NCR Corporation (NCR), The Boeing Company (BA): A Selection of US Industrial Companies

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Since the year started, I have kept a watch-list of US industrial companies. These days I could only find three companies that represented a long opportunity at current market prices.  Here I propose a portfolio composed of these three picks. The three companies combine value and growth, but one of them is especially interesting. Let’s take a one-by-one look.

Investing in special situations

NCR Corporation (NYSE:NCR)

NCR Corporation (NYSE:NCR) is a leading manufacturer of ATMs, self-service kiosks and POS devices. The company sells its products to the financial, retail, travel, and gaming industries. The company was bought by AT&T in 1991 and spun-off a few years later. With its 10.3% free cash flow (FCF) yield and selling at 2013 8.3x EV/EBITDA, I think NCR Corporation (NYSE:NCR) trades at a very conservative level.

Besides, it seems that right now may be the right time to start buying NCR Corporation (NYSE:NCR) shares. Near-term catalysts include: (1) The announcement of the third phase of the pension plan to address the remaining unfunded balance (which could boost FCF by $50 to $70 million in the next two years); and (2) greater than expected synergies from recently purchased Radiant and Retalix.

I believe that current market prices do not reflect NCR Corporation (NYSE:NCR)’s potential earnings upside, nor Radiant and Retalix deal synergies, nor the value of the company’s defensive services business.

Gaining market share and growing margins across the board

WESCO International, Inc. (NYSE:WCC), one of the leading providers of electrical products in America, continues to drive market share gains in the fragmented US electrical distribution market. I am convinced the company is a clear long as the US housing market gains stamina.

For the first quarter this year, EPS was $1.12, or up 13% year-over-year (yoy) on revenues of $1.81 billion (up 13% yoy). One important factor to stress when looking at WESCO International, Inc. (NYSE:WCC) is its constant gross margin expansion. As a matter of fact, for the first quarter, gross margin of 21.1% was up 120 basic points yoy (a record), and well above the company’s 20.6% guidance. The recent EECOL acquisition reinforces business momentum, and I would expect the steady gross margin improvement to support a future multiple expansion.

To sum up, I believe WESCO International, Inc. (NYSE:WCC) represents a good long idea when trading at 2013 11.8x P/E.

This flying giant seems ready for take-off

I chose The Boeing Company (NYSE:BA) because I feel there is increasingly convincing evidence that the 787 program is starting to work for the company. If the program is finally a success, it could drive Boeing’s fundamentals and, henceforth, its stock performance.

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