Plug Power (PLUG) vs. Hitachi (HTHIY): Comparing Industrial Giants for Dividend Stability The industrial sector is thriving due to growing commercial and residential infrastructure development and technological advancements in manufacturing processes. Thus, industrial stocks Plug Power (PLUG) and Hitachi (HTHIY) are poised...
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The industrial sector is thriving due to growing commercial and residential infrastructure development and technological advancements in manufacturing processes. Thus, industrial stocks Plug Power (PLUG) and Hitachi (HTHIY) are poised to benefit from the industry's tailwinds. But which of these stocks provides better dividend stability? Read on to know more….
In this article, I evaluated two industrial stocks, Plug Power Inc. (PLUG) and Hitachi, Ltd. (HTHIY), to compare them for dividend stability. After comparing the fundamentals of these stocks, we believe HTHIY is the better investment for reasons explained throughout this piece.
Industrial production surged by 0.1% in February after declining 0.5% in January. Also, the manufacturing output experienced a 0.8% uptick, and the index for mining rose 2.2%. Furthermore, capacity utilization remained at 78.3% in February, aligning precisely with its historical average.
The growing need for commercial and residential spaces, rapid economic growth and industrialization, government investments in infrastructure development, and digital transformation in several sectors would drive demand for industrial equipment and services. The global industrial services market is expected to grow at a CAGR of 5.7%, reaching $44.05 billion in 2028.
Some key trends in the industrial sector include the expansion of Industry 4.0, integration of artificial intelligence (AI), the Internet of Things (IoT), and data analytics in industrial processes, enhanced focus on predictive maintenance, and remote monitoring. The artificial intelligence market in the industrial sector size is projected to grow at a CAGR of 38.9% by 2028.
Industrial giants PLUG and HTHIY will likely benefit from the industry's growth prospects. Moreover, HTHIY is known for providing dividend stability. HTHIY's annual dividend of $2.15 translates to a yield of 1.21% at the current share price, while its four-year average dividend yield is 2.01%. Its dividend payouts have grown at a CAGR of 14.6% over the past three years.
PLUG has plunged 54.6% over the past six months, while HTHIY has gained 36.7%. PLUG has declined 63.6% over the past nine months, compared to HTHIY's 43% gain. In addition, PLUG has lost 66.9% over the past year, while HTHIY has gained 62.2%.
Therefore, here are several reasons why we think HTHIY could perform better in the near term:
Latest Developments
On February 23, 2024, PLUG and Uline, the leading distributor of shipping, industrial, and packaging materials to businesses throughout North America, announced their expanded partnership to deploy PLUG's hydrogen infrastructure and fuel cell solutions at Uline's new campus in Kenosha, Wisconsin.
On February 21, PLUG revealed it had finalized a contract to supply a major U.S. automobile manufacturer with hydrogen infrastructure and fuel cell solutions supporting material handling operations. The manufacturing campus of over 6 square miles is dedicated to EV batteries and is one of the largest auto manufacturing campuses in U.S. history.
On the other hand, on March 20, HTHIY and Grid United, an independent electrical transmission company, announced a collaboration to deliver high-voltage direct current (HVDC) technology for Grid United transmission projects that would interconnect the eastern and western regional power grids in the U.S.
Also, on March 19, HTHIY and Penske Truck Leasing launched a large-scale, centralized electric truck charging solution. This groundbreaking project supports Penske's electric truck deployments for its customers in the Stockton, California area.
Recent Financial Results
For the fiscal year that ended December 31, 2023, PLUG's gross loss worsened by 161.3% year-over-year to $507.79 million. Its operating loss widened by 97.7% from the previous year to $1.34 billion. Also, the company's net loss and net loss per share worsened by 89% and 84% year-over-year to $1.37 billion and $2.30, respectively.
HTHIY reported revenues of ¥8.11 trillion ($53.53 billion) for the nine months that ended December 31, 2023. The company's adjusted EBITDA came in at ¥632.20 billion ($4.17 billion), up 1.3% from the previous year's period. Its net income increased 42.8% year-over-year to ¥476.50 billion ($3.15 billion).
Furthermore, earnings per share attributable to HTHIY stockholders came in at ¥478.24, an increase of 55.8% from the prior-year period.
Past And Expected Financial Performance
Over the past five years, PLUG's revenue has increased at a CAGR of 38.6%. The company's total assets have grown at a CAGR of 65.9% over the same period.
Analysts expect PLUG's revenue for the fiscal years 2024 and 2025 to increase 14.2% and 55.1% year-over-year to $1.02 billion and $1.58 billion, respectively. However, the company is estimated to report a loss per share of $0.99 and $0.52 for the fiscal years 2024 and 2025, respectively.
Over the past five years, HTHIY's EBITDA and net income have grown at CAGRs of 12.5% and 33.8%, respectively. Also, the company's EPS has increased at a CAGR of 34.7% over the same timeframe.
For the fiscal year ending March 2024, HTHIY's revenue is expected to increase 413.5% year-over-year to $1.83 billion. Likewise, analysts expect the company's EPS for the fiscal year 2025 to grow 4.5% from the prior year to $8.41.
Profitability
HTHIY's trailing-12-month revenue is 79.5 times what PLUG generates. Moreover, HTHIY is more profitable, with a trailing-12-month gross profit margin of 25.69% compared to PLUG's negative 47.28%. HTHIY's trailing-12-month EBITDA margin and net income margin of 15.58% and 8.03% compared to PLUG's negative 109.15% and negative 153.57%, respectively.
Additionally, HTHIY's trailing-12-month levered FCF margin of 22.72% compared with PLUG's negative 152.02%. Also, HTHIY's trailing-12-month ROE and ROTC of 15.98% and 8.81% compared to PLUG's negative 39.34% and negative 14.79%, respectively.
Valuation
In terms of forward EV/Sales, HTHIY is currently trading at 1.39x, 55.6% lower than PLUG, which is trading at 3.13x. HTHIY's forward Price/Sales of 1.36x is 41.1% lower than PLUG's 2.31x.
Thus, HTHIY is relatively more affordable.
POWR Ratings
PLUG has an overall rating of F, which equates to a Strong Sell in our proprietary POWR Ratings system. Conversely, HTHIY has an overall rating of B, translating to a Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. PLUG has an F grade in Momentum. The stock is trading below its 50-day and 200-day moving averages of $3.73 and $6.29, respectively, indicating a downtrend.
In contrast, HTHIY has a B grade for Momentum. The stock is trading above its 50-day and 200-day moving averages of $166.75 and $139.83, respectively, indicating an uptrend.
In addition, PLUG has a D grade for Value, in sync with higher-than-industry valuation. The stock's forward EV/Sales and Price/Sales of 3.13x and 2.31x are 73.8% and 54.2% higher than respective industry averages of 1.80x and 1.50x.
On the other hand, HTHIY has an A grade for Value, consistent with its lower valuation relative to its peers. The stock's forward EV/Sales and Price/Sales of 1.39x and 1.36x are lower than the industry averages of 1.80x and 1.50x, respectively.
Of the 88 stocks in the Industrial - Equipment industry, PLUG is ranked last, while HTHIY is ranked #18.
Beyond what we've stated above, we have also rated both stocks for Stability, Quality, Sentiment, and Growth. Click here to access PLUG Ratings. Get all HTHIY ratings here.
The Winner
The industrial sector's prospects appear promising due to growing demand for commercial and residential spaces, rising government investments in infrastructure development projects, and rapid technological innovation poised to boost manufacturing processes.
However, PLUG's relatively weak financials, low profitability, elevated valuation, and bleak growth outlook make its competitor, HTHIY, the better industrial stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Industrial - Equipment industry here.
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HTHIY shares were unchanged in premarket trading Tuesday. Year-to-date, HTHIY has gained 22.46%, versus a 9.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program.Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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