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2 Stocks in the Industrial Sector That Are Screaming Buys Right Now

Total industrial production increased in January to beyond pre-pandemic production levels. Furthermore, President Biden’s infrastructure spending should be a major boost for the U.S industrial sector going forward. Hence, we believe Heidrick & Struggles (HSII) and Huttig Building (HBP) are industrial stocks that could be solid bets now. Read on.

According to the Federal Reserve, total industrial production in January was 4.1% higher than its year-ago level and 2.1% above its pre-pandemic level. Also, it is expected that total industrial capacity will rise 0.9% this year after increasing 0.4% in 2021. In addition, U.S. industrial production is projected to be 3.6% by the end of this quarter. Moreover, the trillion-dollar bipartisan infrastructure bill, signed into law last November, should boost the industrial sector significantly.

In January, the country’s job growth surged far more than expected, despite the rise in COVID-19 omicron variant cases. Nonfarm payrolls surged by 467,000 for the month, according to the Labor Department, indicating the resilience of the U.S. economy. Robust job growth should increase staffing requirements across industries, benefiting staffing services companies.

Given this backdrop, we believe industrial stocks Heidrick & Struggles International, Inc. (HSII) and Huttig Building Products, Inc. (HBP) could be solid additions to one’s portfolio now.

Heidrick & Struggles International, Inc. (HSII)

Chicago’s HSII provides executive search and consulting services to businesses and business leaders globally. The company facilitates the recruitment, management, and development of senior executives. It also offers consulting services, including leadership assessment and organizational transformation.

On December 21, HSII announced that it had agreed to acquire RosExpert in Russia and WE Partners in Ukraine and Kazakhstan. Both are executive search and leadership consulting firms in the respective countries. The acquisitions are expected to offer a broader range of offerings and capabilities to the company’s local and multinational clients based in these countries.

For its fiscal third quarter, ended September 30, HSII’s total revenue increased 83.6% year-over-year to $265.32 million. Its adjusted net income rose 191.8% from the prior-year quarter to $22.42 million, while its adjusted earnings per common share improved 184.6% from the same period the prior year to $1.11.

The $0.79 consensus EPS estimate for its fiscal fourth quarter, ended Dec. 31, 2021, indicates a 33.9% year-over-year increase. And the $261.40 million consensus revenue estimate for the same quarter reflects an improvement of 62.4% from the prior-year period. Furthermore, HSII has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.

The stock has gained 28.8% in price over the past year and 4.1% over the past six months to close yesterday’s trading session at $43.35.

HSII’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

HSII has a Growth grade of A and a Value, Sentiment, and Quality grade of B. In the 20-stock Outsourcing – Staffing Services industry, it is ranked #1. The industry is rated A.

Click here to see the additional POWR Ratings for HSII (Momentum and Stability).

Note that HSII is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.

Huttig Building Products, Inc. (HBP)

HBP in St. Louis, Miss., operates as a millwork, building material, and wood products distributor for new residential construction, home improvement, remodeling, and repair work in the United States. The company offers products under Therma-Tru, Masonite, Woodgrain, and several other brands.

HBP’s net sales increased 15.3% year-over-year to $245.30 million in its fiscal third quarter, ended September 30. Its operating income improved 176.8% from the prior-year quarter to $19.10 million. Its net income and net EPS came in at $18.70 million and $0.68, respectively, up 206.6% and 183.3% from the same period the prior year.

Over the past year, HBP’s stock has gained 141% in price and 66.8% over the past six months to close yesterday’s trading session at $9.81.

It is no surprise that HBP has an overall A rating, which translates to Strong Buy in our POWR Rating system.

HBP received an A grade for Growth and Value, as well as a B grade for Momentum and Quality. It is ranked #1 out of the 54 stocks in the Industrial – Building Materials industry. The industry is rated B.

To see the additional POWR Ratings for Stability and Sentiment for HBP, click here.

HSII shares were trading at $43.66 per share on Friday afternoon, up $0.31 (+0.72%). Year-to-date, HSII has declined -0.16%, versus a -8.67% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.


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