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 14.3% over the past six months. This performance was worse than the S&P 500’s 6.2% loss.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here is one industrials stock boasting a durable advantage and two that may face trouble.

Two Industrials Stocks to Sell:

MSC Industrial (MSM)

Market Cap: $4.20 billion

Founded in NYC’s Little Italy, MSC Industrial Direct (NYSE: MSM) provides industrial supplies and equipment, offering vast and reliable selection for customers such as contractors

Why Should You Dump MSM?

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. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
3. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 4.5% annually

MSC Industrial is trading at $75.42 per share, or 19.6x forward P/E. To fully understand why you should be careful with MSM, check out our full research report (it’s free).

Avery Dennison (AVY)

Market Cap: $13.3 billion

Founded as Kum Kleen Products, Avery Dennison (NYSE: AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.

Why Are We Out on AVY?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
2. Free cash flow margin dropped by 3.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up
3. Eroding returns on capital suggest its historical profit centers are aging

At $170.19 per share, Avery Dennison trades at 16.5x forward P/E. Check out our free in-depth research report to learn more about why AVY doesn’t pass our bar.

One Industrials Stock to Watch:

AZZ (AZZ)

Market Cap: $2.69 billion

Responsible for projects like nuclear facilities, AZZ (NYSE: AZZ) is a provider of metal coating and power infrastructure solutions.

Why Are We Positive On AZZ?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 9.2% annual sales growth over the last two years
2. Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
3. Incremental sales significantly boosted profitability as its annual earnings per share growth of 24% over the last two years outstripped its revenue performance

AZZ’s stock price of $89.79 implies a valuation ratio of 15.4x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like 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 Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.