Whether you see them or not, industrials businesses play a crucial part in our daily activities. Still, their generally high capital requirements expose them to the ups and downs of economic cycles, and the market seems to be baking in a prolonged downturn as the industry has shed 5.7% over the past six months. This drop was disappointing since the S&P 500 held its ground.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Keeping that in mind, here is one industrials stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Industrials Stocks to Sell:
Kirby (KEX)
Market Cap: $6.19 billion
Transporting goods along all U.S. coasts, Kirby (NYSE: KEX) provides inland and coastal marine transportation services.
Why Do We Think Twice About KEX?
- Annual revenue growth of 3.4% over the last five years was below our standards for the industrials sector
- Free cash flow margin dropped by 10.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
Kirby is trading at $109 per share, or 16.2x forward P/E. If you’re considering KEX for your portfolio, see our FREE research report to learn more.
U-Haul (UHAL)
Market Cap: $11.59 billion
Founded by a husband and wife duo, U-Haul (NYSE: UHAL) is a provider of rental trucks and storage facilities.
Why Should You Sell UHAL?
- Sales tumbled by 1.6% annually over the last two years, showing market trends are working against its favor during this cycle
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 38.3 percentage points
- Waning returns on capital imply its previous profit engines are losing steam
At $65.12 per share, U-Haul trades at 2.2x trailing 12-month price-to-sales. To fully understand why you should be careful with UHAL, check out our full research report (it’s free).
One Industrials Stock to Watch:
Watts Water Technologies (WTS)
Market Cap: $8.15 billion
Founded in 1874, Watts Water (NYSE: WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.
Why Do We Watch WTS?
- Superior product capabilities and pricing power result in a top-tier gross margin of 45%
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share repurchases over the last five years enabled its annual earnings per share growth of 16.9% to outpace its revenue gains
Watts Water Technologies’s stock price of $246.46 implies a valuation ratio of 26.6x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free.
