IW U.S. 50 Best Manufacturers: Vertex Pharmaceuticals Takes Top Spot

It wasn’t the biggest company, the most profitable or the fastest-growing. However, Vertex Pharmaceuticals Inc. placed near the top all of our financial metrics, making it the No.1 performer on the 2024 IW 50 Best U.S. Manufacturers list.

Pulled from our annual IndustryWeek U.S. 500 list of the largest manufacturing companies in the country, the IW 50 Best list evaluates those publicly traded companies on six financial metrics throughout a three-to-five-year period.

Vertex Pharmaceuticals

The manufacturer of cystic fibrosis, sickle-cell anemia and pain management drugs is no stranger to the IW 50 Best U.S. Manufacturers list, having landed at No. 12 last year and No. 3 in 2022. Really, it should have been No. 1 in 2022, given that the companies ahead of it were Apple Inc. and Microsoft Corp. two companies that we have since removed from consideration because neither makes its own products.

So, what makes Vertex the best in manufacturing? Solid, consistent performance anchored by steady revenue and profit growth.

Treating disease creates an odd set of financial targets. While most manufacturers want growing markets for their products, few pharmaceutical company executives would celebrate having more gravely ill patients to treat, even if it’s good for business.

One note in Vertex’s recent financial statements pops out – the estimated number of people living with the genetic lung disorder cystic fibrosis is going up. That increase in patients is a bizarre sign of success. According to the Cystic Fibrosis Foundation, in the 1950s, few children diagnosed with the disease lived long enough to reach elementary school – today, many patients live well into adulthood.

“Continued investment in scientific and serial innovation will allow us to complete our journey to transform [cystic fibrosis] by bringing all eligible CF patients down to … where there are no manifestations of disease,” says Dr. Reshma Kewalramani, M.D., president and CEO of Vertex.

That focus on investing in the future is the core reason for Vertex’s top placement. The company was in the middle of the pack for income and revenue growth, but at more than 30%, its profit margins have been in the Top 10 on the IW U.S. 500 list for the past five years, and the company has similarly excelled in other metrics. Put simply, Vertex’s leadership has invested its resources well for years, creating new products and lowering its costs in ways the provide long-term growth opportunities.

How the Best Performed

The IW 50 Best Manufacturers list isn’t a simple measure of sales or profitability. Inventory management and return on investment are also major factors. However, the best manufacturers did perform significantly better than the rest of the IW U.S. 500.

The broader list posted $6.4 trillion in sales last year, down about 3% from 2023, and $48 billion in net income, up a little less than 1%. The IW 50 Best had just more than $1 trillion in sales, up 2%, and about $151 billion in profits, up 8%.

Outside of solid performance, the best companies had little in common. Companies from seven different industries took the top 10 spots on the list. Only industrial equipment providers (three) and pharmaceutical companies (two) repeated in those top spots.

Industrial equipment makers such as Illinois Tool Works and Parker Hannifin took 10 of the 50 spots, but that’s a pretty broad category with a lot of diversity. Motor vehicle manufacturers and suppliers took six spots on the list, but again, with little commonality.

No. 2 on the list and the top motor vehicles company was Allison Transmission, the Indiana-based manufacturer of heavy-duty truck and commercial vehicle power-delivery systems. Allison’s performance was very similar to Vertex’s – top marks in its use of capital, high returns on equity and assets, a top profit margin, balanced with solid-but-middle-of-the-pack numbers on revenue growth and net income growth.

Tesla, the electric vehicle maker that entered the list for the first time in 2023, scored the exact same rank this year at No. 16.

Odds and Ends

One oddball to make the list was No. 19, Cal-Maine Foods, producer of Egg-Lands Best and other egg brands found at grocery stores nationwide. Cal-Maine had never been in contention for the IW 50 Best in the past because it was too small to make the IW U.S. 500. But remember that massive increase in egg prices in 2023? Inflation sent Cal-Maine revenues up 77% to $3.1 billion and profits up 471% to $758 million. Not only did Cal-Maine make the 500 list, it debuted at No. 328.

In addition to massive revenue and net income growth, Cal-Maine had the highest return on assets in the 500 last year and top rankings in profit margin. However, those gains were all recent, only topping the charts for the past two years. It didn’t have the long-term, consistent returns that put companies such as Vertex and Allison so much higher.

Full disclosure, I wrote about Cal-Maine in the late ’90s and early ’00s as a reporter for The Clarion-Ledger in Mississippi. Cal-Maine is headquartered in Ridgeland, a suburb of Jackson. Since 1993, Burkenroad Reports, an investment research company run by Tulane University Professor Peter Ricchiuti, has issued research reports on companies too small to attract attention from the big investment houses. Those reports have singled out Cal-Maine many times as a particularly well-run small company.

Other notes of interest:

Cavco Industries, No. 6, was the smallest company to land on the IW 50 Best list (No. 421, IW 500). The maker of manufactured and modular homes was No. 36 on the IW 50 Best list.
Oddly, Eagle Materials, maker of concrete and gypsum for drywall, was No. 420 on the IW 500 yet made it all the way to No. 14 on the IW 50 Best.
CF Industries, last year’s No. 1 company, fell to No. 27 for 2024 as its sales and earnings fell sharply last year. Despite those declines, it maintained a solid profit margin and performed well in the other metrics.
Only two energy companies made this year’s list, CVR Energy (No. 5) and Valero (No. 28). Last year, seven oil and gas producers, including industry giants ExxonMobil and Phillips 66, were IW 50 Best Manufacturers. However, last year was rough on oil prices, leading to big revenue and profit declines for the sector.

Calculating the List

Using data from S&P Global Market Intelligence, we evaluated members of the IndustryWeek U.S. 500 list of the largest publicly traded manufacturing companies in the country using six metrics:

Revenue Growth, Net Income Growth: For each of those metrics, we pulled annual results for the past four years to calculate percentage change for the past three years and ranked companies on growth. We assigned a 1-10 score based on where companies fell on the IW 500 for each of the three years and added those figures together, weighting scores at 60% for the most recent year, 25% for the previous year and 15% for results from three years ago.
Inventory Turnover: A measure of how efficiently a company produces, sells and replaces stock, S&P calculates this figure by comparing the how many times a company sold its inventory compared to its costs-of-goods-sold. A low turnover value implies that a company is overstocking material or has poor sales, while a high number indicates a company in state of flow, constantly producing, selling and restocking. Using S&P turnover data, we ranked three years of data to generate and weight scores in the same way that we did for revenue and net income.
Net Income Margin: A simple calculation of net income-to-sales, this measures how much a company earns for each sale made. We then ranked, scored and weighted the results using the same formula as the previous four metrics.
Return on Assets, Return on Equity: RoA measures a company’s net income by its assets, measuring how efficiently it uses its investments in fixed costs such as factories and distribution centers. RoE measures net income in relation to shareholder equity (company assets minus debt), determining how much wealth it generates for those who stock. We ranked and scored companies for their past five years of performance on these two metrics, weighting results at 50% for the most recent year, 20% for the previous year, 15% for three years ago, 10% for four years ago and 5% for five years ago.

We then added the weighted scores from each of those categories into a final score that we ranked to determine the top 50 performers. Using a variety of metrics and measuring companies by how they ranked on our list of 500 candidates prevented companies that excelled in a single category from dominating the list.

Only two companies that topped one of the six metrics landed on the IW 50 Best Manufacturers list—Cal-Maine Foods (No. 19) had the best return on assets, while Colgate-Palmolive had the best return on equity.

Electric automaker Rivian topped the list for revenue growth but hasn’t even been around long enough to generate data on RoE and RoA, and it is still not profitable. Medical device maker Zimmer Biomet topped the net income growth charts for 2023 performance, but its 2022 and 2021 earnings were much lower. Plastics company TPI Composites scored extremely well in inventory turns but had lackluster results in return on equity and return on assets. And, Emerson Electric was the most profitable company (by margin) on the list for 2024, but it was solidly middle of the pack on the other metrics.