Chicago, IL – April 14, 2025 – Today, Zacks Equity Research Equity areLincoln Electric Holdings, Inc. LECO, Core & Main, Inc. CNM, Stanley Black & Decker, Inc. SWK and Enerpac Tool Group Corp. EPAC.
Industry: Manufacturing Tools
Link: https://www.zacks.com/commentary/2447021/4-manufacturing-tools-stocks-to-watch-despite-industry-headwinds
Softness in the manufacturing sector, slowdown in new orders and lingering effects of supply-chain issues have impacted the outlook of the Zacks Manufacturing-Tools & Related Products industry. The shortage of skilled labor in the United States is another concern for the industry.
Investments in product development and cost-control measures are expected to foster the industry participants’ growth. Lincoln Electric Holdings, Inc., Core & Main, Inc., Stanley Black & Decker, Inc. and Enerpac Tool Group Corp. appear well-poised to stay afloat in challenging market conditions.
The Zacks Manufacturing-Tools & Related Products industry comprises companies that develop and distribute hand and mechanics tools, hydraulic tools, engineered fastening systems and heavy-lifting technology solutions. Arc-welding products, fume-extraction equipment, oxy-fuel cutting equipment, plasma cutters, healthcare solutions, electronic security solutions and other products are also produced by some tool-makers.
The highly advanced tools are used in industrial, commercial, oil & gas, mining, automotive and other industries. The providers of electronic security solutions cater to commercial, retail, government, financial and healthcare markets. Regarding international operations, some industry players provide products and services to customers in North and South America, Japan, Europe, Canada, Asia and the Middle East.
Major Trends Shaping the Manufacturing Tools Industry's Prospects
Weakness in the Manufacturing Sector: Persistent weakness in the manufacturing sector has been denting demand in the industry. After witnessing expansion in economic activities for the second consecutive month in February, the manufacturing sector contracted again in March. Per the Institute for Supply Management’s (ISM) report, in March, the Manufacturing Purchasing Manager’s Index touched 49%, down from 50.3% recorded in February. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index returned to the contraction territory, registering 45.2% in March and 48.6% in February.
Rising Costs Hurt Margins: Industry participants have been encountering input cost inflation and other expenses, which have been denting profitability. Also, supply-chain issues might increase raw material and other logistics expenses. The latest ISM report’s Supplier Deliveries Index reflects slower deliveries for the fourth straight month in March. The rise in expenses, along with a tough labor market, poses a threat to margins. That said, companies have been focused on cost management initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and implementing effective pricing policies.
Investments in Product Development & Innovation: Constant focus on innovation by industry players, product upgrades and the development of new products to stay competitive in the market will likely drive growth. While this augurs well for the industry’s long-term growth, hefty investments in research and development often leave companies with highly leveraged balance sheets.
The Zacks Manufacturing-Tools & Related Products industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #162. This rank places it in the bottom 34% of 247 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bleak prospects in the near term. 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.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are keeping less faith in this group's earnings growth potential. The industry’s earnings estimates for 2025 have moved down 11.1% over the past year.
Despite bleak near-term prospects, we will present a couple of stocks that you may want to retain in your portfolios. But it is worth taking a look at the industry’s shareholder returns and its current valuation first.
The Zacks Manufacturing-Tools & Related Products industry has underperformed the sector and the S&P 500 composite index in the past year.
Over this period, the industry and the sector have declined 20.5% and 12.1%, respectively, against the S&P 500 Index’s growth of 6.9%.
On the basis of forward P/E (F12M), which is a commonly used multiple for valuing manufacturing tools and related product stocks, the industry is currently trading at 15.81X compared with the S&P 500’s 20.05X. It is also below the sector’s P/E (F12M) ratio of 16.83X.
In the past five years, the industry has traded as high as 22.71X, as low as 11.65X and at the median of 18.74X.
Stanley Black: Headquartered in New Britain, CT, Stanley Black manufactures tools (power and hand tools) and related accessories and engineered fastening systems, among other items. Solid momentum in the Tools & Outdoor segment, driven by strength in its DEWALT business, is expected to fuel SWK’s growth. Cost-reduction efforts and supply-chain optimization programs are also expected to support this Zacks Rank #3 (Hold) company’s margin in the quarters ahead. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stanley Black reported better-than-expected results in each of the last four quarters, the earnings surprise being 16.2%, on average.
Lincoln Electric: Headquartered in Cleveland, OH, Lincoln Electric is a full-line manufacturer and reseller of welding and cutting products. The company is benefiting from cost management and cost reduction actions. Product launches in the automation solutions market and investments in new technologies are expected to bolster LECO’s growth.
This Zacks Rank #3 company reported better-than-expected results in each of the last four quarters, the earnings surprise being 9.6%, on average. In the past 60 days, Lincoln Electric’s earnings estimates have been revised upward by 2% for 2025.
Core & Main: Based in Saint Louis, MO, CNM provides wastewater, water, storm drainage and fire protection products and services to private water companies, municipalities and professional contractors. The company's products and services are utilized in the maintenance, repair, replacement and construction of infrastructure for water, storm drainage, wastewater and fire protection systems.
CNM is benefiting from increased demand for pipes, valves & fittings and storm drainage products. The acquisitions of certain assets and liabilities of ARGCO Northeast LLC in November 2024 bode well for Core & Main.
The Zacks Consensus Estimate for this Zacks Rank #3 company’s fiscal 2026 (ending January 2026) earnings has been revised upward 1.3% in the past 60 days. Its shares have risen 1.4% in the past month.
Enerpac Tool: Headquartered in Menomonee Falls, WI, EPAC is involved in the designing, manufacturing and distribution of various industrial tools, including high-pressure hydraulic tools and controlled force products. It also provides a wide array of services. Enerpac is benefiting from solid momentum in the Industrial Tools & Services segment. Strength in the Cortland Biomedical business also bodes well for it.
This Zacks Rank #3 stock has gained 12.3% in the past year. The Zacks Consensus Estimate for its fiscal 2025 (ending August 2025) earnings has remained steady over the past 60 days.
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Stanley Black & Decker, Inc. (SWK) : Free Stock Analysis Report
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