Markets

ASX Industrials – Broker views on the sector’s 5 largest firms

Tue 09 Jan 24, 4:45pm (AEDT)
infrastructure transport

Key Points

  • Quality stocks are highly sought during economic downturns
  • Several Quality ASX stocks reside within the industrials sector
  • These 5 stocks include stalwart names across infrastructure and logisics

Quality stocks – what they are and how you can find them – have been a popular topic in the last 18-plus months, since rampant inflation prompted the rate hiking cycle across developed economies. And Industrials is one sector that has been frequently linked with this thematic during this time. Encompassing a broad mix of businesses, the sector captures three industry groups of capital goods, commercial and professional services, and transportation. Companies in this sector are involved in everything from construction and engineering, to aviation and aerospace.

In the following, I look at five of the biggest ASX Industrials companies, by market capitalisation, alongside views from Market Index’s Broker Consensus tool and analysts from large broking houses. All but one of these companies are rated as BUY, except one that is rated as STRONG SELL.

Transurban Group (ASX: TCL)

Market cap: $42.56 billion

An owner and operator of toll roads across multiple Australian states and offshore, Transurban is the largest company in the industrial sector, by market cap, and also ranks in the ASX 20. In the last couple of years, the company has been prized for its inflation-beating characteristics. That’s because toll prices are linked with inflation, a point emphasised by TMS Capital’s Ben Clark last month.

Clark also suggested the infrastructure firm could soon follow another prominent ASX infrastructure firm, Sydney Airport, which was de-listed in early 2022.

What the brokers think

Market Index Broker Consensus: BUY (9 buy, 8 hold, 1 sell).

  • Goldman Sachs rates Transurban as NEUTRAL, with a price target of $13.10 as of 30 October 2023.

  • Jefferies upgraded TCL to BUY from hold on 21 September 2023, with an unchanged price target of $14.08.

  • Citi rates the company as BUY, with a price target of $16.20

Transurban shares closed at $13.82 on Tuesday 9 January 2023.

Screenshot 2024-01-09 at 3.13.37 pm
Transurban 12-month price chart (Source: Market Index)

Brambles (ASX: BXB)

Market cap: $19.25 billion

A company built on the humble pallet, Brambles specialises in the pooling of logistics equipment including pallets, crates, and containers. Brambles has been highly successful in clawing back rising costs of timber, energy, labour and transport by increasing the prices paid by clients. Investors Mutual’s Michael O’Neill in September named the company among his preferred stock picks for 2024. “They achieved a whopping 16% price growth and you have confidence that that is sustainable into the next year and that their guidance of double-digit earnings growth is possible because their net promoter scores show strong underlying momentum in the business,” he said in a Buy Hold Sell episode.

What the brokers think

Market Index Broker Consensus: BUY (12 buy, 4 hold, 2 sell)

  • Citi downgraded Brambles to SELL from neutral on 27 October, cutting the price target to $13.15 from $16

  • Macquarie on 25 September upgraded BXB to OUTPERFORM from neutral, lifting its price target to $15.45 from $15.05.

  • Jarden upgraded Brambles to OVERWEIGHT from neutral on 31 August, increasing its price target to $16 from $14.30.

Brambles' share price closed at $13.94 on Tuesday 9 January 2023.

Screenshot 2024-01-09 at 11.27.51 am
Brambles 12-month price chart (Source: Market Index)

Computershare (ASX: CPU)

Market cap: $14.82 billion

A provider of stock registration and transfer services to companies listed on stock exchanges, Computershare also provides other technology services to listed companies and organisations, including the management of employee share plans.

A stellar dividend history is one of the defining characteristics of Computershare, which rates among the ASX cohort of “dividend aristocrats” unearthed last year by my colleague Kerry Sun.

Last month, in forecasting how various sectors of the ASX will perform in 2024, Tyndall’s Brad Potter said Computershare would benefit from an “improvement in market movements and sentiment”. The company also benefits from higher interest rates.

What the brokers think

Market Index Broker Consensus: STRONG BUY (12 buy, 2 hold, 0 sell)

  • Goldman Sachs added Computershare to its coverage list on 27 November, rating it BUY with a $27 price target.

  • Citi rates the company as BUY with a price target of $29.

  • Barrenjoey downgraded CPU to NEUTRAL from overweight, with a price target of $26.

Computershare's stock traded at $24.81 when the market closed on Tuesday 9 January 2023.

Screenshot 2024-01-09 at 3.17.50 pm
Computershare 12-month price chart (Source: Market Index)

Reece (ASX: REH)

Market cap: $14.26 billion

A distributor of plumbing supplies, Reece is a family-run business that is highly regarded for its earnings quality. The company was recently named among 10 stocks good enough to buy and hold for a decade or more by TMS Capital’s Ben Clark.

What the brokers think

Market Index Broker Consensus: STRONG SELL (0 buy, 5 hold, 12 sell)

  • UBS added Reece to its coverage list on 31 October, with a BUY rating and a $15.80 price target.

  • Ord Minnett downgraded the company to LIGHTEN from hold on 24 August, increasing its price target to $16.50 from $15.50.

  • Morgans rates Reece as REDUCE with a price target of $15.50.

Reece shares closed at $22.06 on Tuesday 9 January 2023.

Screenshot 2024-01-09 at 3.17.50 pm
Reece 12-month price chart (Source: Market Index)

Seven Group Holdings (ASX: SVW)

Market cap: $13.38 billion

Seven Group is a conglomerate with business units in the media, mining and construction industries. MLC Asset Management’s Anthony Golowenko in July named the company among several in which he would invest $10,000 of new capital. “The combined exposures provide what can be seen as reasonably priced, high-investment quality exposure to five underlying business units,” he said.

What the brokers think

Market Index Broker Consensus: BUY (9 buy, 4 hold, 0 sell).

  • Bell Potter added Seven Group to its coverage in September, with a BUY rating and a price target of $33.

  • Bank of America rates the company as BUY, with a price target of $26.51.

  • Goldman Sachs rates SVW as BUY, with a price target of $27.90, as of April 2023.

Seven Group shares closed at $36.72 on Tuesday 9 January 2023.

Screenshot 2024-01-09 at 3.19.25 pm
Seven 12-month price chart (Source: Market Index)

This article was originally published on livewiremarkets.com on Tuesday 9 January 2023.

Written By

Glenn Freeman

Content Editor

Glenn is a Content Editor at Livewire Markets and Market Index. Glenn has almost 20 years’ experience in financial services writing and editing. Glenn’s journalistic experience also spans energy and automotive, in both Australia and abroad – including the Middle East – where he edited an oil and gas publication in the United Arab Emirates.

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