fedex provides customers with transportation, e-commerce and business services. The company operates a fleet of aircraft and vehicles, logistics facilities, and retail stores that help facilitate the shipping of millions of packages daily. it also offers businesses a number of other logistics and e-commerce services that help distribute their products to customers.
fedex produces a lot of free cash flow. that allows the company to pay a competitive and growing dividend. You can also pay off debt to strengthen your balance sheet and make investments to expand your operations.
Fedex’s strong cash flow also allows the company to invest in innovation. the shipping company is testing autonomous vehicles and delivery services. it is also making investments related to sustainability. fedex aims to become carbon neutral by 2040 while generating attractive investment returns for its shareholders.
lockheed martin is a leading global aerospace and security company. researches, designs, develops and manufactures advanced technology systems, products and services, primarily for government customers. the defense contractor has four main business segments: aeronautics, missiles and fire control, rotary and mission systems, and space.
The company invests billions of dollars a year in research and development (R&D) to advance the latest defense technology. routinely supplements its internal research and development program with acquisitions. the company hoped to acquire aerojet rocketdyne (nyse:ajrd) to deliver greater efficiency, speed and significant cost reductions for its customers. however, in 2022, the federal trade commission filed a request to block that transaction, prompting lockheed martin to terminate the deal.
Despite that setback, the defense contractor should continue to grow for years to come. Russia’s invasion of Ukraine has more countries in Europe planning to increase defense spending, which should boost Lockheed Martin’s sales for years to come.
Caterpillar is a leading global manufacturer of construction and mining equipment, off-highway diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. The company has three operating segments: construction industries, resource and energy industries, and transportation. also provides financing and related services.
caterpillar is working to make equipment more sustainable. is collaborating with companies in the railway, energy, mining and technology sectors in the development of new technologies with lower carbon emissions. for example, it works on both battery and hydrogen powered locomotives. it is also developing zero-emission transport trucks and equipment for the mining industry. A focus on sustainability will be a major growth driver for Caterpillar in the coming years as the global economy continues to make progress in reducing carbon emissions.
another important driver of growth for caterpillar is the increasing investment in infrastructure in the coming years. the United States. it is one of many countries that has increased its spending on projects to maintain and expand road and rail systems, bridges and other infrastructure. that should drive higher demand for construction equipment.
3m makes thousands of products that consumers and businesses use every day. As a diversified company, it operates in four main market sectors:
- industrial and security equipment
- transportation and electronics
- consumer goods
3m’s diverse product portfolio enables the company to generate consistent cash flow regardless of market conditions. 3m is ranked among the best companies in the industrial sector for its capital allocation strategy. Historically, it reinvests about 30% of its available capital (operating cash flow plus borrowing capacity) to grow the business through research and development as well as equity investments.
The company typically returns another 30% of its available capital to investors through a growing dividend. the remaining 40% is available for opportunistic acquisitions or to buy back shares when they are trading at an attractive price. the company is a dividend king with an investment grade balance sheet.
Along with developing new products ahead of the competition, 3m is also investing in sustainability. the company plans to spend $1 billion over the next two decades to reduce water use and carbon footprint.
how to identify the best industrial companies
The strongest industrial companies have diversified operations, low operating costs, and investment-grade credit ratings. Diversification, a low cost structure and access to affordable debt are important due to the cyclical nature of the industrial sector. economic downturns directly reduce the demand for industrial goods and services.
Industrial companies also need access to affordable debt because their operations are often very capital intensive. Most industrial companies need to borrow money to purchase new capital equipment and build new manufacturing facilities. Another benefit of a low-cost structure is less exposure to rising cost pressures in inflationary environments.
While a company’s financial performance is always relevant to investors, companies in the industrial sector need to maintain particularly strong financial positions. Potential investors should pay close attention to how specific industrial companies are doing in times of crisis.