Last month, President Joe Biden unveiled a $2 trillion infrastructure and climate plan to rehabilitate the nation’s fraying infrastructure, reshape its economy, and combat climate change. In a speech at a union hall in Pittsburgh, Biden said, “It’s not a plan that tinkers around the edges, it’s a once in a generation investment in America.”
Naming it the American Jobs Plan, he proposed massive investments into modernizing transportation infrastructure, repairing “10,000 bridges,” replacing 100% of the nation’s lead pipes, and a long list of other projects. Once approved, this plan is expected to give a huge boost to infrastructure companies that can contribute immensely toward rebuilding the nation.
Economic recoveries usually drive the performance of small-cap stocks because they are more sensitive to increases in investments and federal spending. So, we believe it would be wise to bet on small-cap infrastructure stocks such as Alamo Group Inc. (ALG), EnPro Industries, Inc. (NPO), and Columbus McKinnon Corporation. (CMCO) now.
Alamo Group Inc. (ALG)
Founded in 1995, ALG is a manufacturer and distributor of infrastructure as well as agricultural maintenance equipment for governmental and industrial use. It offers truck-mounted air vacuums, hydraulically-powered and tractor-mounted mowers, mechanical brooms, and regenerative air sweepers, among other products and services.
On April 2, ALG announced that Ronald A. Robinson will be succeeded by Jeffery A. Leonard as the company’s President and Chief Executive Officer, to be effective as of May 31, 2021. His strong leadership skills and strategic vision should help him lead ALG in its long-term growth and development.
ALG’s net sales in the agricultural segment increased 10.5% year-over-year to $85.94 million in the fourth quarter that ended December 31. Its gross margin was 23.1% compared to 22.7% in the fourth quarter of 2019. The company’s interest income increased 8.4% from its year-ago value to $398,000. Its agricultural division’s income from operations rose 20.7% year-over-year to $7.3 million.
The consensus EPS estimate of $1.84 for the quarter ending June 30, 2021 represents a 61.4% improvement year-over-year. In fact, ALG beat the Street’s EPS estimates in each of the three trailing quarters. The consensus revenue estimate of $311.87 million for the next quarter represents a 16.1% increase from the same period last year. The stock closed yesterday’s trading session at $158.19, gaining 68.5% over the past year.
ALG’s POWR Ratings reflect this promising outlook. The company has an overall B grade, which translates to Buy rating in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ALG has a B Grade for Stability, Quality, and Momentum. Of 87 stocks in the A-rated Industrial – Machinery industry, it is ranked #21.
To see additional grades for Sentiment, Growth, and Value for ALG, click here.
EnPro Industries, Inc. (NPO)
Headquartered in Charlotte, North Carolina, NPO is involved in the development, manufacture, and marketing of engineered industrial products. The company operates through the segments of Sealing Technologies, Advanced Surface Technologies, and Engineered Materials. The company provides hydraulic components, expansion joints, pipeline casing spacers, and various other applications for use in the industrial markets.
Last month, the company launched a global rebrand to “Enpro” and adopted a new logo so that it better reflects NPO’s brand as a materials-science-based industrial technology. This should support the company’s portfolio transformation as it underscores its goal to deliver highly engineered products to its customers.
Last December, NPO completed the sale of its GGB bushing block business to Melma Group. This transaction should support the company’s progress toward reshaping its portfolio and enable it to generate high recurring revenues.
In the fourth quarter that ended December 31, 2020, NPO’s consolidated adjusted EBITDA has increased 11.1% year-over-year to $48.1 million. The company’s adjusted EBITDA margin increased 230 basis points to 17.4%, while its adjusted net income grew 27% year-over-year to $25.4 million. NPO’s gross profit rose 5.5% year-over-year to $103.5 million over the period.
Analysts expect NPO’s revenue for the quarter ending June 30, 2021 to be $267.2 million, representing 15.8% year-over-year growth. The company’s EPS is likely to increase 11.3% for fiscal 2021. NPO’s stock has gained 112.1% over the past year.
NPO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to Buy rating in our POWR Ratings system. It has a B grade for Growth, and an A grade for Sentiment. Among the 90 stocks in the B-rated Industrial – Equipment industry, it is ranked #22.
Click here to see the additional POWR grades for NPO (Momentum, Quality, Value, and Stability).
Columbus McKinnon Corporation. (CMCO)
CMCO is engaged in the distribution and marketing of digital power control systems, motion control products, electric chain hoists, and other technologies and systems for commercial and industrial applications. In addition, it provides alloy and carbon steel chains, and alloy chains under the Herc-Alloy brand.
This month, the company completed the acquisition of Dorner Manufacturing Corporation for an all-cash purchase price of $485 million. This acquisition will leverage CMCO’s position as a provider of intelligent motion solutions for material handling and allow it to advance in its growth objectives.
During the fiscal third quarter that ended December 31, 2020, CMCO’s revenue increased 5.5% sequentially to $166.5 million. Its operating income was $10.4 million and net income was $6.6 million. Moreover, the company reported a free cash flow of $21.9 million over this period.
CMCO is expected to witness revenue growth of 22.1% for fiscal 2022. Its EPS is estimated to increase 628.6% in the next quarter and 104% in 2022. It closed yesterday’s trading session at $52.64, gaining 109.4% over the past year.
CMCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to Buy rating in our POWR Ratings system. CMCO also has a B grade for Growth, Quality, and Stability. The stock is ranked #10 out of 87 stocks in the A-rated Industrial – Machinery industry.
In addition to the grades I’ve just highlighted, you can see the CMCO’s grades for Value, Momentum, and Sentiment.
ALG shares were trading at $158.67 per share on Friday morning, up $0.48 (+0.30%). Year-to-date, ALG has gained 15.13%, versus a 9.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More…
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