The 12 Best Industrial Stocks to Buy for 2022
The pros love several value-oriented sectors for 2022, including industrials. Read on as we highlight 12 top industrial stocks for the year to come.
The industrial sector will enter the new year the same way they entered 2021: generally favored by analysts anticipating growth from a healing economy. And the very best industrial stocks to buy for 2022 could have a very long runway, indeed.
As long as 2022 doesn't play out the same way 2021 did, that is.
Industrial shares roared ahead during 2021's first half as new vaccines promised to reopen America for business and spurred a rebound in economic activity. But the sector ran out of gas by about midway through the year and was poised to underperform the broader market by a considerable margin.
Still, 2022 could be another chance for industrial stocks, despite ongoing concerns about the omicron variant of COVID-19. The Institute of Supply Management's manufacturing Purchasing Manager Index is projecting a 6.5% improvement in industrial sales – lower than 2021's 14%, but still plenty robust.
"If GDP continues to expand as we expect in 2022 (short-term setbacks notwithstanding) and interest rates inch higher," say Janus Henderson Investors strategists, "value-oriented sectors such as financials, industrials, materials and energy might once again take the lead."
However, given that 2022's economic rebound isn't expected to be as vibrant as 2021's, it'll pay to be choosy. With that in mind, read on to explore our 12 best industrial stocks to buy for 2022, including what sets these shares apart from the rest of the sector pack.
Data is as of Dec. 27. Dividend yields are calculated by annualizing the most recent payout and dividing by the share price.
Trex
- Market value: $15.7 billion
- Dividend yield: N/A
- Analysts' ratings: 6 Strong Buy, 0 Buy, 8 Hold, 1 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 2.27 (Buy)
Trex (TREX, $136.76), a leading brand in outdoor living products and composite decking, has designs on another year of double-digit revenue growth in 2022, as homeowners continue to invest in remodels, improvements and repairs.
The Winchester, Virginia-based manufacturer of wood-alternative composite decking, eco-friendly outdoor living products and custom-engineered commercial railing systems is expected to break ground in early 2022 on a new $400 million manufacturing facility to expand production of its Trex Residential outdoor living products.
"Outdoor living remains one of the fastest growing categories within the repair and remodel sector and the strength of the Trex brand coupled with our expanded manufacturing capacity, our competitive advantages, helping us to effectively unlock potential market share and drive long-term growth," said Bryan Fairbanks, president and CEO of Trex, in an earnings call with analysts.
The new facility – located in Little Rock, Arkansas – is scheduled to come online in 2024. It will provide Trex with additional manufacturing capacity as well as unmatched geographical coverage, servicing the East Coast, West Coast and Central regions.
The new site will not only provide customers with access to Trex residential products when and where they need them, but represents a strategic investment in Trex's future.
And the composite decking industry is quickly growing. According to market research firm Reportlinker.com, the global market for composite decking and railing is expected to increase at a compound annual growth rate (CAGR) of 14.1% through 2026 to reach $6.5 billion.
William Blair analyst Ryan Merkel thinks TREX is one of the best industrial stocks for 2022. "Trex is our favorite secular growth story and a play on outdoor living demand and wood conversion," he says. He has an Outperform rating on the stock, which is the equivalent of a Buy.
Merkel's bull suggests shares rise to $171, assuming 35 times EBITDA (earnings before interest, taxes, depreciation and amortization) of $565 million in 2023.
Truist Securities analyst Keith Hughes (Buy) is also upbeat toward TREX. "We believe TREX will likely continue to trade above the peer group average of ~11x given our expectation of above-average organic revenue growth for a decade or more, group leading margins and low leverage," he says.
Paccar
- Market value: $29.8 billion
- Dividend yield: 1.6%
- Analysts' ratings: 7 Strong Buy, 2 Buy, 9 Hold, 1 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 2.21 (Buy)
Paccar (PCAR, $85.80) is navigating its path forward to producing more big rigs in 2022 as the global semiconductor chip shortage wanes.
The Bellevue, Washington-based company manufactures light, medium and heavy-duty 18-wheel commercial trucks including Class 8 nameplates: Kenworth Truck, Peterbilt Motors and DAF.
Paccar delivered 32,800 trucks in the third quarter of 2021, 3,200 fewer vehicles than in the same quarter a year ago due to the undersupply of semiconductors.
Third-quarter net income was $377.7 million, down 2% from the $386 million reported in the year-ago quarter. Revenue for the quarter was $5.1 billion compared to $4.9 billion last year.
Overall, the company has shown solid improvement in 2021. For the first nine months of the year, Paccar earned $1.3 billion, or $3.85 per share, compared to $893 million, or $2.57 per share, in the same period a year ago. Net revenues were $16.8 billion, compared to $13.16 billion a year ago.
Argus Research analyst Bill Selesky (Buy) acknowledged that the PCAR's third-quarter results "reflected the ongoing industry-wide undersupply of semiconductors." However, on the positive side, management also acknowledged "strong" customer demand.
"Depending on the supply of materials, fourth-quarter Paccar global truck deliveries should increase into the low 40,000s with gross margins improving to approximately 12.5%," said CEO R. Preston Freight in the company's earnings call. "The good news is that we're starting to see improvements in the supply chain."
And in 2022, assuming improvements in the supply chain and chip production, Class 8 truck industry sales are estimated to be between 250,000 and 290,000 vehicles in the U.S. and Canada, says Mike Dozier, senior vice president at Paccar. In Europe, 2022 registrations for trucks over 16 tonnes is expected to be between 260,000 and 300,000, he adds.
While Selesky lowered his 2021 earnings per share (EPS) estimate to $5.43 from $5.84 to reflect the 41 cents-per-share third-quarter shortfall, he maintained his "above-consensus 2022 EPS estimate of $7.08 per share, reflecting our expectations for growth in orders, margins and market share next year."
General Electric
- Market value: $103.9 billion
- Dividend yield: 0.3%
- Analysts' ratings: 8 Strong Buy, 5 Buy, 7 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.95 (Buy)
General Electric (GE, $94.62) is awaiting a lift in its commercial aviation business in 2022 after having announced in November it was dumping businesses that had been weighing it down.
The Boston, Massachusetts-based industrial conglomerate's products and services range from aerospace engines and medical diagnostic equipment to gas and steam turbines and onshore and offshore wind turbines.
GE will be divided into separate units focused on aviation, healthcare and energy. The company plans to spin off the healthcare unit by early 2023 and energy in early 2024; leaving it with aviation.
Commercial air travel picked up in 2021 after COVID-19 decimated it in 2020. However, it is still down 23% compared with pre-pandemic levels in 2019. GE had expected a recovery in aviation during the second half of 2021; however, it is monitoring the impact from a spike in COVID-19 cases and its growing list of variants.
"Aviation improved significantly, benefiting from the market recovery," said Larry Culp, chairman and CEO of General Electric, during the company's third-quarter earnings call with investors. "Looking further out to next year, as our businesses continue to strengthen, we expect revenue growth, margin expansion and higher free cash flow despite the pressures we're managing through currently."
Free cash flow (FCF) – the cash profits left over after a company has met all its financial obligations necessary to maintain its business – is a closely watched sign of GE's ability to pay down its debts. In 2020, free cash flow for GE was $606 million, down 66% year-over-year, but coming in above its own guidance. For 2021, GE is expecting free cash flow to arrive between $2.5 billion and $4.5 billion – and anticipates even higher FCF in 2022.
GE is making operational improvements and lowering structural costs as it faces near-term pressures in aviation, says BofA Securities analyst Andrew Obin. Still, "Over the medium term, improving FCF should support share price appreciation," he adds.
GE earnings are forecast to nearly double in 2022 to $3.97 per share from an estimated $2.04 per share in 2021; followed by a growth rate of 34.9% in 2023 to $5.68 per share. Current 2022 gross margins are estimated to be 31.1%, up from 27.8% in 2021.
Certainly GE faces some potential risks in 2022. COVID-19 variants may spark travel restrictions, which could negatively impact airlines orders for and taking delivery of aircraft powered by GE engines. In addition, headwinds associated with disruptions in the global supply chain present the potential for further delaying commercial aviation's recovery.
Nevertheless, analysts firmly believe this is one of the best industrial stocks heading into 2022.
"We reiterate our Buy rating and $140 price objective," Obin wrote in early December. "Investors undervalue GE Aviation, in our view, as it has higher margins versus peers typically used by investors."
Terex
- Market value: $3.1 billion
- Dividend yield: 1.1%
- Analysts' ratings: 8 Strong Buy, 1 Buy, 7 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.94 (Buy)
Terex (TEX, $44.46) could be one of the best industrial stocks of 2022 amid increased spending from the $1.2 billion Infrastructure Investment and Jobs Act – passed in November – compounded by a robust backlog in both its Aerial Works Platform (AWP) and Materials Processing (MP) segments.
The Norwalk, Connecticut-based manufactures aerial work platforms, materials processing equipment and specialty equipment, including concrete mixer trucks. And TEX foresees heavy demand for its equipment used in non-residential construction in the new year.
"We do expect end-market demand to remain strong through the remainder of this year and into 2022," said John L. Garrison, Jr., chairman and CEO of Terex, during the company's third-quarter earnings call with analysts.
Terex said disruptions in the global supply chain limited its production output, particularly in its AWP division. As a result, revenues for the quarter were approximately 9% below the company's expectations from the start of the quarter.
Still, TEX has delivered year-over-year improvement in both revenues and adjusted earnings per share in all three quarters of 2021. Its backlog has been improving, surging roughly 300% year-over-year in Q3 to $2.7 billion.
Now, approximately 70% of AWP's third-quarter backlog is scheduled for delivery in 2022. A portion of the backlog represents orders with 2021 pricing that were scheduled for delivery in 2021 that have now moved over into the new year. So while Terex has implemented price increases across both its AWP and MP segments to offset the inflationary pressures, they won't be realized until 2022.
"As a result, we expect the first half of the year to be price/cost negative," said John D. Sheehan, senior vice president and chief financial officer for Terex. "However, we do expect AWP to be price/cost neutral for the full year 2022."
If price/cost is neutral in 2022, that should reflect an EPS tailwind of 35 cents, says UBS Global Research analyst Steven Fisher, who rates the stock at Buy.
"We are raising our Terex EPS estimates for 2022 and 2023 by 14% and 12%, respectively primarily reflecting a higher margin and lower tax rate," Fisher says. "The higher margin estimates reflect TEX strong performance managing costs thus far with our incremental market assumptions for 2022 and 2023 estimates largely unchanged."
Generac Holdings
- Market value: $22.2 billion
- Dividend yield: N/A
- Analysts' ratings: 12 Strong Buy, 4 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.60 (Buy)
Generac Holdings (GNRC, $352.08) is a Waukesha, Wisconsin-based company that designs, manufactures and sells power generation equipment, energy storage systems and other power products for the residential and light commercial and industrial markets.
With its new Trenton, South Carolina, manufacturing, assembly and distribution facility now online, production increased substantially in the third quarter – helping to cushion the blow from supply chain challenges. As a result, GNRC saw record year-over-year revenue growth of 34%.
"Despite the higher output, demand for home standby generators continues to outpace our ability to produce them which has caused lead times to further grow to approximately 30 weeks,'' said Aaron P. Jagdfel, chairman, president and CEO of Generac, in the company's third-quarter earnings call with investors. "These significant lead times provide excellent visibility as we head into 2022 with our home standby backlog projected to be well over $1 billion entering next year."
Wall Street analysts have a consensus target price of $504 for Generac Holdings, giving the industrial stock implied upside of 43.5% over the next 12 months or so.
Argus Research analyst John Eade (Buy) has an even higher price target for GNRC, at $510.
"This well-managed company has a long record of market outperformance and earnings growth," Eade says. Plus, GNRC shares are attractively valued following a recent pullback from their early November highs north of $500 – down 30%.
"The shares have been in a long-term bullish pattern of higher highs and higher lows dating back to 2015,'' he adds. "We expect the positive sales, earnings, and stock price momentum to continue for this well-positioned company.''
In other words, GNRC is one of the best industrial stocks for 2022 and beyond.
Aecom
- Market value: $10.9 billion
- Dividend yield: 0.8%
- Analysts' ratings: 6 Strong Buy, 1 Buy, 2 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.56 (Buy)
The pipeline for Aecom (ACM, $76.39) is projected to swell in 2022 from its existing backlog and new business wins resulting from President Joe Biden's signature infrastructure bill to upgrade the nation's roads, airports and buildings.
The Los Angeles, California-based global transportation and environmental engineering firm also provides planning, consulting and architectural design and construction management services for highways, bridges and mass transit systems.
Based on clients' strengthening funding backdrop, AECOM expects its backlog to grow. At the end of fiscal 2021, AECOM had a backlog of $38.6 billion, driven by increases in construction management.
With the passage of the $1.2 trillion Infrastructure Investment and Jobs Act, AECOM CEO Troy Rudd sees opportunities for double-digit growth dropping down to AECOM's bottom line.
"We are positioned to benefit from nearly every line item in this bill," said Rudd in the company's fiscal fourth-quarter earnings call. "We anticipate this funding will increase our addressable market in our most profitable business by double digits over the coming years; and we expect the most meaningful benefits in fiscal 2023 and beyond."
In 2022, AECOM expects adjusted EPS of between $3.20 and $3.40 and adjusted EBITDA of between $880 million and $920 million, reflecting a 17% and 8% year-over-year growth at the midpoint of the respective ranges. By fiscal 2024, AECOM expects to deliver adjusted EPS of at least $4.75.
Argus Research analyst John Staszak thinks increased infrastructure spending will result in an even bigger tailwinds for ACM, saying new road and water projects will provide a "stable source of revenue. He recently raised his fiscal year 2022 EPS estimate to $3.45 from $3.40 and his fiscal 2023 estimate to $4.01 from $3.96.
"As ACM continues to execute on its strategic initiatives, we expect the shares to move higher," Staszak writes. "Our long-term rating remains Buy."
XPO Logistics
- Market value: $8.8 billion
- Dividend yield: N/A
- Analysts' ratings: 14 Strong Buy, 4 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.55 (Buy)
XPO Logistics (XPO, $76.61) plans to grow its U.S. network 900 doors by 2024 to improve its operating efficiency and grow revenue while helping to relieve bottlenecks in the supply chain. Half of those XPO doors are expected to be added in 2022.
The Greenwich, Connecticut-based logistics and transportation company provides truckload brokerage and transportation, warehousing and distribution and less-than-truckload (LTL) transportation for some 50,000 customers worldwide.
XPO operates two business segments: Transportation and Logistics. Transportation provides services to move raw materials, parts and finished goods. Logistics offers warehousing and distribution, e-commerce and omnichannel fulfillment and supply chain optimization.
In the wake of the pandemic, LTL stocks have soared as heightened consumer demand and constrained trucking capacity have allowed carriers to drive margins and earnings higher.
"More doors mean more top-line growth, more efficiencies and more yields flowing to the bottom line for our shareholders," said Mario Harik, chief investment officer at XPO Logistics, said in the company's third-quarter earnings call.
Looking ahead, XPO's revenue growth will come from the "Big 3" tailwinds of e-commerce, warehouse automation and outsourcing. Additionally, the company expects new major contracts to deliver more than $300 million in revenue in 2022 and 2023.
"The fundamentals that have underpinned our long-held bullish stance on transportation equities look set to continue in 2022," says Deutsche Bank analyst Amit Mehrotra. However, with "easy monetary and generous fiscal policies that have propelled consumer wealth and spending to all-time highs are now largely in the rearview mirror … we are taking a more disciplined approach to stock selection."
He does say there are "plenty of compelling opportunities to be found," and calls XPO Logistics a Buy.
And with shares underperforming since the GXO Logistics (GXO) spin-off from XPO closed in the summer of 2021 – down 17% from their mid-August peak above $90 – Susquehanna Financial Group analyst Bascome Majors feels XPO offers LTL exposure at a very reasonable price.
"We view XPO's plan to improve near-term performance under new LTL management as credible, the mid-term signal to pursue organic LTL growth as under-appreciated, and the rumored sale of less-than-loved businesses (Europe transport, U.S. intermodal) favorable as they could help earn XPO an investment grade credit rating," Major adds.
A large bull camp earns XPO a spot among our best industrial stocks for 2022. The company has earned 14 Strong Buy ratings and four Buys versus just four Holds and no Sells of any kind.
Jacobs Engineering Group
- Market value: $18.0 billion
- Dividend yield: 0.6%
- Analysts' ratings: 9 Strong Buy, 4 Buy, 2 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.53 (Buy)
Jacobs Engineering Group (J, $138.98) is one of the top industrial stocks not just for 2022, but well beyond, thanks in part to the passage of the Infrastructure Investment and Jobs Act.
The bipartisan bill is expected to deliver $550 billion in new investments to America's roads, bridges and water and energy systems over the next five years. Its goal is to help ensure safe travel and efficient transportation of produce and goods across the U.S., which is seen as a boon for Jacobs.
"The company believes that we are in an unprecedented cycle for advanced facilities and next generation manufacturing as companies seek to advance their supply chain infrastructure," says William Blair analyst Louie DiPalma (Outperform).
Plus, management asserts 95% of the proposed $550 billion infrastructure stimulus is aligned to Jacobs. It already has framework agreements with many of the prospective infrastructure stimulus customers and expects to see the awards in the second half of fiscal 2022, adds DiPalma
Jacobs Engineering – a Dallas-based provider of engineering, design, construction and consulting solutions, for highways, rapid transit and airports – expects this new revenue to help drive earnings per share to $10 in fiscal 2025 from $6.29 in fiscal 2021. And over the next 12 months, DiPalma sees J's share price climbing as high as $183.
"We expect mid-single-digit reported revenue growth in the first quarter of fiscal 2022 with an acceleration in the second half of our fiscal year driven by U.S. infrastructure spending and the ramp-up of new awards in our CMS (critical mission solutions) business," said Kevin Barryman, president and chief financial officer at Jacobs Engineering, on the company's fiscal fourth-quarter earnings call.
MasTec
- Market value: $6.8 billion
- Dividend yield: N/A
- Analysts' ratings: 8 Strong Buy, 3 Buy, 1 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.42 (Strong Buy)
MasTec (MTZ, $92.03) is another name on this list of the best industrial stocks for 2022 that is likely to get a boost from the infrastructure bill. Specifically, the Infrastructure Investment and Jobs Act has $65 billion earmarked to expand internet services to rural communities.
The Coral Gables, Florida-based engineering firm provides services for the communications, energy, utility and other infrastructure – building overhead and underground distribution systems, including cell towers, cable and power lines.
"We expect sequential margin improvement in the Communications segment in the fourth quarter and excellent momentum heading into 2022 based on our backlog build," said Jose Ramon Mas, CEO and director at MasTec, in the company's third-quarter earnings call.
B. Riley Securities analyst Alex Rygiel (Buy) is bullish on MasTech, citing the company's 18-month backlog – which increased 11% year-over-year – to $8.5 billion as one positive.
"We expect the backlog to continue to grow, but can be lumpy, given the large market opportunities for which MTZ is well-positioned," he wrote in a note. "We believe MTZ is well-positioned across strong end markets with its financial flexibility for outsized growth in 2022 and beyond."
For the fourth quarter of 2021, MasTec expects revenue of approximately $1.9 billion, with annual GAAP (generally accepted accounting principles) net income and diluted earnings per share expected to be $75 million and $1.01 respectively.
Jose Ramon Mas, CEO and director at MasTech, is upbeat about the company's opportunities over the next several years.
One of these opportunities is the Rural Digital Opportunity Fund, or RDOF, which is expected to provide $20 billion in funding over the next decade to build and connect gigabit broadband speeds in underserved rural areas. There's also the 5G Fund for Rural America, which will provide up to $9 billion in funding over the next 10 years to bring 5G wireless broadband connectivity to rural America.
Applied Industrial Technologies
- Market value: $4.0 billion
- Dividend yield: 1.3%
- Analysts' ratings: 4 Strong Buy, 0 Buy, 1 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.40 (Strong Buy)
Applied Industrial Technologies (AIT, $103.51) is doubling down on its fiscal 2022 earnings forecast, buoyed by its first-quarter results.
The Cleveland, Ohio-based global distributor of bearings, power transmission products, engineered fluid power components and systems said it expects fiscal 2022 – which ends June 30 – earnings per share of $5.00 to $5.40, based on a sales increase of between 8% and 10%. Plus, AIT forecasts EBITDA margins of 9.7% to 9.9% for the full year.
In the first quarter of 2022, Applied Industrial Technologies net sales grew 19.2% to $891.7 million; and net income jumped 52% to $53 million.
"We started fiscal 2022 on a positive note with sales, EBITDA and EPS all achieving record first quarter levels," said Neil A. Schrimsher, president and CEO at Applied Industrial Technologies. "We are effectively managing through industrial supply chain and inflationary headwinds year-to-date."
Baird analyst David Manthey (Outperform) says Applied Industrial Technologies' management maintained its conservative full year 2022 guidance despite an exemplary first quarter. This is likely due to continued uncertainties surrounding supply-chain and pricing disruptions and greater-than-expected last in first out (LIFO) headwinds.
As is common across the industry right now, Applied Industrial Technologies is dealing with inflationary pressures, supply chain constraints and lingering COVID-19-related impacts. Helping Applied Industrial Technologies' buffer its exposure are: Its products are primarily sourced from across North America, as well as existing orders and projections for future demand.
"The breadth and availability of our products, combined with our leading technical solutions and localized support, is a significant competitive advantage right now," Schrimsher said. "We look to leverage these capabilities across our expanded addressable market during these dynamic times and in years to come."
"We recommend buying AIT into the weakness as robust demand and enhanced share gains and continued high-level execution should drive outperformance," Manthey says.
Alaska Air Group
- Market value: $6.6 billion
- Dividend yield: N/A
- Analysts' ratings: 10 Strong Buy, 3 Buy, 1 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.36 (Strong Buy)
Alaska Air Group (ALK, $52.62) owns not just Alaska Airlines – America's fifth-largest airline – but also regional carrier Horizon Air. And to maintain its altitude, the Seattle-based carrier, which connects the Pacific Northwest, West Coast and Alaska with the continental U.S., is staffing up.
In December, executives from major airlines testified in front of a Senate committee about how they planned on using their COVID payroll assistance. Alaska Air CEO Ben Minicucci said the carrier planned to hire more than 3,000 new employees in 2022 – roughly the same amount it projected it would cut in 2021 amid COVID-related difficulties.
ALK shares, which are barely in the green with just a few days left in 2021, won't enter 2022 with much momentum. But the company will. Alaska Air returned to profitability during the third quarter of 2021, earning $1.53 per share versus a $3.49 loss in the year-ago quarter. Excluding fuel hedges and other special items, profits came to $1.47 per share.
2022 could be a great year for ALK, though there could be some turbulence early on.
"Given the view on rising COVID cases … our 1H22 capacity/revenue growth outlook is moderated, reflecting the anticipated step-function change in U.S. business demand recovery being shifted from our prior assumption of early February to early April," says Raymond James analyst Savanthi Syth, who lowered her 2022 earnings estimates for Alaska but remains plenty bullish on the name.
"Longer term, we view favorably Alaska's low-cost/capital-efficient DNA, relatively unimpaired balance sheet, and revenue upside from the new American partnership and Oneworld membership," she adds. "We believe the risk-reward remains compelling on this historically well-managed airline and reiterate our Strong Buy rating on ALK."
Syth is part of an extremely bullish analyst camp. Of 14 pros covering the stock, 13 say it's a Strong Buy or Buy, and just one calls it a Hold, easily putting ALK among the best industrial stocks to buy for 2022.
Builders FirstSource
- Market value: $16.1 billion
- Dividend yield: N/A
- Analysts' ratings: 10 Strong Buy, 3 Buy, 0 Hold, 0 Sell, 0 Strong Sell
- Analysts' consensus recommendation: 1.23 (Strong Buy)
Builders FirstSource (BLDR, $84.31) is the largest U.S. supplier of structural building products and materials, value-added components and services for new residential construction. And in 2022, it's expected to capitalize on the anticipated multi-year growth in single-family home construction, among other tailwinds.
In December, during its investor-day event, the Dallas-based manufacturer forecast single-family home-construction growth in the low- to mid-single-digit range over the next four years.
Baird analyst David J. Manthey (Outperform) is upbeat on BLDR's projections, and even said the construction giant's estimate could be conservative given a current estimated shortage of 4 to 6 million single-family homes.
"We are incrementally positive on the company's new attractive long-term financial targets," Manthey says. "We continue to think BLDR is well positioned to capitalize on a good multi-year outlook for single family construction, expand margins, and deploy significant free cash flow generated to drive shareholder value."
Through 2025, Builders FirstSource is targeting 10% average annual net sales growth, 15% adjusted EBITDA growth and 50 basis points of annual adjusted EBITDA margin expansion, to 13.2%.
B. Riley Securities analysts Alex Rygiel and Min Cho also walked away encouraged by the investor-day event.
"We believe BLDR's scale, geographic reach, breadth of products with a focus on value-added components, customer relationships with the top homebuilders, innovative culture, and strong cash flow generation, position the company for continued market share gains and solid returns to shareholders," they say. "We are raising our estimates, raising our price target from $74 to $93, and reiterate our Buy rating."
They're part of a unanimously bullish crowd that puts BLDR tops among 2022's best industrial stocks to buy. Specifically, of 13 pros covering the stock, 10 call it a Strong Buy and three call it a Buy – no Holds or Sells to be found.
