Industrials have long been a stable bet among U.S. equities paying reasonable dividends with a relatively defensive standing in the market. While they are not as volatile as tech firms or other growth stocks, they are consistent and they tend to hold up well in recessionary times. One big Wall Street firm thinks that it has picked out some winners within the sector.
BofA has issued a few calls with a focus on industrial firms. Andrew Obin was the lead analyst on the calls for the investment house. Most these calls were incredibly positive, forecasting solid upside for these manufacturing firms.
Obin made this research note as part of restacking his ratings in industrials. He views broad manufacturing demand as softening from the “sugar high” of post-COVID-19 recovery, particularly in consumer-facing sectors.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
BofA upgraded Honeywell International Inc. (NASDAQ: HON) to a Buy rating, from Neutral, with a price target of $210. That implies upside of 21% from the most recent closing price of $173.34. As mentioned, Obin made the upgrade and was restacking his ratings in industrials, citing his view of a broad manufacturing demand softening from the “sugar high” of post-COVID recovery, particularly in consumer-facing sectors. Honeywell’s end market mix includes aerospace and oil and gas, along with longer-cycle nonresidential construction, and recent execution has been strong.
The stock traded at around $172 early on Tuesday, in a 52-week range of $167.35 to $236.86. Shares are down over 18% year to date. The dividend yield is 2.3%.
On Allegion PLC (NYSE: ALLE) Obin’s downgrade was to Underperform from Neutral. The $130 price target was cut to $110, which implies upside of 12% from the most recent closing price of $98.54. He cited the company’s residential and European exposure, as well as the lag relative to its peers on price increases. Recessionary risks and consumer slowdown pose material risk to Allegion’s 2022 guidance and 2023 consensus, according to Obin.
Allegion stock has a 52-week trading range of $93.05 to $148.70, and it traded near $95 a share on Tuesday. The stock is down 28% year to date. The dividend yield is 1.7%.
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