When Donald Trump won the U.S. presidential election, his pledges to help exporters, ease regulation, and invest heavily in the nation’s crumbling infrastructure and defense capabilities were expected to bring boring industrial stocks back into fashion. 

Confidence certainly appears to be returning to the cyclical sector. The purchasing managers' index, a key indicator of the economic health of manufacturing, encouragingly rose to 57.7 at the end of February. 

However, these promising signs have yet to translate into any noticeable gains for the sector as a whole. After an initial surge following Trump's election win, sentiment has since plateaued. The industrials in Standard & Poor’s 500 index appreciated by 3.32 percent versus the 4.56 percent posted by the rest of the market in the first quarter of 2017, suggesting that investors currently believe that favorable prospects are already factored into share prices.

That said, talking about such a diverse sector as a collective unit is misleading. These stocks, which supply specialist equipment to industries ranging from energy and mines to planes, trains and automobiles, each have a very different story to tell.  A look at the tables below, indicating the biggest winners and laggards in the first quarter, show that fortunes have been largely mixed so far this year.

The Winners

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CSX Corporation

 

+29.7%
Allegion +17.0%
Equifax +15.1%
Stanley Black & Decker +14.8%
United Rentals +14.4%

The most noteworthy winner in the first quarter was CSX Corporation (CSX). The largest railroad operator in the eastern U.S was most recently buoyed by news that industry legend Hunter Harrison is to become its new chief executive. Harrison, who did a credible job in his previous role at Canadian Pacific (CP), is a known advocate of efficiently moving trains quickly to their destination, rather than waiting for them to fill. 

Greater demand to transport goods across the country has proved to be the icing on the cake. President Trump's eagerness to increase infrastructure spend and revitalize the nation's fossil fuel industry should spur a return to growth for CSX, a major transporter of coal and other industrial materials. (See also: Is CSX Too Expensive After Recent Gains?)

Other major winners during the period were Allegion (ALLE), a specialist provider of safety and security products, and consumer credit reporting agency Equifax (EFX). Three-quarters of Allegion's business comes from the U.S., where revitalized economic conditions have triggered a surge in consumer spending. Allegion also generates a large chunk of revenues from reinvigorated new construction markets, which have been lifted by rising appetite from higher paid millennials.  Meanwhile, solid top-line growth and stringent cost management recently helped Equifax to beat analyst earnings expectations once again in the fourth quarter of 2016.

The Losers

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Acuity Brands

 

-12.9%
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TransDigm

-12.1%
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Dun & Bradstreet Corporation

-11.4%
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Delta Air Lines

-7.1%
United Parcel Service -6.8%

The biggest laggard during the first quarter was Acuity Brands (AYI). The industrial LED lighting specialist disappointed with weak sales and slimmer profit margins, leading some analysts to question if the stock is overvalued. 

TransDigm (TDG) similarly struggled in the period. The manufacturer of commercial and military aerospace components was rocked by several unfortunate developments in 2017. Chief among them was the publishing of a negative report by Citron Research in January. In it, the activist short seller launched a number of damaging allegations, including claims that TransDigm's business model is designed to rip off its customers and the U.S. taxpayer. That strategy, Citron Research argues, is unsustainable.

To make matters worse, the Pentagon's Defense Logistics Agency is now investigating whether TransDigm's subsidiaries have been violating rules when bidding on government contracts. (See also: U.S. Congressman asks DoD to investigate TransDigm's practices.)

Business service company Dun & Bradstreet (D&B) also had to deal with its fair share of problems. After missing earnings per share estimates for the first time in 2016, word got out that the company's database had been breached. According to reports, 33.6 million records containing sensitive client information fell into the hands of hackers.

 

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