Even if they go mostly unnoticed, industrial businesses are the backbone of our country. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, the tide is turning in their favor as the industry’s 39.5% return over the past six months has topped the S&P 500 by 14 percentage points.
Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. With that said, here is one resilient industrials stock at the top of our wish list and two we’re swiping left on.
Two Industrials Stocks to Sell:
Terex (TEX)
Market Cap: $3.53 billion
With humble beginnings as a dump truck company, Terex (NYSE: TEX) today manufactures lifting and material handling equipment designed to move and hoist heavy goods and materials.
Why Does TEX Worry Us?
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Earnings per share fell by 16.3% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Free cash flow margin shrank by 5.4 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $54.42 per share, Terex trades at 10.6x forward P/E. If you’re considering TEX for your portfolio, see our FREE research report to learn more.
FuelCell Energy (FCEL)
Market Cap: $300.3 million
Founded in 1969, FuelCell Energy (NASDAQ: FCEL) is a leading manufacturer and developer of carbonate fuel cell technology for stationary power generation.
Why Are We Hesitant About FCEL?
- Sales trends were unexciting over the last two years as its 4.3% annual growth was below the typical industrials company
- Negative free cash flow raises questions about the return timeline for its investments
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
FuelCell Energy’s stock price of $9.30 implies a valuation ratio of 1.2x forward price-to-sales. Check out our free in-depth research report to learn more about why FCEL doesn’t pass our bar.
One Industrials Stock to Watch:
AZZ (AZZ)
Market Cap: $2.98 billion
Responsible for projects like nuclear facilities, AZZ (NYSE: AZZ) is a provider of metal coating and power infrastructure solutions.
Why Are We Positive On AZZ?
- Healthy operating margin of 15% shows it’s a well-run company with efficient processes, and it turbocharged its profits by achieving some fixed cost leverage
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 26% annually, topping its revenue gains
- Free cash flow margin jumped by 23 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
AZZ is trading at $99.28 per share, or 16.1x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.
The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. 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-small-cap company Exlservice (+354% 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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