While other sectors show signs of slowing corporate profits, industrials – despite the fallout from the ongoing trade war between Washington and Beijing – continue to grow profits at a faster pace than the market. FactSet data points to the industrials sector growing earnings at 8.4% in 2019 – above the projected 3.8% growth rate for the average S&P 500 company.
"Industrials are at least showing above-average growth," John Davi, chief investment officer at Astoria Portfolio Advisors, told CNBC earlier this year. "We're living in a world where growth is declining. S&P 500 earnings are de-accelerating, so if you can get stocks that have above-average growth to the S&P, then that's really attractive," Davi added.
The industrials sector continues to be one of the best performing sectors in the S&P 500 index. Year to date (YTD), industrials have outpaced the broader market by about 3% as of July 1, 2019. Stocks in the space may get an additional boost this week on news that President Trump and his Chinese counterpart Xi Jinping agreed on Saturday at the Group of 20 (G-20) summit in Osaka, Japan, to restart trade talks and hold off on imposing new tariffs.
Those who follow the sector should add these three stocks to their watchlist. Each is projected to post robust full-year 2019 earnings growth and trades at, or near, an all-time high. Let's take a close look at each issue and work through several trading ideas.
AMETEK, Inc. (AME)
AMETEK, Inc. (AME) manufactures and sells electronic instruments and electromechanical devices. The Berwyn, Pennsylvania-based company posted first quarter (Q1) adjusted earnings per share (EPS) of $1, representing a 15% increase from the year-ago quarter. AMETEK also revised its full-year adjusted EPS guidance upwards to between $3.98 and $4.08 from $3.95 to $4.05, reflecting growth of 9% to 11% from its 2018 reported figure. Analysts have a 12-month price target on the stock at $94.27 – implying upside of 3.8% from Friday's $90.84 closing price. As of July 1, 2019, AMETEK stock has a $20.70 billion market capitalization, offers a 0.63% dividend yield, and sports an impressive YTD gain of 34.59%, outperforming the diversified industrial industry average and S&P 500 by 12.44% and 17.24%, respectively.
Apart from a 7% pullback in May, AMETEK shares have spent most of 2019 in a consistent uptrend. The price set an all-time high at $90.87 on Friday, June 28, accompanied by the most substantial volume since early 2017. Momentum traders who anticipate follow-through buying should set a stop-loss order slightly below a previous two-month resistance line at $88, which now acts as crucial support. Consider using a fast period moving average, such as the 10-day simple moving average (SMA), as a trailing stop to let profits run.
Dover Corporation (DOV)
Dover Corporation (DOV) is a global provider of equipment and components, specialty systems, consumable supplies, software and digital solutions, and support services. The $14.56 billion industrial equipment giant posted Q1 adjusted EPS of $1.24, exceeding expectations of $1.12 per share. It also topped revenue forecasts over the period by $38 million. Analysts expect the company to post 2019 earnings growth of 16.90%. Dover stock trades at $100.20 and has surged nearly 43% YTD as of July 1, 2019. Investors also receive a 1.92% dividend yield.
Dover shares added the bulk of their YTD gain between January and April before falling 11% in May and recovering those losses in June. The price rallied to a fresh all-time high at $100.43 on above-average volume in Friday's trading session – breaking above a period of two-month resistance at $99 in the process. Traders who open a long position at current levels could set a profit target by measuring the January to April rally and adding it to the breakout point, For example, adding $29.87 to $99 gives a $128.87 target. Consider placing to stop below the 50-day SMA to protect against a possible bull trap.
Ingersoll-Rand Plc (IR)
Ingersoll-Rand Plc (IR) manufactures and services HVAC systems and transportation refrigeration solutions along with compression systems, fluid management equipment, and utility vehicles. The company, headquartered in Swords, Ireland, announced it plans to spin off and merge its industrial segment in 2020 and operate as a pure-play HVAC and refrigeration business. The company beat the Street's Q1 top- and bottom-line growth projections, with analysts forecasting 2019 earnings growth to come in at 13.45%. As of July 1, 2019, Ingersoll-Rand stock has a market value of $30.55 billion, issues a 1.70% dividend yield, and is up 40% on the year.
The refrigeration maker's share price trended sharply higher over the first four months of 2019, accelerating in late April after the company's stellar quarterly financial results. Since that time, the price has remained above the 50-day SMA, with only a very minor retracement in May. The stock closed toward its session high Friday to trade within a half dollar of its all-time high set on June 10, 2019, at $127.08. Those who take a trade could trail a stop below the previous day's low to ride momentum as far as possible. Think about positioning an initial stop order below horizontal line support at $122.50.