Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Sure, they are at the whim of macroeconomic factors that influence capital spending (like interest rates), but the industry has held its ground over the past six months as its 5.2% return was almost identical to the S&P 500.
Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here is one industrials stock boasting a durable advantage and two we’re steering clear of.
Two IndustrialsStocks to Sell:
WESCO (WCC)
Market Cap: $10.46 billion
Based in Pittsburgh, WESCO (NYSE: WCC) provides electrical, industrial, and communications products and augments them with services such as supply chain management.
Why Do We Think Twice About WCC?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
WESCO is trading at $214.43 per share, or 15.1x forward P/E. Check out our free in-depth research report to learn more about why WCC doesn’t pass our bar.
Emerson Electric (EMR)
Market Cap: $84.17 billion
Founded in 1890, Emerson Electric (NYSE: EMR) is a multinational technology and engineering company providing solutions in the industrial, commercial, and residential markets.
Why Are We Wary of EMR?
- Sales stagnated over the last five years and signal the need for new growth strategies
- Free cash flow margin dropped by 4.1 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Waning returns on capital imply its previous profit engines are losing steam
At $149.63 per share, Emerson Electric trades at 24.2x forward P/E. Dive into our free research report to see why there are better opportunities than EMR.
One Industrials Stock to Watch:
Granite Construction (GVA)
Market Cap: $4.20 billion
Having played a role in the construction of the Hoover Dam, Granite Construction (NYSE: GVA) is a provider of infrastructure solutions for roads, bridges, and other projects.
Why Do We Like GVA?
- Annual revenue growth of 12.2% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings per share have massively outperformed its peers over the last two years, increasing by 60.9% annually
- Returns on capital are increasing as management’s prior bets are starting to bear fruit
Granite Construction’s stock price of $95.94 implies a valuation ratio of 8.9x forward EV-to-EBITDA. Is now the right time to buy? Find out in our full research report, it’s free.
Stocks We Like Even More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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