The electronics industry, within the realm of miscellaneous products, finds itself amidst a conundrum. A pandemonium of challenging macroeconomic conditions, surging inventories, and formidable interest rates have cast a pall over the landscape. The semiconductor capex is shackled, constricting the growth prospects of industry participants in the short haul. Yet, amid the adversity, a few players such as KLA, Carrier Global, and Trimble are drawing sustenance from escalated investments in cutting-edge technologies, including augmented reality (AR) and virtual reality (VR).
Triumphant Amid Turmoil
Surging investments in data centers, high-performance computing, and the 5G end markets are the prime movers, propelling these players ahead. Furthermore, the landscape is dotted with fab (foundry) expansions in the United States, South Korea, Taiwan, and China, along with augmented expenditure on memory equipment, projecting a buoyant phase in 2024 and beyond. An alleviation of supply-chain constraints is also tilting the scales in favor of industry participants.
Insight Into the Industry
The Zacks Electronics – Miscellaneous Products industry encompasses original equipment manufacturers of a wide array of products, including air-conditioning systems, green energy solutions, GPS navigation, and the gamut of semiconductor applications. The industry’s evolution is underpinned by digital transformation and an escalating demand for silicon across a multitude of markets. The rising manufacturing costs resonate positively for equipment suppliers. Moreover, the escalating demand for silicon spells good tidings for semiconductor companies.
Three Trends Shaping the Future
Solid Capital Spending Drives Prospects: Technology transitions are breeding complexity in products and, in turn, escalating the demand for solutions provided by industry participants. The upscale capital investment in expanding manufacturing capacity by semiconductor companies is a noteworthy catalyst. The burgeoning investment in advanced nodes, such as 7 nm, 5 nm, and 3 nm processes, is another feather in the cap for industry participants.
Emerging Markets of Wearables, AR & VR Drive Growth: The industry is riding high on the burgeoning demand for wearables, AR, and VR-supported display systems, penetrating defense, industrial, consumer applications, and healthcare end markets. The increasing adoption of AR and VR, riding on the coattails of the growing metaverse, is charting a compelling trajectory.
Challenging Macroeconomic Condition is a Headwind: The industry grapples with a tough macroeconomic scenario, with enterprises exhibiting hesitance in engaging in multi-year deals. Escalating inflation and unfavorable forex trends further compound the plight of industry participants.
Industry Rank and Performance
The Zacks Electronics – Miscellaneous Products industry finds its haven within the broader Zacks Computer and Technology sector, straddling a Zacks Industry Rank #215, placing it in the lower echelon of over 250 Zacks industries. The industry positions in the bottom 50% of Zacks-ranked industries, spelling bearish near-term outlook.
In the past year, the industry has underperformed, tallying a 17.8% return compared to the S&P 500 Index’s growth of 22% and the broader sector’s return of 43.8%.
One-Year Price Performance
Valuation Picture
The forward 12-month P/E ratio for the industry currently stands at 17.86X, against the S&P 500’s 20.56X and the sector’s 26.22X. Over the past five years, the industry has seen a trading range between 11.05X and 20.82X, with the median at 15.38X.
Forward 12-Month Price-to-Earnings (P/E) Ratio
Stocks to Watch Right Now
KLA: This Zacks Rank #3 (Hold) company is reaping the benefits of a robust performance in the wafer inspection business, courtesy of heightened demand for advanced wafer inspection applications in leading-edge technology development.
The San Jose, CA-based company is profiting from burgeoning investments across multiple nodes and the escalating capital intensity in Foundry & Logic. The Zacks Consensus Estimate for fiscal 2024 stands at $22.88 per share, marking a 2% dip over the past 30 days. KLA shares have catapulted by 66.4% in the previo
Price and Consensus: KLAC
Frontline Players in the Climate and Infrastructure Space
Carrier Global: This Florida-based company stands at the forefront, capitalizing on the burgeoning trends towards sustainability and healthy buildings. Embracing a repertoire of intelligent climate and energy solutions, the company is sprinting forward, riding a wave of top-line growth.
With Viessmann Climate Solution sales expected to climb mid-single digits from the 2023-end figures, the company anticipates high teens adjusted EBITDA margins. Such forward-looking trajectories project significant revenue synergy post-acquisition, driving a more productive second-half of 2024 in contrast to the initial half, where European orders stood subdued.
The stock of CARR has swelled 21.6% in the past year. Yet, the Zacks Consensus Estimate for the company’s 2024 earnings recently recorded a 1.7% dip, settling at $2.83 per share over the last 30 days.
CARR: Current Status and Predictions
Trimble: Zooming into play is this prominent contender, currently reveling in the spotlight with an enviable Zacks Rank #3. The company is reaping bountiful rewards from the robust performances across buildings, infrastructure, and transportation segments. It’s experiencing an upsurge in AECO software bookings, gathering momentum with an over 30% year-over-year increase, with a special nod to the remarkable cross-sell and TC1 performance in the final quarter of 2024.
The transportation segment is basking in a similar spotlight, with organic growth in Enterprise and MAPS driving a surge while Transporeon reported record-breaking bookings in the recent fourth quarter.
TRMB shares have leaped 5.9% in the past year. However, the consensus rating for Trimble’s 2024 earnings encountered a 0.7% slump, settling at $2.69 per share over the past 30 days.
TRMB: Recent Performance and Expectations
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Free: See Our Top Stock And 4 Runners Up
KLA Corporation (KLAC) : Free Stock Analysis Report
Trimble Inc. (TRMB) : Free Stock Analysis Report
Carrier Global Corporation (CARR) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
