As President-elect Joe Biden prepares to take the oath of office in Washington DC later today, Wall Street wonders which stocks could continue to do well in the coming quarters. We recently discussed how alternative energy and infrastructure}} spending is likely to be high on the agenda, and introduced exchange-traded funds (ETFs) that may be a suitable solution in the coming months.
Today, we look beyond the borders of the US and discuss an industrial company that could benefit from a greater emphasis on the infrastructure sector, which is partly dependent on these companies. It is the energy equipment manufacturer Weir Group (LON 🙂 (OTC :), a member of the .
The stock delivered strong returns over the past year, with gains of around 36%. On January 19, WEIR stock closed at 1,964.50p ($ 13.50 for US stocks). With a market capitalization of £ 5.14 billion (or $ 7.0 billion), it could become a candidate to be included in the country's largest index, the.
Currently, the FTSE 100 is down 12% for the year, while the FTSE 250 is down 6%.
The New Year also means less security for many international companies headquartered in the UK. The country and the European Union recently agreed on a free trade agreement and friendly cooperation, following the UK's departure from the EU. Many companies are now looking forward to improved economic conditions after the introduction of vaccines.
Let's see if the group deserves to be on the investors' radar by 2021.
How Recent Revenues Are Piling Up
The company's history dates back to 1871, when the Weir brothers established an engineering firm in the west of Scotland. They invented pumping equipment for use in the steamships being built at Clyde's shipyards. Since then, the company has built a strong reputation and a loyal global customer base in engineering, procurement and construction management.
The group serves infrastructure, mining and energy customers worldwide. For example, its pumps are used to process minerals and help convert mined rock into valuable ore, and its safety valves are installed in more than half of the world's nuclear power plants.
Worldwide, it has more than 13,500 employees in more than 200 manufacturing and service facilities.
According to the most recent {{erl-6674 || half-year results sales were £ 1.1 billion ($ 1.5 billion), down 18% year-over-year (year-over-year). Reported pre-tax profit was £ 63 million (or US $ 85.8 million), down 41% year-on-year.
CEO Jon Stanton said:
" Company is performing well … More generally, the long-term outlook for mining remains positive, supported by demographic trends, carbon transition, long-term decline in ore species and the need to reduce waste and water and energy consumption. ”
In recent weeks, management announced the upcoming sale of its oil and gas division to Caterpillar (NYSE :).
So far, investors seem to have approved the proposed transaction. In recent years, the company has seen strong growth in its mining business, while the oil and gas business has lagged significantly.
Management is expected to use cash from the sale to pay off debt and concentrate their energy on mining technology.
Bottom Line
Despite the drop in revenues, shareholders were richly rewarded in 2020. Forward P / E and P / S ratios for Weir shares are 25.51 and 2.14, respectively. However, due to the price increase over the past year, valuation is on the frothy side. While we like the company, ideally we wait for a 5% -7% decline before putting new capital into Weir Group.
Investors interested in Weir stock, but not willing to spend all of the capital on the stock, may be interested in buying an ETF that has it as an equity investment. Examples are: the Invesco FTSE RAFI Developed Markets ex-U.S. ETF (NYSE :), the iShares MSCI United Kingdom Small-Cap ETF (NYSE 🙂 and JPMorgan BetaBuilders Europe (NYSE :).
