The world’s major industrial companies are approaching a tipping point that is beginning to transform the fortunes of the major players.
One example is the digitalization drive that is transforming the fortunes of industrial automation giants such as Honeywell International (HON), making them more profitable and less vulnerable to market cycles, according to ratings agency Moody’s.
The consultancy McKinsey estimates that the industrial automation market as a whole will be worth $115 billion by 2025. It expects the fastest growth in the development of cloud-based software and “industrial internet of things” (IIoT) platforms facilitating connectivity.
The improvement was not universal, but enough companies improved their business profile that Moody’s believes the improvement was structural.
One stock in particular stands out…
Wheeling and Dealing
One reason for this is that many industrial companies have undergone major restructurings, selling off many low-profit businesses, as they’ve bought higher-margin businesses like automation software firms.
These improvements mean that even as end-markets have looked much more uncertain for industrial companies this year, as recession fears grow, valuations of the big industrial companies have held firm.
This change from stodgy, boring industrial firms into more growth-oriented companies led Moody’s to recently upgrade the credit ratings of industrial players such as Eaton (ETN). And valuations for most of these companies’ stocks are still reasonable: if viewed over a 10-year period, industrial sector valuations are only a little bit higher than midway through an economic cycle.
Using comparisons further back in history are…
Continue reading at INVESTORSALLEY.com
