Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that sway capital spending, like interest rates. Wariness surrounding these influences has caused the industry to underperform the market as it was flat over the past six months while the S&P 500 climbed by 3.6%.

Some companies can grow regardless of the economic backdrop, but the odds aren’t great for the ones we’re analyzing today. Taking that into account, here are three industrials stocks that may face trouble.

Beacon Roofing Supply (BECN)

Market Cap: $6.84 billion

Established in 1928, Beacon Roofing Supply (NASDAQ: BECN) distributes residential and commercial roofing materials and complementary building products.

Why Does BECN Fall Short?

1. 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
2. Estimated sales growth of 3.8% for the next 12 months implies demand will slow from its two-year trend
3. Earnings per share have dipped by 4.6% annually over the past two years, which is concerning because stock prices follow EPS over the long term

At $120.60 per share, Beacon Roofing Supply trades at 14x forward price-to-earnings. Check out our free in-depth research report to learn more about why BECN doesn’t pass our bar.

Titan Machinery (TITN)

Market Cap: $351.9 million

Founded in 1980, Titan Machinery (NASDAQ: TITN) is a distributor of agricultural and construction equipment across the United States and Europe.

Why Do We Avoid TITN?

1. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 3.3% annually
2. Free cash flow margin dropped by 5.8 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders

Titan Machinery’s stock price of $15.35 implies a valuation ratio of 14.5x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including TITN in your portfolio.

Otis (OTIS)

Market Cap: $41.24 billion

Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE: OTIS) is an elevator and escalator manufacturing, installation and service company.

Why Does OTIS Worry Us?

1. 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
2. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
3. Gross margin of 29.1% is below its competitors, leaving less money to invest in areas like marketing and R&D

Otis is trading at $103 per share, or 25.8x forward price-to-earnings. To fully understand why you should be careful with OTIS, check out our full research report (it’s free).

Stocks We Like 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 United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.