Whether you see them or not, industrials businesses play a crucial part in our daily activities. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and the industry is currently lagging as its six-month return of 7.2% has trailed the S&P 500’s 9.5% gain.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here are two resilient industrials stocks at the top of our wish list and one we’re steering clear of.
One Industrials Stock to Sell:
NN (NNBR)
Market Cap: $163.3 million
Formerly known as Nuturn, NN (NASDAQ: NNBR) provides metal components, bearings, and plastic and rubber components to the automotive, aerospace, medical, and industrial sectors.
Why Should You Sell NNBR?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 3.1% annually over the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
NN’s stock price of $3.30 implies a valuation ratio of 3x forward EV-to-EBITDA. Dive into our free research report to see why there are better opportunities than NNBR.
Two Industrials Stocks to Watch:
Herc (HRI)
Market Cap: $5.12 billion
Formerly a subsidiary of Hertz Corporation and with a logo that still bears some similarities to its former parent, Herc Holdings (NYSE: HRI) provides equipment rental and related services to a wide range of industries.
Why Do We Like HRI?
- Annual revenue growth of 14.1% over the last two years was superb and indicates its market share increased during this cycle
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 18.8%, and its profits increased over the last five years as it scaled
- Share buybacks catapulted its annual earnings per share growth to 32.7%, which outperformed its revenue gains over the last five years
Herc is trading at $180.07 per share, or 11.9x forward price-to-earnings. Is now the right time to buy? Find out in our full research report, it’s free.
GE Aerospace (GE)
Market Cap: $225.9 billion
One of the original 12 companies on the Dow Jones Industrial Average, General Electric (NYSE: GE) is a multinational conglomerate providing technologies for various sectors including aviation, power, renewable energy, and healthcare.
Why Does GE Catch Our Eye?
- Annual revenue growth of 21.9% over the past two years has been outstanding, reflecting market share gains this cycle
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Free cash flow margin increased by 13 percentage points over the last five years, giving the company more capital to invest or return to shareholders
At $209.79 per share, GE Aerospace trades at 40x forward price-to-earnings. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.
Put yourself in the driver’s seat 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 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.
