Industrial and energy companies can be challenging to follow because their businesses can have big ups and downs based on the economy, interest rates, or commodity prices.
Sometimes, it's best to buy these companies on weakness when things aren't going well, anticipating that another upswing will eventually come. Importantly, these companies must be financially built for the tough times.
Here are four fantastic industrial and energy stocks with rock-solid fundamentals, all trading near their 52-week lows today.
1. ExxonMobil
Energy giant ExxonMobil (XOM 1.45%) is a fixture in fossil fuels. The company explores for, extracts, refines, and sells oil and gas products. ExxonMobil enjoyed banner years in 2022 and 2023, but the stock is near its 52-week lows due to weakness in commodity prices. The price of oil has retreated from triple-digits to between $70 and $80 per barrel. While refining margins improve when oil prices drop, the exploration business is too big to offset falling oil prices.
The good news is that ExxonMobil is financially sound. The company has $31 billion in cash on its balance sheet against $41 billion in total debt, resulting in just $10 billion net debt. Investors can enjoy a solid 3.6% dividend yield at the current share price, and the company has raised its dividend for 41 consecutive years, showing it's endured multiple industry ups and downs.
2. NextEra Energy
Renewable energy company and electric utility NextEra Energy (NEE -0.61%) is the opposite of Exxon, playing a massive role in renewable energy sources like wind and solar power. Its renewable energy subsidiary is the world's largest, with projects across North America, and its utility business, Florida Power & Light, services over 12 million people in Florida. The company is also an outstanding dividend stock, with a 28-year streak of raises and a solid 3.6% yield today.
NextEra Energy's stock is struggling due to high interest rates. The company relies on borrowing money to fund investments in its business, and the higher rates make debt more expensive and potentially inhibit growth. However, rates tend to be cyclical, and the market expects rate cuts to come sometime this summer. Don't lose sight of NextEra's leading position in a growing renewable energy industry. Embrace the stock's valuation dropping from over 30 times earnings to 16 times.
3. Archer-Daniels-Midland
Food is a core need of society, and Archer-Daniels-Midland (ADM 1.49%) plays a crucial role in feeding the world. The company processes and trades grains, seeds, oils, and other agricultural products worldwide. Its giant footprint spans 750 facilities and 42,000 employees, packing size and scale that make competing with Archer-Daniels-Midland no easy task. The stock is nearing Dividend King status, with 48 consecutive years of dividend increases.
The company is currently under investigation by the Department of Justice for account practices related to how it priced commodities traded within its business. Shares fell sharply after the news, putting the stock near its 52-week low. Investors should follow developments closely and respect the severity of potential violations. At the same time, Archer-Daniels-Midland has such a long track record that it seems unlikely that the severity of any alleged violations would ruin a long-term investment thesis. That makes this black-eye situation a potential buy-the-dip opportunity.
4. Deere & Company
There is no food without farming, and Deere & Company (DE -0.76%) is arguably the flagship brand of machines used for commercial agriculture, construction, and forestry. The company's famous green paint marks every machine in service. Deere isn't just a machinery company, though. It's become a technology company, too. It provides farmers with machinery and software solutions to maximize efficiency and crop yields.
Right now, Deere is in a slump. Higher interest rates make machinery more expensive for farmers, who often rely on financing to afford the large tractors and other machines they use. Deere's net sales fell 8% year over year in the first quarter of Deere's fiscal year 2024, ended Jan. 28, 2024, and earnings per share fell 5%. Consider buying the stock on weakness. Analysts believe the business will compound earnings at nearly 10% annually over the long term. Deere is a classic example of an excellent business going through a cyclical phase, as many do.
Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NextEra Energy. The Motley Fool recommends Deere. The Motley Fool has a disclosure policy.
