3 Industrials Stocks We're Skeptical Of

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, the tide is turning in their favor as the industry’s 7.5% return over the past six months has topped the S&P 500 by 2.1 percentage points.

Nevertheless, investors must be mindful as the cycle can unexpectedly turn. When this inevitably happens, only the elite companies will survive and ultimately thrive. On that note, here are three industrials stocks we’re passing on.

Concrete Pumping (BBCP)

Market Cap: $356.9 million

Going public via SPAC in 2018, Concrete Pumping (NASDAQ:BBCP) is a provider of concrete pumping and waste management services in the United States and the United Kingdom.

Why Should You Sell BBCP?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Projected sales decline of 3.1% over the next 12 months indicates demand will continue deteriorating
3. Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term

At $6.99 per share, Concrete Pumping trades at 16.4x forward P/E. To fully understand why you should be careful with BBCP, check out our full research report (it’s free).

Otis (OTIS)

Market Cap: $34.36 billion

Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.

Why Are We Hesitant About OTIS?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.1%
3. 1.9 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

Otis’s stock price of $87.97 implies a valuation ratio of 20.2x forward P/E. Read our free research report to see why you should think twice about including OTIS in your portfolio.

C.H. Robinson Worldwide (CHRW)

Market Cap: $14.35 billion

Engaging in contracts with tens of thousands of transportation companies, C.H. Robinson (NASDAQ:CHRW) offers freight transportation and logistics services.

Why Do We Steer Clear of CHRW?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 8% annually over the last two years
2. Gross margin of 7.3% reflects its high production costs
3. Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability

C.H. Robinson Worldwide is trading at $121.52 per share, or 24.6x forward P/E. If you’re considering CHRW for your portfolio, see our FREE research report to learn more.

Stocks We Like More

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