Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 47.9% for the sector - higher than the S&P 500’s 34.7% return.
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 are three industrials stocks best left ignored.
CSX (CSX)
Market Cap: $67.1 billion
Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ: CSX) is a transportation company specializing in freight rail services.
Why Do We Steer Clear of CSX?
- Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- 13.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
CSX is trading at $36 per share, or 20x forward P/E. Check out our free in-depth research report to learn more about why CSX doesn’t pass our bar.
FedEx (FDX)
Market Cap: $57.18 billion
Sporting one of the largest air cargo fleets in the world, FedEx (NYSE: FDX) is a global provider of parcel and cargo delivery services.
Why Should You Dump FDX?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
FedEx’s stock price of $242.50 implies a valuation ratio of 13x forward P/E. Read our free research report to see why you should think twice about including FDX in your portfolio.
TopBuild (BLD)
Market Cap: $11.09 billion
Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE: BLD) is a distributor and installer of insulation and other building products.
Why Does BLD Fall Short?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Projected sales growth of 3% for the next 12 months suggests sluggish demand
- Earnings per share lagged its peers over the last two years as they only grew by 5% annually
At $396.24 per share, TopBuild trades at 19x forward P/E. If you’re considering BLD for your portfolio, see our FREE research report to learn more.
Stocks We Like 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 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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