The industrial sector seldom outperforms during high inflation because of headwinds like higher input costs and reduced demand. Thus far in 2023, the sector is in the green, although the gain is barely 1% (+0.99%). However, three constituents continue to go against the downtrend.
SNC-Lavalin Group (TSX: ATRL) Westshore Terminals Investment (TSX: WTE), and GFL Environmental (TSX: GFL) are worth buying today for stability and essential services. The businesses and essential services likewise contribute to the economy and facilitate trade.
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Engineering and construction
Engineering giant SNC-Lavalin has rebranded by changing its name to AtkinsRéalis. Also, its ticker symbol on the TSX changed from SNC to ATRL, effective September 18, 2023. After years of a tainted reputation, the $6.99 billion fully integrated professional services and project management company said it had reached an “inflection” point.
Now, the storyline is entirely different. According to its chief executive officer (CEO), Ian L. Edwards, SNC-Lavalin wants to shed the negative image. He said, “From here, it’s all about growth.” In the first half of 2023, net income from continuing operations soared 263% year over year to $92.1 million.
Edwards credited the success of the “Pivoting to Growth” strategy for the strong second quarter and year-to-date results. The business turnaround shows in the stock’s performance. At $39.82%, ATRL is up 67.18% year-to-date and pays a modest 0.19% dividend.
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Marine shipping
Westshore Terminals provides access to all major rail corridors and shipping lanes and is an export revenue generator. The $1.49 billion company operates Canada’s busiest coal export terminal, whose annual volume is more than 33 million tonnes of coal. Current investors enjoy a 10.65% year-to-date gain ($23.89) on top of a generous dividend yield (5.88%).
In the first half of 2023, revenue and profit rose 10% and 21% to $188.5 million and $61 million from a year ago. Cash flows provided by operations increased 29% year over year to $67.3 million. Westshore shipped 13.6 million tonnes during the period, where 63% was thermal coal and 37% was metallurgical coal.
Coal is a vital resource, although Westshore has introduced an $800 million Potash Project to its current coal terminal. It’s a significant diversification move because the company would have another product for the long term. The construction is ongoing, and potash handling should commence in 2026.
Waste management
GFL Environmental operates in Canada and the United States. This $15.35 billion diversified environmental services company undertakes environmental challenges. It offers solid waste management, liquid waste management, and soil-remediation services. This top industrial stock is relatively stable (+5.6% year to date) and trades at $41.69 per share with a corresponding 0.17% dividend.
In the first half of 2023, revenue rose 20% year over year to $3.74 billion, although net income fell 17% to $76 million compared to a year ago. Still, Patrick Dovigi, GFL founder and CEO, said, “We remain focused on executing on our strategy to create long-term shareholder value. We continue to see upside opportunities from our robust M&A [merger and acquisition] pipeline.”
Beating the odds
Some market analysts say the industrial sector has historically underperformed while inflation rises. However, you can’t ignore performers like SNC-Lavalin, which beat the odds. It has delivered considerable gains in one year (74.1%) and should reward investors more after the rebranding.
