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About the Industry
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, robotic-welding packages, 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 Future of the Manufacturing Tools Industry
Investments in Product Development & Innovation: The industry participants’ constant focus on innovation, product upgrades and the development of new products to stay competitive in the market should drive growth. 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. Digitization enables industry participants to boost their competitiveness through enhanced operational productivity, product quality and better cost management.
Acquisition-Based Growth Strategy: The industry participants bank on an acquisition-based growth strategy to expand their customer reach and product offerings. This helps them foray into new markets and solidify their competitive position. Exposure to various end markets helps tool manufacturing companies offset risks associated with a single market.
Easing Supply-Chain Disruptions: Although supply-chain disruptions persist, especially related to the availability of electrical & electronic components, the situation has improved. This is evident from the latest ISM report’s Supplier Deliveries Index, which reflected faster deliveries in November, following three months of slower deliveries. Easing supply-chain issues should support tool manufacturing companies’ growth going forward.
Softness in the Manufacturing Sector: Persistent 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 2025, the manufacturing sector contracted for the ninth successive month in November. Per the Institute for Supply Management’s (ISM) report, the Manufacturing Purchasing Manager’s Index touched 48.2% in November. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index contracted, registering 47.4% in the same month.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Manufacturing-Tools & Related Products industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #15. This rank places it in the top 6% of 243 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates strong 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.
We will present a few stocks from the industry that you may want to consider for your portfolio. But before that, it is worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Sector & Underperforms S&P 500
The Zacks Manufacturing-Tools & Related Products industry has outperformed the sector but underperformed the S&P 500 composite index in the past year.
Over this period, the industry has appreciated 5.7% compared with the sector and the S&P 500 index’s growth of 3.9% and 15.1%, respectively.
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Industry's Current Valuation
On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing tools and related product stocks, the industry is currently trading at 18.40X compared with the S&P 500’s 23.27X. It is also below the sector’s P/E (F12M) ratio of 20.39X.
Over the past five years, the industry has traded as high as 22.13X and as low as 11.65X, with a median of 18.35X, as the chart below shows:
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Four Manufacturing Tool Stocks to Keep a Tab on
Kennametal: Based in Latrobe, PA, Kennametal is a manufacturer, marketer and distributor of high-speed metal cutting tools, tooling systems and wear-resistant parts. Its products are marketed through several channels to the end users, including manufacturers of machine tools, transportation vehicles and others. The company is benefiting from strength in the aerospace & defense, energy and general engineering end markets in the Metal Cutting segment. Recovery in the earthworks market, driven by higher mining activity and new project wins in the Americas region, also augurs well. Its investments in product development and manufacturing facilities also bode well.
This Zacks Rank #1 (Strong Buy) company’s Zacks Consensus Estimate for fiscal 2026 (ending June 2026) earnings has been revised 19.5% upward over the past 60 days. The stock has gained 19.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
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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 used 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 fusible high-density polyethylene, treatment plant solutions, metering and geosynthetics products. The acquisitions of certain assets and liabilities of Canada Waterworks in September 2025 also bode well for Core & Main.
The Zacks Consensus Estimate for this Zacks Rank #2 (Buy) company’s fiscal 2026 (ending January 2026) earnings has been revised upward 1.3% in the past 60 days. Its shares have risen 6.2% in the past year.
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Enerpac Tool: Based 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. Enerpac Tool is benefiting from solid momentum in the Industrial Tools & Services segment, driven by strength in the product business. The acquisition of DTA also bodes well for the company.
EPAC currently carries a Zacks Rank #3 (Hold). For fiscal 2026 (ending August 2026), the company’s consensus estimate for earnings has remained steady in the past 60 days. Although shares of Enerpac lost 9% in the past year, it has rebounded 3.6% in the past month.
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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. SWK is benefiting from solid momentum in the DEWALT business. The company’s commitment to rewarding shareholders through dividend payments adds to its appeal. Cost-reduction efforts and supply-chain optimization programs are also expected to support Stanley Black’s margin in the quarters ahead.
SWK currently carries a Zacks Rank of 3. The company’s consensus estimate for 2026 bottom line is pegged at $4.53 per share. Although the company’s shares lost 7.2% in the past year, they rose 12% in the past month.
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This article originally published on Zacks Investment Research (zacks.com).
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