Industrial stocks usually consist of some of the most important sectors in an economy. Thus, they are excellent assets to diversify one’s portfolio and effectively spread one’s risks.
However, just purchasing stocks across different sectors will not do. Investors need to look for companies which have strong growth prospects and solid financials. By doing so, they can ensure that the businesses can generate sustainable profits down the line, ensuring long-term capital appreciation.
In this regard, here are the top two industrial stocks on the TSX.
Canadian Pacific Railway
Canadian Pacific Railway (TSX: CP) operates trans-continental railway freight systems in Canada and the United States of America. CP has navigated the high commodity price environment well, beating analyst estimates in recent quarters.
This past quarter, CP reported quarterly earnings of US$0.68 per share, surpassing analyst estimates of US$0.68 per share. Moreover, the company’s reported operating ratio (OR) appreciated to 64.9%, and its core adjusted combined OR grew to 61.7%, indicating an increase of 540 basic points and 190 basic points, respectively.
Canadian Pacific also declared a dividend payment of $0.19 per common share for the current quarter. It will be payable on Jan. 29 and will be available to shareholders of record on Dec. 28.
Magna International
Magna International (TSX: MG) is a Canadian multinational designer and manufacturer of manufacturer (OEM) modules, subsystems, assemblies, and components.
As per the latest reports, this company is developing a modular eDecoupling unit for a German premium OEM. It is the first of its kind in the market and will be able to support multiple battery electric vehicles (BEVs). This technology will also help reduce battery usage and increase the overall driving range by 9%.
Additionally, Magna has signed a long-term supply agreement with Onsemi to integrate its EliteSiC intelligent power solutions. It will improve the efficiency of Magna’s eDrive systems, along with providing increased driving range, better cooling, quicker acceleration, etc.
Furthermore, the end-to-end silicon carbide manufacturing facilities of Onsemi will help Magna increase production, simplify its supply chain, and improve its vertical integration. Apart from this, the Canadian auto parts manufacturer had excellent financial results in the third quarter of 2023.
It had a 15% sales growth, amounting to US$10.7 billion and diluted earnings per share of US$1.37. The company’s adjusted earnings before interest, taxes, depreciation, and amortization also appreciated to US$615 million from last year’s same quarter’s US$452 million. As per sources, higher global light vehicle production and increasing selling prices enabled Magna to effectively cover its production costs, thus resulting in its profits.
Bottom line
Both companies have strong financials and solid growth prospects. Thus, investors looking to add industrial stocks to their portfolios can consider buying these two stocks at current levels, in my view.
