Mueller Industries: Boring Stock, But It Makes Money (NYSE:MLI)

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Mueller Industries Inc. (NYSE:MLI) is a superb firm working within the steel fabrication business. The firm operates in a market that doesn’t elicit ideas of nice earnings or progress and can be thought of by many to be boring. But they do make money and have a predictable and regular enterprise. These are the forms of corporations that I desire, and you’ll make certain that some buyers should not wanting on this nook of the market. The firm has been paying down their debt diligently, and now they’ve zero debt, and so they have a totally untapped credit score facility of $400M that leaves them very versatile if an acquisition goal presents itself and the corporate can act rapidly. Even with out some sort of acquisition to kick-start progress, the corporate has nice free money stream and has been rising that money stream for a few years, and that development looks like it would proceed into the longer term. The market doesn’t appear to understand this firm, and the latest progress in income and earnings in the previous couple of years appear to make an much more compelling case.

Introduction

“Mueller Industries, Inc. manufactures and sells copper, brass, aluminum, and plastic products in the United States, the United Kingdom, Canada, South Korea, the Middle East, China, and Mexico. It operates through three segments: Piping Systems, Industrial Metals, and Climate. The Piping Systems segment offers copper tubes, fittings, line sets, and pipe nipples; PEX plumbing and radiant systems; and plumbing-related fittings and plastic injection tooling. It also resells steel pipes, brass and plastic plumbing valves, malleable iron fittings and faucets, and plumbing specialties; and supplies water tubes. This segment sells its products to wholesalers in the plumbing and refrigeration markets, distributors to the manufactured housing and recreational vehicle industries, building material retailers, and air-conditioning original equipment manufacturers (OEMs). The Industrial Metals segment manufactures brass, bronze, and copper alloy rods; plumbing brass, valves, and fittings; cold-form aluminum and copper products; machining of aluminum, steel, brass, and cast iron impacts and castings; brass and aluminum forgings; brass, aluminum, and stainless-steel valves; fluid control solutions; and gas train assembles to OEMs in the industrial, construction, HVAC, plumbing, and refrigeration markets. The Climate segment offers valves, protection devices, and brass fittings for various OEMs in the commercial HVAC and refrigeration markets; high-pressure components and accessories for the air-conditioning and refrigeration markets; coaxial heat exchangers and twisted tubes for the HVAC, geothermal, refrigeration, swimming pool heat pump, marine, ice machine, commercial boiler, and heat reclamation markets; insulated HVAC flexible duct systems; and brazed manifolds, headers, and distributor assemblies. The company was founded in 1917 and is headquartered in Collierville, Tennessee.”

Numbers/Outlook

In 2021 Mueller Industries Inc had full-year results of $3.8B in revenues and net income of $468.5M which comes out to $8.25 EPS diluted. The firm has additionally reported their first and second quarter earnings for 2022. For the primary half of 2022 the corporate has had $2.16B in revenues and $364M in internet earnings which is $6.43 EPS diluted. The firm pays a present dividend of $1.00 per share, which is a 1.48% yield on the present share worth.

The outlook for the corporate’s future progress is nice. New housing begins and industrial building are essential elements that affect and assist decide how the gross sales of the corporate can be as a result of these areas make up a good portion of demand for the corporate’s merchandise. According to the U.S. Census Bureau, actual housing starts within the U.S. have been 1.60M in 2021 in comparison with 1.38M in 2020. Also, the worth of personal non-residential building was 467.9B in 2021, 479B in 2020, and 500.1B in 2019. The demand in these areas is predicted to stay excessive, and the corporate believes their enterprise and monetary outcomes will profit and stay steady due to these elements. The outlook for non-residential building is projected to develop 5.4% in 2022 and 6.1% in 2023. This outlook in demand will assist Mueller Industries, Inc. continue to grow and working at a excessive degree.

Mueller Industries 2021 Gross Margin, FCF

Mueller Industries Annual Report

Potential Risks

A possible danger issue that may have an effect on the enterprise is financial situations relating to housing and industrial building industries. The building markets seem steady presently and have been good for the final a number of years, however sooner or later if there’s a deterioration in these markets it might considerably influence the corporate’s enterprise.

Valuation

Mueller Industries Inc. presently has a market capitalization of $3.8B and a worth to earnings (P/E) ratio of 5.80. This P/E is definitely fairly a bit decrease than most of Mueller’s opponents. Other corporations within the steel fabrication have P/E ratios presently which can be nearer to round 20. Based on the P/E ratio, it appears like the corporate is affordable in comparison with its opponents. The firm seems to already be undervalued with the standing of present operations. When you think about progress of revenues and internet earnings for the corporate, it seems to be a really engaging stock with unrecognized worth.

The firm has been aggressive at paying down debt during the last couple of years, and now the corporate has zero debt. That could be very constructive for the corporate as a result of proper now it would not put a squeeze on any of the corporate’s internet earnings, and it makes them very versatile. The firm has $202M of money on the finish of the second quarter, and so they have a revolving credit score facility of $400M that’s untapped that could possibly be used if wanted for operations or if a strategic acquisition alternative comes alongside.

Investor Takeaway/Conclusion

Mueller Industries appears like an amazing firm and an amazing stock. The firm has traditionally been a gentle performer and has skilled an explosion of demand in 2021 that has continued into 2022. The backlog is robust and the numbers the corporate has been hitting are nice. The firm has a low P/E a number of and seems to be very considerably undervalued in comparison with its opponents and simply typically. If the corporate was at a extra regular P/E ratio of 10-15 this stock would greater than double from present ranges. The firm appears poised for extra progress which makes the present undervaluation that rather more engaging and even when they don’t seem to be going to have wonderful progress of their enterprise if it would simply stay regular, the corporate have ready themselves for something the market may throw at them.



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