As the U.S. manufacturing sector emerges from a lengthy downturn, Wall Street is showing renewed interest in these stocks. One example is automation technology giant Rockwell Automation (ticker: ROK), whose shares were recently upgraded by Wolfe Research analyst Nigel Coe.
While the upgrade to a Hold rating may not be wildly bullish, it does reflect Coe’s confidence that Rockwell stock will keep pace with the market. This comes as no surprise, as the stock has already gained an impressive 32% this year.
In Tuesday trading, Rockwell stock rose 1.3% to $340.26, outperforming the flat S&P 500 and the slightly up Dow Jones Industrial Average.
The industrial economy has faced difficulties in recent times, with contraction since late 2021. However, analysts tend to become more bullish at the turning point rather than when things are already looking positive. Citi analyst Andrew Kaplowitz believes that the upcoming upcycle will be “stronger for longer,” driven by megatrends like the electrification of the economy and increased government spending on infrastructure projects.
Kaplowitz rates Rockwell stock as a Buy with a $375 price target.
In addition, Citi strategist Hong Li predicts that industrial stocks will deliver robust earnings reports in the upcoming quarter. Supporting this view is the iShares U.S. Industrials ETF (IJY), which has seen an 8% increase over the past three months, compared to a 2% decline in the iShares U.S. Consumer Staples ETF (IYK) over the same period.
While investing in cyclical stocks during challenging times may seem counterintuitive, Wall Street experts argue it to be the best course of action.
Leave a Reply