Raymond James Names Allison, Griffon, and Construction Partners as Top Industrial Picks

Raymond James has identified three industrial stocks with significant upside potential in its latest "Analyst Current Favorites" list. The firm spotlighted Allison Transmission (ALSN), Griffon Corporation (GFF), and Construction Partners (ROAD), with analysts citing attractive valuations, solid fundamentals, and clear near-term catalysts for each company.

Selection Criteria

To be included in the list, companies must have a "Strong Buy" or "Outperform" rating from a Raymond James analyst. The selection process is highly focused, as each analyst is permitted to recommend only one stock for the list at any given time. The firm's research team prioritizes companies with strong underlying business fundamentals, appealing valuations, and specific events or trends expected to drive stock performance.

Analyst Top Picks

Allison Transmission (ALSN)

Analysts at Raymond James see a favorable investment setup for the transmission manufacturer, arguing that its current valuation does not fully reflect the potential bottoming of global on- and off-highway markets. The firm believes Allison's premium valuation is justified by several factors:

• Superior profit margins and growth potential from the increasing adoption of fully automatic transmissions.
• A shareholder-friendly capital return strategy.
• An aggressive share repurchase program that is expected to continue providing support for the stock, even with increased leverage following its acquisition of DAN.

Allison Transmission recently reported second-quarter adjusted earnings of $2.73 per share on $1.56 billion in revenue, beating analyst expectations and raising its full-year revenue guidance.

Ad

Griffon Corporation (GFF)

Raymond James highlighted Griffon Corporation for its highly asymmetric risk-reward profile, suggesting limited downside risk. The bullish case is supported by a large-scale share buyback program and a double-digit free cash flow yield. Analysts noted the company's commitment to using nearly all its free cash flow for repurchases as its HBP business segment continues to meet margin targets.

With no major debt maturities until 2028, Griffon has ample financial flexibility. Furthermore, analysts believe the board is preparing for a potential sale of most or all of its business, which could occur at a significant premium to its current share price. The company recently beat Wall Street estimates in its third-quarter report, and both S&P and Moody's subsequently upgraded its credit rating, citing its debt reduction efforts.

Construction Partners (ROAD)

Construction Partners was added to the list following a recent pullback in its stock price, which Raymond James views as an overreaction to market concerns. Analysts believe fears regarding weather trends, the reauthorization of the federal infrastructure bill, and rising fuel costs are overstated.

The firm argued that since most of ROAD's business comes from state departments of transportation, the timing of federal legislation has a limited impact. Additionally, fuel costs are largely passed on through asphalt price indexing and hedging arrangements. Analysts see long-term value in the company's strong M&A integration capabilities and its focus on high-growth, well-funded state markets. Construction Partners also recently exceeded analyst expectations for its third-quarter earnings and revenue, leading it to raise its full-year financial outlook.