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3 commercial industrial stocks you should have on your watchlist

It’s hard to pin down a good definition for industrial stocks, but the sector encapsulates companies producing goods used in construction and manufacturing which can include stocks from the aerospace arena to metal fabrication or salary packaging.

These 3 ASX-listed stocks are worth watching if you are seeking a solid industrial for your portfolio.

Brambles Limited (ASX: BXB)

Supply chain logistics company Brambles Limited is a $15.65 billion market cap company with a long history on the ASX.

Last month Credit Suisse upgraded the stock to outperform from neutral, with speculation the current management team will deliver a turnaround in its struggling US business by controlling costs and using technology to increase competitive advantage.

Brambles has lagged behind building and construction player Boral Limited (ASX: BLD) in the last year, with Boral’s share price rising steadily from $5.76 at this time last year to an April 5 close of $7.38, while Brambles has suffered through some share price volatility to land down at an April 5 close at $9.83.

Brambles do seem to have a plan to improve its business performance in the next few years, with investment in technology for pallet tracking and cost reduction in the transport and logistics space.

One to watch as the US dollar has a resurgence and Credit Suisse has slapped a $10.40 share price target on the stock.

ALS Ltd (ASX: ALQ)

Global provider of testing and analytical laboratory services, ALS Ltd, is asserting itself as a global leader in its sector.

ALS has had a volatile year of share pricing, up from its 52-week low of $5.79 to its April 5 close of $7.26, but a far cry from its 52-week high in October 2017 of $8.50.

ALS has about $700 million in debt which may put some investors off on fundamentals alone, but such a diversified offering costs money and ALS has certainly poured some cash into building its reputation globally – operating hundreds of offices across 65 countries.

ALS will hand down its preliminary report in May and the contents will be hotly anticipated by investors hoping to see if the company is on track to reach its 2022 target of $500 million EBITDA and $2.2 billion revenue.

McMillan Shakespeare Limited (ASX: MMS)

Salary packaging company McMillan Shakespeare Limited has had a strong 12-months in terms of share price, despite a downtrend in the last month to sit at an April 5 close of $16.

McMillan Shakespeare operate the well-known RemServ salary packaging business, also offering novated leases and fleet and asset management systems to major employers across Australia, New Zealand and the UK.

Although McMillan is well-respected, salary packaging competitor Smartgroup Corporation Ltd (ASX: SIQ) has been a stand-out performer in the recent past with its share price surging upwards from $6.59 at this time last year to an April 5 close of $10.60.

Smartgroup has made some clever acquisitions in the last 12-months and announced a 46% increase in profits for the full year ended December 31, 2017, with revenue up 40% to $205.4 million.

McMillan reported first-half results in late February, announcing a revenue rise of 4.4% to $262.3 million with EBITDA up 2% to $67.9 million and a fully-franked dividend of 33c per share – up 6.5% on the previous corresponding period.

Growth in the salary packaging segment is strong, but it will be interesting to see who out of McMillan and Smartgroup emerges the best off from some regulatory uncertainty tipped for the medium term in the sector.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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