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 10.7% over the past six months. This performance was worse than the S&P 500’s 1.9% loss.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one industrials stock boasting a durable advantage and two that may face trouble.
Two Industrials Stocks to Sell:
Builders FirstSource (BLDR)
Market Cap: $12.32 billion
Headquartered in Irving, TX, Builders FirstSource (NYSE: BLDR) is a construction materials manufacturer that offers a variety of lumber and lumber-related building products.
Why Are We Wary of BLDR?
- Sales tumbled by 12.1% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings per share have dipped by 23.2% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
At $110.50 per share, Builders FirstSource trades at 11.5x forward P/E. Check out our free in-depth research report to learn more about why BLDR doesn’t pass our bar.
MDU Resources (MDU)
Market Cap: $3.51 billion
Founded to provide electricity to towns in Minnesota, MDU Resources (NYSE: MDU) provides products and services in the utilities and construction materials industries.
Why Should You Dump MDU?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 25.9% annually over the last five years
- Falling earnings per share over the last five years has some investors worried as stock prices ultimately follow EPS over the long term
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
MDU Resources is trading at $17.19 per share, or 16.7x forward P/E. If you’re considering MDU for your portfolio, see our FREE research report to learn more.
One Industrials Stock to Buy:
American Superconductor (AMSC)
Market Cap: $1.08 billion
Founded in 1987, American Superconductor (NASDAQ: AMSC) has shifted from superconductor research to developing power systems, adapting to changing energy grid needs and naval technology requirements.
Why Are We Backing AMSC?
- Annual revenue growth of 45% over the last two years was superb and indicates its market share increased during this cycle
- Free cash flow profile has moved into positive territory over the last five years, showing the company has crossed a key inflection point
- Historical investments are beginning to pay off as its returns on capital are growing
American Superconductor’s stock price of $27.41 implies a valuation ratio of 51.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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.
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