Even if they go mostly unnoticed, industrial businesses are the backbone of our country. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 16.4% over the past six months. This performance was worse than the S&P 500’s 8.7% fall.

Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, 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:

Norfolk Southern (NSC)

Market Cap: $47.11 billion

Starting with a single route from Virginia to North Carolina, Norfolk Southern (NYSE: NSC) is a freight transportation company operating a major railroad network across the eastern United States.

Why Should You Sell NSC?

1. Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
2. Earnings per share have contracted by 7.6% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
3. Free cash flow margin shrank by 7.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Norfolk Southern’s stock price of $214.48 implies a valuation ratio of 15.8x forward price-to-earnings. To fully understand why you should be careful with NSC, check out our full research report (it’s free).

Packaging Corporation of America (PKG)

Market Cap: $16.14 billion

Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.

Why Do We Pass on PKG?

1. Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Earnings per share have dipped by 9.9% annually over the past two years, which is concerning because stock prices follow EPS over the long term
3. 3 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

Packaging Corporation of America is trading at $183.63 per share, or 15.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than PKG.

One Industrials Stock to Watch:

ESCO (ESE)

Market Cap: $3.67 billion

A developer of the communication systems used in the Batmobile of “The Dark Knight,” ESCO (NYSE: ESE) is a provider of engineered components for the aerospace, defense, and utility sectors.

Why Should ESE Be on Your Watchlist?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 9.1% annual sales growth over the last two years
2. Market share is on track to rise over the next 12 months as its 14.3% projected revenue growth implies demand will accelerate from its two-year trend
3. Earnings per share grew by 17.6% annually over the last two years and trumped its peers

At $146.17 per share, ESCO trades at 29x forward price-to-earnings. Is now the right time to buy? See for yourself in our full research report, it’s free.

Stocks We Like Even More

Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.

While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking 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 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.