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 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 11.2% over the past six months. This drop was worse than the S&P 500’s 2.5% decline.

Investors should tread carefully as timing cyclical companies is a challenging task, and any misstep can have you catching a falling knife. Keeping that in mind, here are three industrials stocks we’re swiping left on.

Nordson (NDSN)

Market Cap: $11.14 billion

Founded in 1954, Nordson Corporation (NASDAQ: NDSN) manufactures dispensing equipment and industrial adhesives, sealants and coatings.

Why Should You Dump NDSN?

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. Earnings per share were flat over the last two years and fell short of the peer group average
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 4.5 percentage points

Nordson’s stock price of $206.50 implies a valuation ratio of 18.8x forward P/E. To fully understand why you should be careful with NDSN, check out our full research report (it’s free).

Honeywell (HON)

Market Cap: $144.4 billion

Originally founded in 1906 as a thermostat company, Honeywell (NASDAQ: HON) is a multinational conglomerate known for its aerospace systems, building technologies, performance materials, and safety and productivity solutions.

Why Do We Think Twice About HON?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Estimated sales growth of 3.3% for the next 12 months is soft and implies weaker demand
3. Free cash flow margin dropped by 3.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Honeywell is trading at $226 per share, or 21.1x forward P/E. Check out our free in-depth research report to learn more about why HON doesn’t pass our bar.

Tesla (TSLA)

Market Cap: $1.15 trillion

Originally founded by Martin Eberhard and Marc Tarpenning in 2003, Tesla (NASDAQ: TSLA) is an electric vehicle company accelerating the world’s transition to sustainable energy.

Why Does TSLA Fall Short?

1. Tesla's scale advantage in EV production leads to gross margins that exceed incumbents such as General Motors and Ford. However, a softer macroeconomic backdrop and tariff pressures have weighed on automobile sales, which are highly cyclical.
2. The company's execution ability is a question mark given its long history of delays, such as the Cybertruck and Robotaxi launches. Its sizeable investments in projects with uncertain return timelines, like Optimus, also raise skepticism from investors.
3. On the bright side, Tesla's Megapack product solves a critical problem for utilities needing renewable energy storage solutions. This innovation has made the energy segment the most profitable and fastest-growing business line for the company.

At $364.59 per share, Tesla trades at 136.6x forward price-to-earnings. Read our free research report to see why you should think twice about including TSLA in your portfolio.

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