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The Zacks Security and Safety Services industry is poised to benefit from strong demand for security and safety solutions prompted by growing concerns of terrorist and criminal activities and the need to safeguard citizens and infrastructure. Improving supply chains and a deceleration in inflation augur well for the industrys near-term prospects.

Companies like Johnson Controls International JCI, Brady Corporation BRC and Lakeland Industries LAKE are poised to take advantage of the buoyancy in the industry.

About the Industry

The Zacks Security and Safety Services industry comprises companies that provide sophisticated and interactive security solutions and related services, which are meant to be used for residential, commercial and institutional purposes. A few industry players develop electrical weapons for personal defense, as well as military, federal, law enforcement and private security. Some of them provide solutions for the recovery of stolen vehicles, wireless communication devices, equipment for the safety of facility infrastructure and employees, and products for detecting hazards. A few companies provide a variety of services to automobile owners and insurance companies. The industry serves customers belonging to various end markets, including manufacturing, electronics, hospitality, education, construction, telecommunications, aerospace and medical.

3 Trends Shaping the Future of the Security and Safety Services Industry

Demand for Security and Safety Services: Growing concerns of terrorism and criminal activities around the world are promoting demand for security and safety services. Political unrest across countries, prompting governments to safeguard citizens and protect infrastructure, acts as a key growth driver for the industry. With growing urbanization, governments are increasingly focusing on the safety and security of people, assets and the like, thus driving demand in the industry. Thanks to rising instances of hacking, the industry is seeing growing demand for Internet security products and services like firewalls and unified threat management. Increasing efforts directed toward ensuring safe infrastructure in smart cities bode well for the industry.

Improving Supply Chains: While supply chain disruptions persist, the situation has improved significantly, as evident from the Institute for Supply Management reports Supplier Deliveries Index, which reflected faster deliveries for the eighth straight month in June. This is expected to drive the industrys growth in 2023. A reduction in raw material costs, thanks to the deceleration in inflation, should support the bottom line of industry players.

High Debt Levels: To stay competitive and keep up with changing customer needs, industry players constantly focus on upgrading and developing new products. While this augurs well for the industrys long-term growth, hefty investments in research and development often leave companies with highly leveraged balance sheets.

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Zacks Industry Rank Indicates Bright Prospects

The Zacks Security and Safety Services industry, housed within the broader Industrial Products sector, currently carries a Zacks Industry Rank #67. This rank places it in the top 27% of more than 250 Zacks industries.

The groups Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid 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 two to one.

The industrys positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. The Zacks Consensus Estimate for the groups 2023 earnings per share has increased 8.5% in the past year.

Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it is worth taking a look at the industrys shareholder returns and its current valuation first.

Industry Outperforms Sector & S&P 500

The Zacks Security and Safety Services industry has outperformed both the broader sector and the Zacks S&P 500 composite index over the past year.

Over this period, the industry has rallied 25.4% compared with the sector and the S&P 500 Indexs increase of 21.4% and 13.9%, respectively.

Industry's Current Valuation

On the basis of forward P/E (F12M), which is a commonly used multiple for valuing security and safety services stocks, the industry is currently trading at 19.52X compared with the S&P 500s 20.10X. However, it exceeds the sectors P/E (F12M) ratio of 17.11X.

Over the past five years, the industry has traded as high as 27.04X, as low as 10.38X and at the median of 18.68X, as the chart below shows:

3 Security and Safety Services Stocks to Buy

Each of the companies mentioned below presently carries a Zacks Rank #2 (Buy). You can see the complete list of todays Zacks #1 Rank (Strong Buy) stocks here.

Johnson Controls: A diversified technology company and a multi-industrial leader, Johnson Controls is involved in the creation of intelligent buildings, providing efficient energy solutions and integrated infrastructure. A robust demand environment, pricing actions and cost-control initiatives are expected to drive JCIs growth. Continued improvement in HVAC & Controls and strength in the Fire & Security are key catalysts to the companys growth.

The Zacks Consensus Estimate for Johnson Controls fiscal 2023 (ending September 2023) earnings has been revised upward by 2.6% in the past 90 days. Shares of the company have gained 8.6% in the year-to-date period.

Brady: The company offers complete identification solutions that help companies improve productivity, performance, safety and security. Brady is gaining from its continued focus on product development and innovation. Inorganic activities position BRC well for future growth.The Zacks Consensus Estimate for Bradys fiscal 2023 (ending July 2023) and fiscal 2024 earnings has been revised by 1.4% each in the past 90 days. Shares of the company have gained around 7% in the year-to-date period.

Lakeland Industries: The company manufactures industrial protective clothing and accessories for the industrial and public protective clothing market. LAKE is benefiting from significant contributions from the acquisition of Eagle Technical Products, which has expanded the companys fire service protective clothing division. Improved product mix and cost-control measures should fuel the companys growth. Reduction in raw material costs and manufacturing expenses should bolster LAKEs bottom line.

The Zacks Consensus Estimate for Lakeland Industries fiscal 2024 (ending January 2024) earnings has been revised upward by 9.4% in the past 90 days. Shares of the company have appreciated 15.1% in the year-to-date period.

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Johnson Controls International plc (JCI) : Free Stock Analysis Report

Brady Corporation (BRC) : Free Stock Analysis Report

Lakeland Industries, Inc. (LAKE) : Free Stock Analysis Report

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3 Top Stocks From the Flourishing Security and Safety Services Industry - Yahoo Finance