Whether you see them or not, industrials businesses play a crucial part in our daily activities. 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 6.1% over the past six months. This performance was discouraging since the S&P 500 stood firm.

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 best left ignored.

Northwest Pipe (NWPX)

Market Cap: $390.3 million

Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ: NWPX) is a manufacturer of pipeline systems for water infrastructure.

Why Are We Hesitant About NWPX?

1. Muted 5.2% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Demand will likely fall over the next 12 months as Wall Street expects flat revenue
3. Earnings per share have contracted by 2.1% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance

At $39.51 per share, Northwest Pipe trades at 11.5x forward P/E. Check out our free in-depth research report to learn more about why NWPX doesn’t pass our bar.

Fortive (FTV)

Market Cap: $24.23 billion

Taking its name from the Latin root of "strong", Fortive (NYSE: FTV) manufactures products and develops industrial software for numerous industries.

Why Do We Think Twice About FTV?

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. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.6%
3. Annual earnings per share growth of 2.1% underperformed its revenue over the last five years, partly because it diluted shareholders

Fortive’s stock price of $71.30 implies a valuation ratio of 17.4x forward P/E. Read our free research report to see why you should think twice about including FTV in your portfolio.

Mueller Water Products (MWA)

Market Cap: $3.78 billion

As one of the oldest companies in the water infrastructure industry, Mueller (NYSE: MWA) is a provider of water infrastructure products and flow control systems for various sectors.

Why Does MWA Give Us Pause?

1. Annual revenue growth of 2.3% over the last two years was below our standards for the industrials sector
2. 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
3. Estimated sales growth of 4.1% for the next 12 months is soft and implies weaker demand

Mueller Water Products is trading at $24.10 per share, or 19x forward P/E. If you’re considering MWA for your portfolio, see our FREE research report to learn more.

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