Zacks Industry Outlook Siemens, W.W. Grainger and SiteOne Landscape Supply

For Immediate ReleaseChicago, IL – October 30, 2024 – Today, Zacks Equity Research like Siemens SIEGY, W.W. Grainger, Inc. GWW and SiteOne Landscape Supply, Inc. SITE.Industry: Industrial ServicesLink: https://www.zacks.com/commentary/2359697/3-industrial-services-stocks-to-consider-amid-industry-challengesThe Zacks Industrial Services industry has been bearing the brunt of the prolonged contraction in the manufacturing sector as customers remain cautious about spending. Flared-up input costs have added to the woes.Despite the current setback, the rise in e-commerce activities will be a key catalyst for the industry. Companies like Siemens, W.W. Grainger, Inc.  and SiteOne Landscape Supply, Inc.  are positioned for growth by leveraging strategies to capitalize on this demand. The companies have also been focusing on lowering costs, increasing productivity and efficiency, and investing in automation and digitization, which will aid growth.Industry DescriptionThe Zacks Industrial Services industry comprises companies that provide industrial equipment products and MRO (maintenance, repair and operations) services. It includes routine maintenance, emergency maintenance and spare part inventory control, which keep a facility and its equipment in good operating condition. Industry participants serve a wide array of customers, ranging from commercial, government and healthcare to manufacturing.The industry's products (power tools, hand tools, cutting fluids, lubricants, personal protective equipment and consumables) are utilized in production and plant maintenance but are not directly related to customers’ core products or services. These companies reduce MRO supply-chain costs and improve customers' plant floor productivity by offering inventory management, and process and procurement solutions.Trends Shaping the Future of the Industrial Services IndustryExtended Downturn in Manufacturing Activity is Concerning: The manufacturing sector contributes around 70% to the industry's revenues. Customer activity trends are historically correlated to changes in the Industrial Production Index. Per the Federal Reserve’s last update, industrial production was down 0.6% in the 12 months ended September 2024.The durable goods manufacturing index was down 1.9% during the period. The Institute for Supply Management’s manufacturing index had languished in contraction territory for a consecutive 16 months until February 2024. March saw a slight uptick to 50.3%, which ended the prolonged contraction.However, this was not sustained as the index slipped to the contraction territory again, with a 49.2% reading in April. It has been below 50% since then and was 47.2% in September. The average for the 12 months ended September 2024 is 48%.The New Orders index has also contracted for the sixth consecutive month in September. The index has not delivered consistent growth since the end of its 24-month expansion streak in May 2022. Some industry players have reported gradually easing supply-chain issues, with improvements in lead times. Once the situation normalizes, strong demand in the diverse end markets will drive the industry’s growth.Pricing Actions to Combat High Costs: The industry has been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. Industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency, and the diversification of the supplier base to mitigate some of these headwinds.E-commerce to be a Growth Driver: MRO demand is significantly impacted by the evolution of e-commerce. Customer demand for highly tailored solutions, with real-time access to information and rapid delivery of products, is rising. Customers want to execute their business activities in the most efficient way possible, which often means online.According to Statista, global e-commerce sales are expected to see a compound annual growth rate (CAGR) of 9.5% between 2024 and 2029. Turkey is expected to lead the retail e-commerce development with a projected CAGR of 11.58% over this period, closely followed by Brazil and India.The U.S. retail e-commerce market is expected to cross the $1.5-trillion mark in 2026 and grow, seeing a CAGR of 9% between 2024 and 2029. To capitalize on this trend, industrial service companies are heavily investing in improving their digital capabilities and increasing their e-commerce share.Zacks Industry Rank Indicates Dull ProspectsThe group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bearish prospects in the near term. The Zacks Industrial Services Industry, a 19-stock group within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #158, which places it in the bottom 37% of 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.Before we present a few Industrial services stocks that investors can add to their portfolio, it is worth taking a look at the industry’s stock-market performance and its valuation picture.Industry Vs S&P 500 & SectorThe Industrial Services industry has underperformed its sector and the Zacks S&P 500 composite over the past year.Over this period, the industry has gained 17.8% against the sector’s growth of 35%. The Zacks S&P 500 composite has moved up 39.4%.Industry's Current ValuationOn the basis of the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Industrial Services companies, we see that the industry is currently trading at 29.30X compared with the S&P 500’s 14.47X and the Industrial Products sector’s forward 12-month EV/EBITDA of 20.65X.Over the last five years, the industry traded as high as 29.52X and as low as 6.04X, the median being 19.66X.3 Industrial Services Stocks to Keep an Eye OnSiemens: The company has teamed up with ServiceNow to enhance industrial cybersecurity and drive the integration of generative AI into shopfloor operations. The company has also collaborated with Microsoft to enable Siemens Industrial Copilot to handle the most demanding environments. The Siemens Industrial Copilot is a Generative AI-powered copilot designed to help automation engineers generate codes and diagnose faults.Siemens recently closed the sale of Innomotics, which marks a step toward optimizing its portfolio. In September 2024, Siemens inked a deal to acquire Trayer Engineering to expand its grid modernization product offering. Also, Siemens Smart Infrastructure and E.ON Drive Infrastructure signed a global framework agreement to improve Europe's electric vehicle charging infrastructure.In Smart Infrastructure, the company is seeing significant order growth on contributions from all businesses, most notably the electrification and buildings businesses. Order intake has been high, supported by strong demand from data center and energy customers. In Digital Industries, the industrial software business has won several large license contracts.The Zacks Consensus Estimate for the Munich, Germany-based company’s fiscal 2024 earnings has been revised 1% upward in the past 30 days. The consensus mark indicates year-over-year growth of 10.2%. SIEGY has a trailing four-quarter earnings surprise of 10.2%, on average. The company has a long-term estimated earnings growth rate of 6% and currently flaunts a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.Grainger: The company continues to deliver robust results, aided by margin improvements in its segments and strong operating performance. GWW is well-poised to gain from efforts to increase its customer base through incremental marketing investments and effective marketing strategies. The High Touch Solutions North America segment will continue to benefit from pricing actions and volume growth. The Endless Assortment segment is gaining from customer acquisitions at its Zoro and MonotaRO businesses.Cost-control measures undertaken by GWW will sustain margins. The company is also focused on improving the end-to-end customer experience by investing in its e-commerce and digital capabilities, and executing improvement initiatives within its supply chain.Lake Forest, IL-based Grainger is a broad-line, business-to-business distributor of MRO supplies, and other related products and services. The Zacks Consensus Estimate for 2024 earnings indicates growth of 5.5% from the prior-year reported number. GWW currently has a trailing four-quarter earnings surprise of 3.15%, on average. GWW has an estimated long-term earnings growth rate of 9.3% and a Zacks Rank #3 (Hold) at present.SiteOne: The company is the largest and only national full-product line wholesale distributor of landscape supplies. SITE is three times larger than its closest competitor. The company remains focused on increasing its share from the current 17% of the $25 billion wholesale landscaping products distribution market. SiteOne has been enhancing its business through acquisitions to increase its customer base, broaden product lines and expand its geographic reach.SITE made 11 acquisitions in 2023 and five so far in 2024. The company will also gain from its focus on cost reduction, driving operational excellence, product category management, enhancing supply-chain efficiency and strengthening pricing. SITE has been investing more in sophisticated information technology systems and data analytics.The Zacks Consensus Estimate for Roswell, GA-based SiteOne’s earnings for 2024 indicates year-over-year growth of 3.2%. The estimate has remained unchanged in the past 30 days. SITE currently carries a Zacks Rank #3.Why Haven't You Looked at Zacks' Top Stocks?Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.Today you can access their live picks without cost or obligation.See Stocks Free >>Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.Media ContactZacks Investment Research800-767-3771 ext. 9339support@zacks.comhttps://www.zacks.comPast performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report W.W. Grainger, Inc. (GWW): Free Stock Analysis Report Siemens AG (SIEGY): Free Stock Analysis Report SiteOne Landscape Supply, Inc. (SITE): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks