The industrials sector of the stock market is where I am most involved nowadays. While the big names like General Electric (NYSE: GE) and Caterpillar (NYSE: CAT) may not jump out at you as big gainers, plenty of these rock-solid companies have been hit unfairly, and I see value. As an added bonus, industrials companies often act as a hedge to thriving markets like agriculture. We’ve got some killer stock picks for this week, lets see what we can dig up.
Industrial Machinery – Harsco (NYSE: HSC)
I may be a sucker for fallen stocks, but Harsco’s drop off their highs was especially unwarranted. You want proof? How about beating fourth-quarter earnings estimates of $0.70 with $0.74 and increasing 2008 guidance. How about topping revenue expectations by $75 million. Harsco manufactures in mill services and gas technologies.. they are the top dogs in a boring market, and I’m loving it. A whopping 70% of their sales are international, and even in a slowing world economy, an unusually high rate
of recurring service revenues gives me confidence in Harsco’s ability to maintain earnings momentum.
Don’t be concerned with rising costs and problems in home construction, Harsco’s end markets such as global steel production and non-residential construction are expected to remain firm in 2008. Despite slight challenges in Mill Services in the most recent quarter, Harsco outperformed with strong gains in Rail & Mineral Technologies. I see nothing but upside in growth for 2008, and with a key acquisition possibility, Harsco could completely out-do themselves. Access Services has a nice hedge against a possible falling non-residential construction since about 25% of their industrial maintenance business is recurring. Very protected from a slow-down, and undervalued at $55 versus a target of $75… I put a purchase price at under $54 for Harsco.
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