Boeing and 7 other industrial stocks for the second half of 2022
The first half of 2022 has been a bad one for most stocks, including stocks in the industrials sector. But that pain can create opportunity.
Several industrial stocks appear to be the big winners, from what Wall Street thinks.
fell 16.5% in the second quarter. The
Dow Jones Industrial Average
fell 11.8%. This is the worst quarterly performance for these indices since the first quarter of 2020, according to Dow Jones Market Data.
Industrials did no better. The average industrial park in
Russell 1000 Index
down about 15%. Inflation and rising interest rates raised fears of a recession among investors, although industrial demand continued to grow.
The ISM PMI, a key indicator of manufacturing activity, averaged around 55 in the second quarter. A level above 50 indicates growth. And ISM
Chairman Tim Fiore has characterized the industrial sector as a demand-driven, limited-supply industry for months.
With demand holding up, Wall Street sees opportunities in several stocks.
The best bets, based on analyst target prices are: logistics service providers
(symbol: GXO) and
(BLDR); taser maker
(AXONE); boat builder Brunswick (BC); and electric distributor
Wall Street expects these stocks to rise on average about 75% over the next 12 months, based on analysts’ average price targets.
the stock looks almost as attractive. Analysts’ average price target is around $216 per share, up 55% from recent levels.
Analyst price targets, of course, are just a way to filter out new ideas. And when markets turn volatile, as they were in the second quarter, those targets can often lag actual stock prices, up or down.
Still, the seven plus Boeings all enjoy strong analyst support.
The average buy rating ratio for S&P 500 stocks is around 58%, and every stock has a ratio above that mark. The ratio is the number of buy ratings compared to the total number of ratings.
Analyst ratings aren’t the ultimate solution for investors, but they are a way to ensure that investors aren’t looking at cheap stocks for a fundamental reason.
The seven non-Boeing stocks are also trading at an average of 14.4 times 2023 earnings estimates. At the end of the first quarter, those stocks were trading at more than 21 times 2023 earnings estimates.
Additionally, valuation multiples have fallen even as earnings estimates have risen. Over the past three months, full-year 2022 earnings estimates for the seven have actually risen by around 5% on average.
Boeing is trading at around 23 times estimated 2023 earnings, down from around 25 times estimated 2023 earnings at the end of March. His estimate did not go in the same direction as the others.
Boeing’s estimates for 2022 are down about 86% in the past three months. Boeing laid an egg when it released its first-quarter results in April, leading the estimate cuts. The street still likes the stock, but Boeing had a tougher first half than other industrial stocks.
A screen never replaces a complete investment thesis. And the upside potential based on analyst numbers is just the starting point for investors looking for bargains.
Inflation remains a major concern, but things should eventually improve. This is usually the case, especially for sufficiently cheap stocks.
Write to Al Root at email@example.com