The companies in the industrial sector engage in various businesses and serve diversified industries. This sector is broad but has sub-categories such as aerospace, automotive, chemical, electronics, machinery, and steel. Since the sector’s main objective is to produce goods, resources, and services, it contributes to economic growth.
Companies like SNC-Lavalin Group (TSX:SNC), Westshore Terminals (TSX:WTE), and Wajax (TSX:WJX) keep Canada’s economy going. Their businesses thrive in 2023, despite the challenging environment. More importantly, investors enjoy market-beating returns year to date.
Pivoting to growth
The worst is over for SNC-Lavalin after a scandal rocked the company more than 10 years ago. Today, the $5.87 billion construction giant is pivoting to growth and on track to realizing its goal of becoming the preferred Professional Services and Project Management company.
SNC-Lavalin provides engineering, procurement, and construction services to various industries, including environment and water, infrastructure, and clean energy. In the first quarter (Q1) of 2023, net income from continuing operations rose 14.5% year over year to $28.4 million on revenues of $2.02 billion. Notably, as of March 31, 2023, the backlog reached a record-high $12.1 billion, or an 8% increase from a year ago.
Its president and chief executive officer Ian L. Edwards said the continued backlog growth in SNCL Services demonstrates the resiliency of the business notwithstanding economic pressures. He added that the list of prospects is strong with the continued investments of the government and commercial clients in infrastructure.
At $33.47 per share, SNC investors have a 40.45% year-to-date gain and partake in the modest 0.24% dividend. Market analysts have a 12-month average price target of $40.17 (+20%).
Coal mover
Westshore Terminals is a high flyer like SNC-Lavalin. At $31.14 per share, the positive return thus far in 2023 is 40.68%. If you invest today, the dividend yield is a juicy 4.54%. It operates the largest coal export terminal in North America (24/7). It handles steel making and thermal coal for Canadian and American clients.
The $1.95 billion company provides safe, efficient access to all major rail corridors and shipping lanes. According to management, the terminal can handle over 33 million tons of coal yearly. In Q1 2023, revenue and profit increased 9.5% and 27.7% year over year to $96.7 million and $32.8 million.
Westshore’s cash inflows depend on operating results, particularly the volume and mix of coal shipment, rates, and administrative costs. Meanwhile, management looks forward to handling potash in 2026 when the construction project is complete.
Support for core sectors
Wajax caters to major Canadian industries and core sectors. The $483.95 million company supplies industrial products and provides end-to-end services and solutions. Its extensive network (100 branches) enables the team to have coast-to-coast coverage of the country’s communities.
Management is confident about the organic growth and sustainability of the business because of solid fundamentals, especially in the construction, energy, and mining markets. In Q1 2023, the top and bottom lines rose 17.4% and 8.8% to $516.1 million and $17.5 million versus Q1 2022.
The current share price is $22.52 (+15.71% year to date), while the dividend yield is 5.8%. Market analysts forecast a 27.6% price appreciation to $28.75 in one year.
Superior returns
Any of the three industrial stocks in focus are excellent additions to a stock portfolio. The combination of dividends and capital gains translate to higher, if not superior, returns.
