3 Promising Robotic Stocks Poised to Shine in 2H
The Industrial Products sector has been in investors’ good books of late, driven by impressive factors such as President Trump’s impetus to boost U.S. infrastructure spending, upbeat labor market, improved Gross Domestic Product (GDP) numbers, as well as the recovery of Chinese economic conditions. However, on the other hand, tropical hurricanes, volatile oil prices and North Korea’s back-to-back nuclear tests on Japan have spurred global tensions and unnerved investors.
The Industrial Market Scenario
The latest Institute for Supply Management (ISM) report reveals that the ISM Manufacturing Index was pegged at 58.8% this August, up 2.5 percentage points from July, marking the highest level recorded since April 2011. Also, GDP of the United States grew at an annualized rate of 3% in second-quarter 2017, the strongest growth registered since first-quarter 2015.
We note that the Zacks Industrial Products sector is currently placed at the top 25% out of the 16 Zacks Sectors. This sector has also been outperforming the S&P 500 market in recent times. In three months’ time, the sector has recorded around 4.6% growth, well above the S&P 500 index’s growth of 2.5%. Per the Earnings Preview dated Sep 15, the Industrial Products sector (accounting for 2.2% of the S&P 500 index’s total market capitalization) is likely to record 2.6% growth in revenues and 8.3% upside in earnings in the Q3 earnings season.
Robotics Outlook
Per ROBO Global, the collective robotics market is anticipated to increase tenfold between 2015 and 2020. We notice that demand for robotic products in the United States has been shooting up at workplaces as well as households.
The United States is likely to witness an upswing in service robots’ sales over the next three years. Unlike industrial robots, service robots are used to perform tasks beneficial for humans. These types of robots are used for assisting medical surgeries, household activities (like mopping), and are also used in agricultural applications, such as milking cows. A number of U.S. companies, including iRobot Corporation IRBT, are major players in the global service robotics market.
However, we notice that currently the industrial robotic forum is still dominated by China. Reports revealed by Bernstein state that China is widely outspending the United States, by boosting its robotics industry with nearly $3-billion annual investment. The Chinese government has launched the Made in China 2025 plan and Robotics Industry Development Plan to rapidly fortify its robotic industry over the long run. Notably, a major proportion of robots used in the United States are manufactured by non-U.S. companies.
3 Robotic Stocks in Focus
We have selected three robotic stocks, which, we believe embrace promising near-term prospects amid the prevalent issues troubling the U.S. automation and robotics industry.
iRobot Corporation manufactures, designs and sells premium home robotic products for the global consumer market. The company currently carries a Zacks Rank #3 (Hold) and its earnings are expected to be up 20% over the next three to five years. The stock promises returns of 14% on both equity and capital. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rockwell Automation Inc. ROK offers premium industrial information and automation solutions in various end markets across the globe. The company has a Zacks Rank #3 and its earnings are projected to climb 11.1% in the next three to five years. It promises returns of 40.7% on equity and 25.1% on capital.
Fanuc Corporation FANUY offers state-of-the-art factory automation products globally. The company has a Zacks Rank #3, at present, and its earnings are estimated to be up 8.3% in the next three to five years. The stock promises returns of 9.6% on equity and 9% on capital.
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