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The Zacks Office Automation and Equipment Industry participants like Canon (CAJ Free Report) and Seiko Epson (SEKEY Free Report) are gaining from growing demand for coronavirus-led medical equipment systems and a low-mid class of printers, thanks to the ongoing spike in demand for work-from-home and online learning. Strong capital spending on lithography equipment for memory devices and sensors has been benefiting industry participants. The rapid adoption of Internet of Things and 5G technologies has driven sales of CMOS sensors and communication devices, which bodes well for these companies. Nevertheless, the industry is facing supply-chain disruption due to the coronavirus pandemic. Macro-economic slowdown, high rate of Inflation and heightened price competition are hurting industry participants.

Industry Description

The Zacks Office Automation and Equipment Industry comprises companies that provide products and services related to e-commerce, shipping, digital delivery, printing, digital cameras, healthcare and industrial businesses. The industry participants are located primarily in Japan and the United States. The industry has been witnessing rapid evolution with the advancement in Internet and printing technology. Change in customer preference from monochrome to color products and from hardware to services and solution has been noteworthy. Companies like Canon are launching new full-frame mirrorless products amid declining demand for SLR cameras. Industry participants cater to a broad market from Small Office Home Office (SOHO) and Small and Midsize Business (SMB) to large enterprises. The work and learn-from-home trend has been beneficial to industry participants.

3 Trends Shaping the Future of the Office Automation and Equipment Industry

Hybrid Working to Aid Demand: Increasing preference for the hybrid working model is driving demand for printers at homes and offices. Hybrid working essentially means increased office attendance as compared with full-fledged remote working. Industry participants expect print volume to recover, driven by economic re-opening and higher office attendance.

Supply-Chain Constraints Hurting Growth: Companies in the industry are suffering production and supply-chain constraints. Inflation and concerns about an economic downturn are major headwinds for industry participants. Additionally, increased product offerings from local manufacturers along with their low-cost alternatives are forcing industry participants to slash prices. This is eating into the industry participants’ bottom line.

Sluggish Demand for Office Equipment Mars Prospects: Soft demand for copiers and office equipment due to increasing adoption of smartphones and portable devices has been detrimental to the industry’s growth. Heavy investments in technology to innovate and customize products specific to client requirements is dragging down margins. Additionally, with product life cycles being short, investments in research and development are increasing.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Office Automation and Equipment industry is housed within the broader Zacks Computer And Technology sector. It carries a Zacks Industry Rank #97, which places it in the top 38% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the …….

Source: https://www.zacks.com/commentary/1913146/2-office-equipment-stocks-to-watch-in-a-prospering-industry

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