Even if they go mostly unnoticed, industrial businesses are the backbone of our country. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and investors seem to be forecasting a downturn – over the past six months, the industry has pulled back by 1.5%. This performance is a noticeable divergence from the S&P 500’s 11.6% return.
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. On that note, here is one resilient industrials stock at the top of our wish list and two best left ignored.
Two Industrials Stocks to Sell:
Masco (MAS)
Market Cap: $14.3 billion
Headquartered just outside of Detroit, MI, Masco (NYSE:MAS) designs and manufactures home-building products such as glass shower doors, decorative lighting, bathtubs, and faucets.
Why Are We Out on MAS?
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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
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Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 1.6%
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Eroding returns on capital suggest its historical profit centers are aging
Masco is trading at $72.79 per share, or 16.8x forward P/E. To fully understand why you should be careful with MAS, check out our full research report (it’s free).
Leonardo DRS (DRS)
Market Cap: $10.39 billion
Developing submarine detection systems for the U.S. Navy, Leonardo DRS (NASDAQ:DRS) is a provider of defense systems, electronics, and military support services.
Why Is DRS Not Exciting?
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5.6% annual revenue growth over the last five years was slower than its industrials peers
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Product roadmap and go-to-market strategy need to be reconsidered as its backlog has averaged 6.8% declines over the past two years
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Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Leonardo DRS’s stock price of $39.49 implies a valuation ratio of 29x forward P/E. If you’re considering DRS for your portfolio, see our FREE research report to learn more.
One Industrials Stock to Buy:
Corning (GLW)
Market Cap: $131.6 billion
Supplying windows for some of the United States’s earliest spacecraft, Corning (NYSE:GLW) provides glass and other electronic components for the consumer electronics, telecommunications, automotive, and healthcare industries.
Why Will GLW Outperform?
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Annual revenue growth of 14.3% over the last two years was superb and indicates its market share increased during this cycle
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Earnings per share grew by 30.3% annually over the last two years, massively outpacing its peers
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Free cash flow margin expanded by 5.9 percentage points over the last five years, providing additional flexibility for investments and share buybacks/dividends