The industrial sector includes companies that produce machinery, equipment, and supplies that are used in construction and manufacturing, as well as providing related services. These companies are closely tied to the economy, and their business volume often shrinks during recessions, though each industrial subsector often performs differently. Well-known companies include Caterpillar Inc. (CAT), Honeywell International Inc. (HON), and Boeing Co. (BA). The industrial sector also includes companies that provide air transportation services such as American Airlines Group Inc. (AAL).

Industrial stocks, as represented by the Industrial Select Sector SPDR ETF (XLI), have dramatically underperformed the broader market, posting a total return of -6.6% compared to the S&P 500's total return of 12.2% over the past 12 months, a performance gap of nearly 19 percentage points. These market performance numbers and the statistics in the tables below are as of July 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
Johnson Controls International PLC (JCI) 36.80 27.4 6.1
Alaska Air Group Inc. (ALK) 35.89 4.4 8.4
United Airlines Holdings Inc. (UAL) 32.33 9.4 8.8

Source: YCharts

  • Johnson Controls International PLC: Johnson Controls is an Ireland-based multinational conglomerate that provides building products and technology solutions, including air systems, building management, HVAC controls, security, and fire safety solutions.
  • Alaska Air Group Inc.: Alaska Air operates and manages more than 1,200 daily flights to 115 destinations in the United States, Mexico, Canada, and Costa Rica. The company on May 5 reported a net loss of $232 million for Q1 2020 ended March 31, 2020. Alaska Air said that, as of May, passenger demand remained more than 90% below normal levels due to the COVID-19 health crisis.
  • United Airlines Holdings Inc.: United Airlines provides air transportation services worldwide for passengers and cargo. The company said in early July that it had added nearly 25,000 more flights for August 2020 than the previous month. However, United Airlines said the number of flights scheduled for August was only 40% of its scheduled flights in August 2019.

Fastest Growing Industrial Stocks

These are the industrial stocks with the highest year-over-year (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 (%)
Masco Corp. (MAS) 53.42 14.1 392.3
General Electric Co. (GE) 6.87 60.1 75.0
Dover Corp. (DOV) 102.54 14.8 68.1

Source: YCharts

  • Masco Corp.: Masco manufactures home improvement and building products, including faucets, kitchen and bath cabinets, architectural coatings, and hardware. The company sells its products through mass merchandisers, home centers, hardware stores, and other wholesale and retail outlets. Masco on April 29 reported net income growth of 323.6% on net sales growth of 4.5% for Q1 2020 ended March 31, 2020.
  • General Electric Co.: General Electric sells a diverse range of technology and financial products and services. It offers aircraft engines, power generation, water processing, household appliances, industrial products, and business and consumer financing. GE announced in mid-June that David Joyce, vice chair of GE and chief executive officer (CEO) of GE Aviation, would retire after 40 years with the company. John Slattery, CEO of Commercial Aviation at Brazilian aerospace conglomerate Embraer S.A., will succeed Joyce as president and CEO of GE Aviation.
  • Dover Corp.: Dover manufactures industrial products and equipment. The company's products include printing, identification, marking and coding systems, waste handling, refrigeration systems, display cases, industrial pumps, fuel dispensers, and more.

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 (%)
Old Dominion Freight Lines Inc. (ODFL) 187.59 22.1 82.1
Fastenal Co. (FAST) 44.84 25.7 51.6
Masco Corp. (MAS) 53.42 14.1 42.9
S&P 500 N/A N/A 12.2
Industrial Select Sector SPDR ETF (XLI) N/A N/A -6.6

Source: YCharts

  • Old Dominion Freight Lines Inc.: Old Dominion Freight Lines is a motor carrier that transports shipments of a variety of goods and commodities. The company serves regional markets across the U.S.
  • Fastenal Co.: Fastenal provides industrial and construction supplies to customers worldwide via both wholesale and retail channels. The company said on July 14 that a sharp increase in demand for personal protective equipment (PPE) products offset sales declines for its traditional businesses due to the coronavirus pandemic in its latest quarter. The company reported net earnings growth of 16.7% on net sales growth of 10.3% for Q2 2020 ended June 30, 2020. 
  • Masco Corp.: See above for company description.