The industrial sector includes companies that produce machinery, equipment, and supplies that are used in construction and manufacturing, as well as those that provide related services. These companies are closely tied to the economy, and their business volume often falls sharply during recessions, though each industrial subsector often performs differently. Well-known companies include Lockheed Martin Corp. (LMT), Honeywell International Inc. (HON), and 3M Co. (MMM). The industrial sector also includes companies that provide air transportation services such as United Airlines Holdings Inc. (UAL).

Industrial stocks, as represented by the Industrial Select Sector SPDR ETF (XLI), have underperformed the broader market, providing investors with a total return of 11.7% compared to the Russell 1000's total return of 21.2% over the past 12 months. These market performance numbers are as of December 18 and the statistics in the tables below are as of December 21.

Here are the top 3 industrial stocks with the best value, the fastest earnings growth, and the most momentum.

Best Value Industrial Stocks

These are the industrial stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows you’re paying less for each dollar of profit generated.

Best Value Industrial Stocks

 

Price ($) Market Cap ($B) 12-Month Trailing P/E Ratio
HD Supply Holdings Inc. (HDS) 55.86 8.7 4.7
GrafTech International Ltd. (EAF) 8.72 2.3 5.0
Air Lease Corp. (AL) 41.56 4.7 8.5

Source: YCharts

  • HD Supply Holdings Inc.: HD Supply Holdings is a holding company that, through subsidiaries, distributes products used for repair, operations, maintenance, infrastructure and power, and specialty construction projects. HD Supply Holdings announced in mid-November that it had entered into an agreement to be acquired by The Home Depot Inc. (HD). The Home Depot has agreed to acquire all of the outstanding shares of HD Supply common stock for $56 per share in cash. The transaction is expected to be completed by January 31, 2021. For Q3 2020, the company reported a more than 12-fold increase in net income on flat net sales year-over-year (YOY). The gains in net income were primarily driven by a one-time $1.5 billion gain related to the sale of the company's Construction & Industrial business.
  • GrafTech International Ltd.: GrafTech manufactures graphite and carbon-based products and offers related services. Among the company's products are graphite electrodes, petroleum needle coke, and energy solutions for making steel, silicon metal, electronics, aluminum, and automotive products.
  • Air Lease Corp.: Air Lease is involved in the purchase, sale, and leasing of commercial aircraft worldwide.

Fastest Growing Industrial Stocks

These are the industrial stocks with the highest YOY earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.

Fastest Growing Industrial Stocks

 

Price ($) Market Cap ($B) EPS Growth (%)
Rockwell Automation Inc. (ROK) 247.95 28.8 3,110
AGCO Corp. (AGCO) 102.88 7.7 1,990
HD Supply Holdings Inc. (HDS) 55.86 8.7 1,160

Source: YCharts

  • Rockwell Automation Inc.: Rockwell Automation manufactures industrial automation products including control systems, sensors, motor control devices, and control panels. For Q4 FY 2020 ended September 30, Rockwell posted a 9.3% YOY decline in total sales while net income rose more than 32-fold compared to Q4 FY 2019. The higher net income was largely due to fair-value adjustments in connection with the company's investment in PTC Inc. (PTC). Rockwell bought a $1 billion stake in PTC, a maker of software and computer-aided design (CAD) programs, in June of 2018.
  • AGCO Corp.: AGCO makes and sells agricultural equipment. The company's products include tractors, combines, sprayers, forage equipment, and replacement parts.
  • HD Supply Holdings Inc.: See company description above.

Industrial Stocks with the Most Momentum

These are the industrial stocks that had the highest total return over the last 12 months.

Industrial Stocks with the Most Momentum

 

Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Virgin Galactic Holdings Inc. (SPCE) 23.84 5.6 149.4
Generac Holdings Inc. (GNRC) 216.79 13.6 114.1
Trex Co. Inc. (TREX) 83.88 9.7 91.6
Russell 1000 N/A N/A 21.2
Industrial Select Sector SPDR ETF (XLI) N/A N/A 11.7

Source: YCharts

  • Virgin Galactic Holdings Inc.: Virgin Galactic is a holding company that, through subsidiaries, develops missiles, rockets, and other space vehicles. The company serves customers throughout the U.S. Virgin Galactic's test flight on December 12 failed to reach space as planned due to a computer malfunction. As a result of the malfunction, the ignition sequence did not complete and the rocket motor did not fire. All pilots and the mothership and spaceship landed safely at Spaceport America in New Mexico.
  • Generac Holdings Inc.: Generac Holdings makes automatic, portable, and stationary standby generators for use in commercial, industrial, residential, and telecommunications applications.
  • Trex Co. Inc.: Trex Co. is a manufacturer of non-wood decking products. The company offers outdoor lighting, decking, railing, and accessory hardware products to customers around the world. Net income increased by 1.7% YOY and net sales climbed by 19.0% YOY for Q3 2020. Net income was hurt by a $6.5 million charge related to the company's Trex Residential warranty reserve related to "flaking" on some of its product produced before 2007. The company said that demand for its products continued to outpace supply during the quarter and that sales in calendar Q4 could rise by $210 million to $220 million, or by about 30% at the midpoint.

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