The 3 Most Undervalued Manufacturing Stocks to Buy: November 2023

Muslim Farooque

Sat, Nov 18, 2023, 8:00 PM 4 min read

Manufacturing stocks are often considered bellwethers for economic shifts and offer unique investment opportunities. As manufacturing activity typically precedes broader market trends, it’s perhaps a more opportune moment to consider undervalued manufacturing stocks. This earnings season has brought encouraging news for the sector, with rising earnings and a promising future outlook. Consequently, investors are looking for undervalued manufacturing stocks offering healthy upside ahead.

Additionally, these manufacturing companies have proven adept at weathering challenges and rewarding shareholders during prosperous periods. In 2024, these undervalued manufacturing stocks could be shining stars, particularly as supply-chain issues wither away, especially in electronic components. Moreover, industry players’ strategic shift towards acquisitions is broadening their horizons. This enhances their product offerings and market reach and facilitates diversification, reducing reliance on a single market.

General Electric (GE)

Company breakups: The General Electric GE logo on a building

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General Electric (NYSE:GE) emerged as a standout early in the third quarter earnings season. With the company blowing past expectations on revenue and earnings, GE’s performance highlights its effective transformation. Moreover, it impressively raised its full-year guidance for the third time, with the consistent upward revision underscoring GE’s momentum and strategic success.

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The specifics of GE’s earnings are noteworthy with its Non-GAAP EPS of 82 cents, exceeding forecasts by 26 cents. Additionally, the company reported a remarkable revenue increase to $17.3 billion, up 19.6% year-over-year, proving that GE’s financial health remains robust.

GE’s focus on becoming a more nimble and focused company appears to be paying off, as seen in the successful spinoff of its healthcare business and the launch of its Aerospace and Vernova segments as independent entities. This move is poised to streamline GE’s operations further and sharpen its focus, promising a bright future for the company. Additionally, GE stock attracts a moderate buy rating, offering almost a 13% upside from current price levels.

Caterpillar (CAT)

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Caterpillar (NYSE:CAT) is a giant in the manufacturing sphere, focusing on construction, mining, and engineering equipment, becoming a top pick for both long-term and income-focused investors. Its impressive track record of increasing dividends for 30 consecutive years has cemented the company’s reputation as a reliable dividend stock, boasting a yield of 2%. This consistency in shareholder returns is a testament to the company’s powerful financial health and operational stability.

Furthermore, the company delivered solid financial results in the third quarter, reporting a Non-GAAP EPS of $5.52, outperforming estimates by 73 cents. Revenue rose to $16.8 billion, a 12% year-over-year increase, surpassing expectations by $240 million. This growth was driven by favorable pricing and increased sales volume, highlighting Caterpillar’s powerful market position and operational efficiency.

The company’s strong performance suggests a potential resurgence in normal economic activities. Moreover, from a valuation perspective, CAT stock is an attractive investment option, trading at a 12% discount from current price levels.

Deere (DE)

Several John Deere vehicles are parked outside of a building.

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Deere (NYSE:DE), known for its farming equipment, continues to ride high on the wave of elevated food prices, spurring increased agricultural activity. This trend benefits Deere immensely, as evidenced by a remarkable 12% jump in sales and a staggering 58% surge in net income year-over-year, reaching a whopping $2.98 billion. These figures reflect the company’s solid financial footing and its leverage in the booming agricultural sector.

Deere’s sales in the U.S. and Canada, especially in large agricultural equipment, are forecasted to grow by an impressive 10% in fiscal 2023. This growth is a clear indicator of the robust demand for farm machinery. Transitioning to the construction and forestry sectors,

Analysts from TipRanks are bullish on Deere and assign it a moderate buy rating offering a 16% upside. Additionally, Deere offers an attractive dividend yield of 1.33% while trading at a compelling 1.96 times forward sales estimates. This blend of solid earnings growth, favorable market position, and attractive valuation makes Deere a notable investment contender.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.