3 Industrials Stocks We Keep Off Our Radar
Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But their prominence also brings high exposure to the ups and downs of economic cycles. Luckily, their overall demand was steady over the past six months as the industry’s 8.3% return has closely followed the S&P 500.
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. Taking that into account, here are three industrials stocks best left ignored.
WillScot Mobile Mini (WSC)
Market Cap: $4.96 billion
Originally focusing on mobile offices for construction sites, WillScot (NASDAQ:WSC) provides ready-to-use temporary spaces, largely for longer-term lease.
Why Do We Steer Clear of WSC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 2.5% annually over the last two years
- Earnings per share have dipped by 1.8% annually over the past five years, which is concerning because stock prices follow EPS over the long term
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
WillScot Mobile Mini is trading at $25.79 per share, or 22.1x forward P/E. To fully understand why you should be careful with WSC, check out our full research report (it’s free).
Expeditors (EXPD)
Market Cap: $21.77 billion
Expeditors (NYSE:EXPD) offers air and ocean freight as well as brokerage services.
Why Does EXPD Fall Short?
- Flat sales over the last five years suggest it must find different ways to grow during this cycle
- Gross margin of 13.5% reflects its high production costs
- Waning returns on capital imply its previous profit engines are losing steam
Expeditors’s stock price of $170.61 implies a valuation ratio of 24.6x forward P/E. If you’re considering EXPD for your portfolio, see our FREE research report to learn more.
MDU Resources (MDU)
Market Cap: $4.37 billion
Founded to provide electricity to towns in Minnesota, MDU Resources (NYSE:MDU) provides products and services in the utilities and construction materials industries.
Why Should You Sell MDU?
- Annual sales declines of 20.1% for the past five years show its products and services struggled to connect with the market during this cycle
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 16.8 percentage points
At $20.79 per share, MDU Resources trades at 19.9x forward P/E. Read our free research report to see why you should think twice about including MDU in your portfolio.
Stocks We Like More
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