3 Industrials Stocks That Concern Us

Whether you see them or not, industrials businesses play a crucial part in our daily activities. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 38.5% for the sector - higher than the S&P 500’s 25.9% return.

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

Veralto (VLTO)

Market Cap: $25.29 billion

Spun off from Danaher in 2023, Veralto (NYSE:VLTO) provides water analytics and treatment solutions.

Why Is VLTO Risky?

1. 4.1% annual revenue growth over the last two years was slower than its industrials peers
2. Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 5.5%
3. Incremental sales over the last four years were less profitable as its earnings per share were flat while its revenue grew

Veralto is trading at $102.35 per share, or 25.7x forward P/E. Read our free research report to see why you should think twice about including VLTO in your portfolio.

Otis (OTIS)

Market Cap: $35.59 billion

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

Why Does OTIS Give Us Pause?

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 4.2%
3. Free cash flow margin dropped by 2 percentage points over the last five years, implying the company became more capital intensive as competition picked up

Otis’s stock price of $91.38 implies a valuation ratio of 21.8x forward P/E. Dive into our free research report to see why there are better opportunities than OTIS.

RXO (RXO)

Market Cap: $2.93 billion

With access to millions of trucks, RXO (NYSE:RXO) offers full-truckload, less-than-truckload, and last-mile deliveries.

Why Are We Cautious About RXO?

1. Costs have risen faster than its revenue over the last five years, causing its operating margin to decline by 5.4 percentage points
2. Earnings per share fell by 61.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
3. Low returns on capital reflect management’s struggle to allocate funds effectively

At $17.37 per share, RXO trades at 80.9x forward P/E. If you’re considering RXO for your portfolio, see our FREE research report to learn more.

Stocks We Like More

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.