Whether you see them or not, industrials businesses play a crucial part in our daily activities. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 18.9% gain over the past six months, beating the S&P 500 by 9.7 percentage points.
Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. With that said, here is one industrials stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Industrials Stocks to Sell:
Fortune Brands (FBIN)
Market Cap: $5.12 billion
Targeting a wide customer base of residential and commercial customers, Fortune Brands (NYSE: FBIN) makes plumbing, security, and outdoor living products.
Why Do We Think FBIN Will Underperform?
- 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
- Projected sales decline of 1.2% over the next 12 months indicates demand will continue deteriorating
- Earnings per share have contracted by 6% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
Fortune Brands’s stock price of $43.01 implies a valuation ratio of 13.2x forward P/E. To fully understand why you should be careful with FBIN, check out our full research report (it’s free).
Packaging Corporation of America (PKG)
Market Cap: $19.87 billion
Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.
Why Are We Hesitant About PKG?
- Underwhelming unit sales over the past two years show it’s struggled to increase its sales volumes and had to rely on price increases
- Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 5.2 percentage points
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
Packaging Corporation of America is trading at $230.02 per share, or 21.4x forward P/E. If you’re considering PKG for your portfolio, see our FREE research report to learn more.
One Industrials Stock to Buy:
DXP (DXPE)
Market Cap: $2.60 billion
Founded during the emergence of Big Oil in Texas, DXP (NASDAQ: DXPE) provides pumps, valves, and other industrial components.
Why Are We Backing DXPE?
- Market share has increased this cycle as its 16.8% annual revenue growth over the last five years was exceptional
- Operating margin improvement of 4.1 percentage points over the last five years demonstrates its ability to scale efficiently
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
At $168.42 per share, DXP trades at 25.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren’t just high-quality businesses. Something is happening with them right now. Elite fundamentals meet near-term momentum — both boxes checked at the same time.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
