budget. And that level of spending isn’t going to go down. That’s great news if you’re a shareholder and it explains why institutions own over 75% of LMT stock.
Lockheed Martin is up approximately 56% in the last five years. And the company has a solid dividend that has been increasing for 20 consecutive years and has a 2.89% yield.
About Lockheed Martin
Lockheed Martin Corporation, a security and aerospace company, engages in the research, design, development, manufacture, integration, and sustainment of technology systems, products, and services worldwide. The company operates through Aeronautics, Missiles and Fire Control, Rotary and Mission Systems, and Space segments.
Read More - Current Price
- $489.02
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $612.29 (25.2% Upside)
#3 - Cummins (NYSE:CMI)
Cummins, Inc. (NYSE: CMI) is another manufacturing stock that continues to reward long-term investors. CMI stock is up over 73% in the last five years. Much of the revenue that fuels this growth comes from the company’s signature diesel and natural gas engines. As the need for infrastructure projects will remain strong, Cummins core business has a long runway.
However, there’s a larger story emerging for Cummins. That has to do with the company’s transition into renewable energy. The company is diving into areas like hydrogen fuel cells and battery storage. As of the first quarter 2023, this sector only makes up about 14% of the company’s total revenue. But you can imagine that this sector will continue to grow as demand for new energy sources continues to grow.
In addition to the strong return on CMI stock, shareholders are being rewarded with a solid dividend. Cummins has increased its dividend in each of the last 20 consecutive years. The yield of 2.71% isn’t eye-popping, but it does come with a current annual payout of $6.28.
About Cummins
Cummins Inc designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. It operates through five segments: Engine, Distribution, Components, Power Systems, and Accelera. The company offers diesel and natural gas-powered engines under the Cummins and other customer brands for the heavy and medium-duty truck, bus, recreational vehicle, light-duty automotive, construction, mining, marine, rail, oil and gas, defense, and agricultural markets; and offers parts and services, as well as remanufactured parts and engines.
Read More - Current Price
- $351.38
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $356.92 (1.6% Upside)
#4 - Emerson Electric (NYSE:EMR)
Many manufacturing companies are known as pick and shovel companies. These companies provide the key products and services that companies need to run their businesses. Emerson Electric Co. (NYSE: EMR) makes this list as a pick and shovel company for many manufacturing companies. This list includes key customers in sectors such as chemicals, oil and gas, and food and beverage.
Emerson Electric is also widely regarded as a sneaky play for investors looking to capitalize on the popularity of artificial intelligence. It’s not a pure play AI company, but it will provide many of the products that these companies will need.
EMR stock is “only” up about 26% in the last five years. But for many investors owning this stock is about the dividend. Emerson Electric is a Dividend King which has increased its dividend for 66 consecutive years. It also has a very sustainable payout ratio of just over 25%.
About Emerson Electric
Emerson Electric Co, a technology and software company, provides various solutions for customers in industrial, commercial, and consumer markets in the Americas, Asia, the Middle East, Africa, and Europe. It operates in six segments: Final Control, Control Systems & Software, Measurement & Analytical, AspenTech, Discrete Automation, and Safety & Productivity.
Read More - Current Price
- $124.09
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $134.58 (8.5% Upside)
#5 - Generac (NYSE:GNC)
Generac Holdings Inc. (NYSE: GNC) is best known for their whole home generators that provide backup power during power outages. Not surprisingly, interest in the company's products rises in and around times of natural disasters. But a look at the company’s quarterly earnings shows that revenue is consistent year-round.
A criticism for GNRC stock is that, as a big ticket purchase, it’s a one-off. Simply put, once a consumer buys a generator, they won’t have to buy another one for some time. And after seeing sales surge in 2020 and 2021, Generac reported an inventory glut in 2022 that weighed on the company’s stock price.
But the recent population shift may provide pockets of emerging need as consumers think about ways to protect their home. Add to that an aging electric infrastructure and you can see why GNRC stock should have stable revenue and earnings for years to come.
About GNC
GNC Holdings, Inc, together with its subsidiaries, operates as a specialty retailer of health, wellness, and performance products. The company operates through three segments: U.S. and Canada, International, and Manufacturing/Wholesale. Its products include proteins, performance supplements, weight management supplements, vitamins, herbs and greens, wellness supplements, health and beauty products, food and drink products, and other general merchandise.
Read More - Current Price
- $0.55
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - CNH Industrial (NYSE:CNHI)
When you think about agricultural and construction equipment, there may be a “green” company that comes to mind. But you may want to consider CNH Industrial N.V. (NYSE: CNHI). One reason for that is its commitment to new energy solutions.
The company has an international reach and is expanding into areas like electric tractors and tractors powered by alternative fuels. CNH Industial also has clients in the areas of automation and artificial intelligence as it attempts to offer solutions in the growing desire for a circular economy. All of this positions CNH Industrial for a future that is getting greener, but will still rely on farming and construction equipment.
CNHI stock is only owned by 35% of institutional investors. But an attractive valuation and a dividend that has a 25% payout ratio as of June 2023, are just two reasons why CNHI stock should be on a retail investor’s watch list.
About CNH Industrial
CNH Industrial N.V., an equipment and services company, engages in the design, production, marketing, sale, and financing of agricultural and construction equipment in North America, Europe, the Middle East, Africa, South America, and the Asia Pacific. The company operates through three segments: Agriculture, Construction, and Financial Services.
Read More - Current Price
- $0.00
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $14.96
#7 - Mueller Industries (MLI) (NYSE:MLI)
Mueller Industries, Inc. (NYSE: MLI) is proof positive that when it comes to building a rock-solid portfolio, boring can be beautiful. It doesn’t get much more pedestrian than fittings for industrial products. But that’s what Mueller brings to the table. There are few businesses that are as “essential” to what other companies need than Mueller.
The company does business on several continents and in its 106-year history has never had an unprofitable quarter. That’s what investors call money in the bank. And also a great reason to own MLI stock.
MLI stock is up over 54% in 2023. That’s one reason that Mueller’s market cap has grown to over $4 billion which has moved the stock into mid-cap territory. And the company offers a dividend that, on first glance, may not seem that impressive with a yield of 1.50%. But the annual payout of $1.20 a share isn’t bad when you compare it to a June 2023 share price of just over $80.
About Mueller Industries
Mueller Industries, Inc manufactures and sells copper, brass, aluminum, and plastic products in the United States, the United Kingdom, Canada, South Korea, the Middle East, China, and Mexico. It operates through three segments: Piping Systems, Industrial Metals, and Climate. The Piping Systems segment offers copper tubes, fittings, line sets, and pipe nipples.
Read More - Current Price
- $80.18
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $105.00 (31.0% Upside)
Manufacturing stocks deserve a place in every investor's portfolio. But it should only be a portion of that part of your portfolio that skews toward value.
These stocks tend to be low beta stocks. This means that they will not match the growth of some of the high-performing tech stocks. The converse of this is that these stocks also tend not to force investors to endure the sharp sell-off's that can occur in the tech sector.
But what these stocks may lack in sizzle, they more than make up for in security. The market is always forward looking. So, manufacturing stocks will start to outperform the market before lagging economic indicators will suggest that they should.
Rather than guessing when that turnaround will take place, having a solid base of manufacturing stocks keeps you from trying to time the market. And, in many cases, you'll be able to collect a reliable dividend when the sector is slowing down.
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