Growing adoption of breakthrough technologies is changing industry operations across the globe. Smart factories, with obvious financial benefits, are becoming the way for companies to effectively compete with their counterparts.
Let us, thus, focus on some stocks that could benefit from this trend.
The Future of Smart Manufacturing is Bright
The smart factory market is expected to see a CAGR of 9.8% between 2019 and 2024, according to a Markets and Markets report. The market is estimated to be valued at $153.7 billion in 2019.
In fact, the global economy could gain as much as $1.5 trillion to $2.2 trillion every year by 2023 from smart factories, a recent survey by the Capgemini Research Institute disclosed. The research institute surveyed one thousand executives from companies that have adopted smart factory initiatives.
According to Capgemini, smart factories are putting to use “digital platforms and technologies” in order to achieve “significant improvements in productivity, quality, flexibility and service.”
Needless to say, manufacturing companies could benefit from converting their current industrial units into smart factories.
Smart Factory is the Next Industrial Revolution
Delving deeper into the smart factory concept, the major reason any manufacturing unit can gain from it is the flexibility it offers. In a smart factory environment, systems can run autonomously and deliver self-optimized performance. Self-operating and evaluating systems are imperative to this concept.
A smart factory is an extremely digitized, connected production facility, which is powered by smart machines. A smart factory is essentially a combination of machinery, automation and optimization.
Now, in order to run autonomously, a system requires networking and Internet. This is where technologies such as cyber physical systems, IoT, cloud computing and cognitive computing come in. Companies such as General Electric Company GE, SAP SE SAP, Honeywell International Inc. HON and International Business Machines Corporation IBM are some of the key players in these spaces.
The entire concept of a smart factory rests on the fact that separate systems can not only function independently but also communicate effectively among themselves. In other words, it is an interconnected system of standalone subsystems.
While it is essential to learn how efficient smart factories are, investors also need to consider why smart factories are so vital and which end-user industries could benefit from them.
First, increased competition is a major reason for manufacturers to upgrade their factories. The rising demand for higher living standards among consumers today is reflected in their preference for better products. Second, steadily increasing world population is also driving demand.
This is why manufacturers need to raise their productivity while maintaining the quality of products. Smart manufacturing processes not only improve productivity but also uphold the expected level of finesse.
Smart factories could greatly boost productivity of industries such as food and beverages, oil and gas, energy and power, chemical, pharmaceutical and mining and metals.
In fact, feedbacks from companies that have already turned their manufacturing units into smart factories are largely positive.
Siemens Aktiengesellschaft’s SIEGY manufacturing unit in Amberg, Germany, is a key example of a well-planned smart factory. The plant witnessed increased productivity on workers’ ability to reprogram Siemens’ factory machinery in just 60 seconds, compared to two hours needed earlier.
In fact, the company’s productivity has increased tenfold with a 99.9% level of production quality.
Stocks in Focus
Investors might therefore want to take a look at stocks which carry a Zacks Rank #2 (Buy) or 3 (Hold) and could gain considerably from their engagement in the smart factory revolution.
Intuitive Surgical, Inc. ISRG is a designer, manufacturer and marketer of da Vinci surgical systems and related instruments and accessories. The company dominates the robotics-assisted surgical domain with its da Vinci line.
Intuitive Surgical is one of the fastest-growing companies in healthcare that is set to revolutionize the manner in which surgeries are performed. Applications of the companies’ da Vinci surgical systems are slowly gaining momentum in healthcare and could witness large-scale implementation ahead.
The company carries a Zacks Rank #2. The Zacks Consensus Estimate for Intuitive Surgical’s current-year earnings has risen 3.7% over the past 30 days.You can see the complete list of today’s Zacks #1 Rank stocks here.
Honeywell International is a diversified technology and manufacturing company. The company introduced its Experion PKS Highly Integrated Virtual Environment (HIVE) in June 2019, which is a new approach for engineering and maintenance of industrial control systems. The company carries a Zacks Rank #3. The Zacks Consensus Estimate for Honeywell International’s current-year earnings has moved up 0.7% over the past 30 days.
General Electric is a high-tech industrial company. The company's products and services include aircraft engines, power generation, oil and gas production equipment, medical imaging, financing and industrial products etc.
The company’s Proficy Manufacturing Execution Systems (Proficy MES) is an array of solutions that can transform manufacturing through insights and intelligence with the help of data integration, the industrial IoT, ML and predictive analytics.
The company carries a Zacks Rank #3. The Zacks Consensus Estimate for General Electric’s current-year earnings has risen 1.7% over the past 30 days.
SAP is an enterprise application software, and analytics and business intelligence company. The company offers SAP Digital Manufacturing Cloud, which, with a manufacturing execution system, improves operations visibility. The manufacturing execution system offers near real-time data and analytics.
The company’s SAP Manufacturing Execution simplifies manufacturing operations by monitoring, controlling and optimizing the production processes. The company carries a Zacks Rank #3. The Zacks Consensus Estimate for SAP’s current-year earnings has climbed 1.8% over the past 30 days.
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International Business Machines Corporation (IBM) : Free Stock Analysis Report
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