Different investors like to look at different sectors for opportunities. ASX tech shares can deliver strong margins and can grow quickly, while ASX mining shares can attract cyclical investors wanting contrarian opportunities. S&P/ASX 200 Index (ASX: XJO) industrial shares may appeal for their potential to deliver relatively consistent earnings growth.
The 'industrial' sector can cover a wide range of areas. In this article, we're going to look at what experts think of a waste management and recycling business, and another business that's heavily involved in the global logistics and supply chain.
Being an industrial ASX 200 share doesn't automatically mean a company will grow and be successful, but experts really like the look of the two stocks below.
Cleanaway Waste Management Ltd (ASX: CWY)
Writing on The Bull, Toby Grimm from Baker Young called Cleanaway shares a buy.
Cleanaway generates revenue from numerous activities, so I'll list just some of them. It provides commercial, industrial, municipal and residential collection services. It owns and operates waste transfer stations, recycling facilities and landfills. Cleanaway sells recovered paper, cardboard, metals and plastics. The final one I'll mention is that it generates and sells carbon credits and electricity produced utilising landfill gas.
FY24 saw the business report net revenue growth of 7.7%, underlying profit (EBIT) growth of 18.9% and earnings per share (EPS) growth of 15.2%.
Grimm suggests the ASX 200 industrial share is trading at a discount despite it having a "strong outlook" for revenue growth and underlying earnings. The expert likes the defensive characteristics of the business. Grimm then wrote:
We expect cyclical upside from increasing construction volumes and government infrastructure and residential construction policies.
Brambles Ltd (ASX: BXB)
This global business provides reusable pallets and containers through its CHEP brand, which are predominantly used by fast-moving consumer goods, fresh produce, beverage, retail, and general manufacturing industries. It operates in approximately 60 countries and has around 347 million pallets, crates, and containers.
Peter Day from Sequoia Wealth Management has called Brambles shares a buy.
Day highlighted some of the pleasing financial numbers from the recent FY24 result, which included the announcement of a US$500 million share buyback.
In FY24, Brambles' revenue rose 8% to US$6.5 billion, continuing operations underlying net profit increased 18% to US$1.26 billion, and the bottom line saw 9% growth to US$780 million.
The expert noted that Brambles has provided guidance that revenue could grow by between 4% and 6% in FY25, using the same foreign exchange rate as FY24. According to Brambles, the ASX 200 industrial share's underlying net profit could grow by between 8% and 11%.
Brambles also said that it's expecting free cash flow before dividends of between US$750 million and US$850 million. The company also noted that its dividend payout ratio will be between 50% and 70% of underlying profit after finance costs and tax in US dollar terms and funded by free cash flow.
