Chicago, IL – May 7, 2025 – Today, Zacks Equity Research discusses Eaton Corp. plc ETN, Emerson Electric Co. EMR, EnerSys ENS and Powell Industries, Inc. POWL.
Link: https://www.zacks.com/commentary/2462805/4-manufacturing-electronics-stocks-to-watch-on-robust-industry-trends
The Zacks Manufacturing - Electronics industry stands to benefit from steady demand across the electronic services end market, increasing adoption of advanced manufacturing technologies and product innovation efforts. A surge in e-commerce activities is also likely to aid the industry's growth.
A slowdown in manufacturing activities and the contraction of new orders might continue to dent the performance of the industry players. Eaton Corp. plc, Emerson Electric Co., EnerSys and Powell Industries, Inc. are a few industry participants that are expected to capitalize on prevalent opportunities.
The Zacks Manufacturing-Electronics industry comprises companies that manufacture electronic products like battery chargers, battery accessories, outdoor cabinet enclosures, power transmission products, electrical motion controls and motive power devices. Some industry players also provide water-treatment products, engineered flow components, process equipment and turn-key systems.
These companies offer state-of-the-art customer support and after-market services to end users. The firms are increasing investments in developing innovative technologies, boosting customer and employee experience, and supply-chain modernization programs. The manufacturing electronic companies sell products and services in various end markets, including robotics, semiconductor, defense, aerospace, medical equipment and satellite communications.
Weakness in the Manufacturing Sector: Weakness in the manufacturing sector has been denting the demand in the industry. After witnessing expansion in economic activities for the second consecutive month in February, the manufacturing sector contracted in both March and April. Per the Institute for Supply Management's (ISM) report, the Manufacturing Purchasing Manager's Index touched 48.7% in April, down from 49% in March. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index remained in the contraction territory for the third consecutive month, registering 47.2% in April.
Strength in the Electronics Services Market: Despite a slowdown in manufacturing activities, demand across key end markets has been stable. Electronics manufacturers are steadily benefiting from the higher adoption of advanced manufacturing technologies and processes by original equipment manufacturers. The requirement for integrating advanced electronic components into machinery and electronic devices has been supporting the electronics manufacturing services market.
In addition, a few industry players with wide exposure to the booming medical and life science markets are witnessing a positive momentum across their businesses due to sturdy demand for their products and solutions. A surge in the e-commerce business has also been boosting several industry participants' prospects.
Technological Advancement Benefits: With the gradual development of business models and cutting-edge technologies, several industry players have been banking on digitizing their business operations for a while now. With digitization, businesses are gaining a detailed insight into their operational performances, demand cycles, delivery status and supply-chain issues. This, in turn, is helping them bolster their competitiveness in the market with enhanced operational productivity, product quality and lower costs.
The Zacks Manufacturing – Electronics industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #66. This rank places it in the top 27% of 246 Zacks industries.
The group's Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Given the strong near-term prospects of the industry, we will present a few noteworthy stocks for your consideration. But it is worth looking at the industry's shareholder returns and its current valuation first.
The Zacks Manufacturing – Electronics industry has underperformed the broader sector and the Zacks S&P 500 composite index over the past year. Over this period, the industry has lost 17.7% compared with the sector's decline of 7% and the S&P 500 Index's growth of 9.7%.
However, the industry has rebounded in the past month, increasing 15.1%, which outperformed the sector's and S&P 500 Index's growth of 12.6% and 11.7%, respectively.
On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 21.19X compared with the S&P 500's 20.97X. It is above the sector's P/E ratio of 17.94X.
Over the past five years, the industry has traded as high as 28.87X, as low as 17.17X and at the median of 22.86X.
Each of the companies mentioned below carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Eaton: Headquartered in Dublin, Ireland, Eaton is a diversified power management company and a global technology leader in electrical components and systems. ETN is benefiting from improving end market conditions, increasing demand from the new AI data center, solid backlog level and product development initiatives through investments in research and development.
Although Eaton's shares have lost 8.9% in the past year, it has rebounded 18.3% in the past month. The company reported better-than-expected results in each of the last four quarters, the average being 1.9%. The Zacks Consensus Estimate for its 2025 earnings has inched down 0.3% in the past 60 days.
Emerson: Based in St. Louis, MO, this global engineering and technology company offers a wide range of products and services to customers in the consumer, commercial and industrial markets. Emerson is witnessing solid momentum in the Intelligent Devices and Software and Control segments. Strength in the power end markets is driving the Final Control business, while a strong backlog conversion level is acting as a tailwind for the Measurement & Analytical business.
EMR's shares have gained 0.9% in the past year. The company reported better-than-expected results in each of the trailing four quarters, the average being 4.3%. The Zacks Consensus Estimate for its fiscal 2025 (ending September 2025) earnings has inched down 0.7% in the past 60 days.
EnerSys: Headquartered in Pennsylvania, the company is a leading provider of stored energy solutions for industrial applications throughout the world. ENS is set to benefit from solid product offerings, a firm focus on product innovation and strength in the electric industrial forklift trucks market. Increased sales of maintenance-free thin plate pure lead and lithium products bode well. Global megatrends, including 5G expansion, electrification, automation and decarbonization, are aiding the company.
Although shares of the company have lost 4.7% in the past year, it has rebounded 11.9% in the past month. EnerSys delivered an earnings surprise of 2.2%, on average, beating estimates in each of the trailing four quarters. The Zacks Consensus Estimate for ENS' fiscal 2025 (ended March 2025, results awaited) earnings has remained stable in the past 60 days.
Powell Industries: Headquartered in Houston, TX, the company is engaged in designing, manufacturing and distributing custom-engineered equipment and systems. Powell Industries has been witnessing several favorable trends across its oil, gas and petrochemical end markets that include growth in energy transition projects, such as biofuels, carbon capture and hydrogen. Also, significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, are likely to drive POWL's performance in the quarters ahead.
Shares of the company have gained 21.1% in the past year. The company reported better-than-expected results in each of the trailing four quarters, the average being 33.3%. The Zacks Consensus Estimate for its fiscal 2025 (ending September 2025) earnings has been stable in the past 60 days.
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Emerson Electric Co. (EMR) : Free Stock Analysis Report
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