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 12.1% over the past six months. This performance was worse than the S&P 500’s 5.2% decline.
Investors should tread carefully as timing cyclical companies is a challenging task, and any misstep can have you catching a falling knife. With that said, here are three industrials stocks we’re passing on.
ArcBest (ARCB)
Market Cap: $1.35 billion
Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ:ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.
Why Do We Pass on ARCB?
- Flat unit sales over the past two years imply it may need to invest in improvements to get back on track
- Earnings per share have dipped by 32.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Waning returns on capital imply its previous profit engines are losing steam
At $58.50 per share, ArcBest trades at 7.7x forward price-to-earnings. Check out our free in-depth research report to learn more about why ARCB doesn’t pass our bar.
Vishay Precision (VPG)
Market Cap: $290.3 million
Emerging from Vishay Intertechnology in 2010, Vishay Precision (NYSE:VPG) operates as a global provider of precision measurement and sensing technologies.
Why Are We Out on VPG?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 8.1% annually over the last two years
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 3.9 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 13.4% annually while its revenue grew
Vishay Precision is trading at $22.15 per share, or 20.4x forward price-to-earnings. Read our free research report to see why you should think twice about including VPG in your portfolio.
AGCO (AGCO)
Market Cap: $6.25 billion
With a history that features both organic growth and acquisitions, AGCO (NYSE:AGCO) designs, manufactures, and sells agricultural machinery and related technology.
Why Do We Steer Clear of AGCO?
- 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
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 7.6 percentage points
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 40.8% annually while its revenue grew
AGCO’s stock price of $84.36 implies a valuation ratio of 19.9x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than AGCO.
Stocks We Like 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 Axon (+711% five-year return). Find your next big winner with StockStory today for free.