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 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 significantly underperformed the broader market, providing investors with a total return of 7.5% compared to the Russell 1000's total return of 18.9% over the past 12 months. These market performance numbers are as of October 20 and the statistics in the tables below are as of October 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|
|GrafTech International Ltd. (EAF)||6.96||1.9||3.4|
|Air Lease Corp. (AL)||31.07||3.5||6.0|
|Huntington Ingalls Industries Inc. (HII)||147.70||6.0||11.5|
- 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. On October 7, Air Lease company said it ended Q3 2020 with $7 billion in liquidity as it delivered 7 new aircraft from its order book and invested approximately $600 million on aircraft. The company owns 308 aircraft and has 377 on order.
- Huntington Ingalls Industries Inc.: Huntington Ingalls is a shipbuilding company that designs, builds, and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The company also provides fleet support, and oil and gas services.
Fastest Growing Industrial Stocks
These are the industrial stocks with the highest YOY earnings per share (EPS) growth for the most recent quarter. Rising earnings show that a company’s business is growing and is generating more money that it can reinvest or return to shareholders.
|Fastest Growing Industrial Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)|
|Energizer Holdings Inc. (ENR)||41.12||2.8||850.0|
|IHS Markit Ltd. (INFO)||81.42||32.4||310.0|
|Quanta Services Inc. (PWR)||63.04||8.8||173.7|
- Energizer Holdings Inc.: Energizer Holdings makes dry cell batteries and flashlights. Through subsidiaries, the company offers alkaline, rechargeable, miniature, and carbon zinc batteries, as well as lighting products, razors, and flashlights.
- IHS Markit Ltd.: U.K.-based IHS Markit is an information, analytics, and solutions company. IHS Markit works with customers in business, finance, and government to improve operational efficiency. In the company's Q3 2020 results, ended August 31, revenue declined by 3.5% YOY as net income increased by about 306% YOY. The sizable net income gain was due to comparison to a major expense a year earlier that hurt the company's Q3 2019 earnings. At that time, IHS Market incurred a one-time tax expense of roughly $200 million related to U.S. Treasury regulations.
- Quanta Services Inc.: Quanta Services provides specialty contracting services, including infrastructure solutions to the electric power, oil and gas, and communication industries.
Industrial Stocks with the Most Momentum
These are the industrial stocks that had the highest total return over the last 12 months.
|Industrial Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Generac Holdings Inc. (GNRC)||211.87||13.3||142.6|
|Virgin Galactic Holdings Inc. (SPCE)||23.03||4.8||121.9|
|Axon Enterprise Inc. (AAXN)||106.07||6.7||109.8|
|Industrial Select Sector SPDR ETF (XLI)||N/A||N/A||7.5|
- Generac Holdings Inc.: Generac Holdings makes automatic, portable, and stationary standby generators for use in commercial, industrial, residential, and telecommunications applications. On October 5, the company announced that it had signed an agreement to acquire Enbala Power Networks, Inc., a distributed energy resources technology company. Generac said the deal solidifies market leadership in Smart Grid 2.0 technologies. Financial terms of the deal were undisclosed.
- Virgin Galactic Holdings Inc.: Virgin Galactic is a holding company which, through subsidiaries, develops missiles, rockets, and other space vehicles. The company serves customers throughout the U.S.
- Axon Enterprise Inc.: Axon Enterprise is a security system company that provides military, law enforcement, and self defense technologies and services to customers worldwide. On September 30, the company announced that it had signed a $13 million contract to outfit 3,800 U.S. Customs & Border Protection Agency agents with Axon-branded body cameras. These cameras will utilize Axon Evidence, a cloud-based digital evidence management solution, to enhance transparency and accountability.
YCharts. "YCharts." Accessed Oct. 21, 2020.
Air Lease Corp. "Air Lease Corporation Activity Update for the Third Quarter of 2020." Accessed Oct. 21, 2020.
IHS Markit Ltd. "IHS Markit Reports Third Quarter 2020 Results." Accessed Oct. 21, 2020.
Generac Holdings Inc. "Generac Accelerates Its Energy Technology Capabilities With Acquisition of Enbala Power Networks." Accessed Oct. 21, 2020.
Axon Enterprise Inc. "Axon Partners with U.S. Customs & Border Protection to Support Agents with Body Cameras & Digital Evidence Management System." Accessed Oct. 21, 2020.