4 Industrial Manufacturing Stocks to Buy Despite Industry Headwinds

The Zacks Manufacturing – General Industrial industry has been grappling with persistent weakness in the manufacturing sector and supply-chain disruptions. Also, rising input costs and a tough labor market add concerns for the industry.

However, industry participants’ focus on cost-control measures and investments in product development have been allowing them to stay competitive in the market. Parker-Hannifin Corp. PH, Flowserve Corp. FLS, Watts Water Technologies, Inc. WTS and Helios Technologies, Inc. HLIO are a few industry participants that can capitalize on the prevalent opportunities.

About the Industry

The Zacks Manufacturing – General Industrial industry comprises companies that produce a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. Industrial manufacturing companies also reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing (OEM) and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation and utilities industries.

Major Trends Shaping the Future of the Manufacturing General Industrial Industry

Softness in the Manufacturing Sector: Persistent weakness in the manufacturing sector has been denting the demand in the industry. After witnessing expansion in economic activities for the second consecutive month in February 2025, the manufacturing sector contracted for the ninth successive month in November. Per the Institute for Supply Management’s (ISM) report, the Manufacturing Purchasing Manager’s Index touched 48.2% in November. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index contracted, registering 47.4% in the same month.

Rising Costs Hurt Margins: Industry participants have been encountering input cost inflation and other expenses, which have been denting profitability. Also, supply-chain issues have increased warehouse, packaging and other logistics expenses. The rise in expenses, along with a tough labor market, poses a threat to margins. That said, companies have been focused on cost management initiatives to mitigate cost-related challenges. These include streamlining operational structures, optimizing supply networks and implementing effective pricing policies.

Investments in Product Development & Innovation: Constant focus on innovation by industry players, product upgrades and the development of new products to stay competitive in the market will likely drive growth. While this augurs well for the industry’s long-term growth, hefty investments in research and development often leave companies with highly leveraged balance sheets.

Zacks Industry Rank Indicates Bleak Prospects

The Zacks Manufacturing – General Industrial industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #173. This rank places it in the bottom 28% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates weak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of negative earnings prospects for the constituent companies in aggregate. Looking at the aggregate earnings estimate revision, it appears that analysts are keeping less faith in this group's earnings growth potential. The industry’s earnings estimates for 2025 have moved down 2% over the past year.

Despite bleak near-term prospects, we will present a few stocks that you may want to add to your portfolios. However, it is worth looking at the industry’s shareholder returns and current valuation first.

Industry Outperforms Sector but Lags S&P

The Zacks Manufacturing – General Industrial industry has outperformed the broader sector but lagged the Zacks S&P 500 composite index over the past year.

Over this period, the industry has inched up 0.1% against the sector’s decline of 1.4% and compared with the S&P 500 Index’s growth of 14.5%.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 21.73X compared with the S&P 500’s 23.46X. However, it is above the sector’s P/E ratio of 20.60X.

In the past five years, the industry has traded as high as 26.70X and as low as 16.06X, with the median being 21.46X, as the chart below shows.

Price-to-Earnings Ratio vs SP500

Price-to-Earnings Ratio vs Sector

4 Manufacturing-General Industrial Stocks Leading the Pack

Helios Technologies: This Sarasota, FL-based company supplies engineered motion control and electronic controls technology solutions in the Americas, the Middle East, Africa, Europe and the Asia Pacific. Increase in demand for products across the recreational, mobile and industrial end markets is supporting HLIO’s performance. Also, solid momentum in the agriculture end market bodes well for the company.

The consensus estimate for this Zacks Rank #1 (Strong Buy) company’s 2025 earnings has been revised 2.5% upward over the past 60 days. The company outpaced estimates in each of the trailing four quarters, the average earnings surprise being 16.8%. Although shares of Helios lost 1.1% in the past year, they surged 59.6% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: HLIO

Flowserve: Based in Irving, TX, the company is engaged in manufacturing precision-engineered flow control equipment, such as pumps, valves and seals, for critical service applications that require high reliability. Flowserve is benefiting from strength in the aftermarket business, driven by a strong demand for products and services in North America, the Middle East and Africa. The increase in bookings across the energy and general industries end markets is also supporting the company’s performance.

This Zacks Rank #2 (Buy) stock has gained 18% in the past year. The company outpaced estimates in each of the trailing four quarters, the average earnings surprise being 10.5%. The Zacks Consensus Estimate for its 2025 earnings has been revised 3% upward over the past 60 days.

Price and Consensus: FLS

Parker-Hannifin: Based in Cleveland, OH, Parker-Hannifin provides precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The company stands to gain from steady demand in the commercial and military end markets across both OEM and aftermarket channels within the Aerospace segment. Also, strong demand for its products and aftermarket support services in the general aviation market, driven by growth in air transport activities, bodes well for PH.

This Zacks Rank #2 company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average earnings surprise being 6.2%. The Zacks Consensus Estimate for fiscal 2026 (ending June 2026) earnings has been revised 4.2% upward over the past 60 days. Shares of PH have gained 25.8% in the past year.

Price and Consensus: PH

Watts Water: Headquartered in North Andover, MA, Watts Water designs, manufactures and sells various water safety and flow control products to promote safety, energy efficiency and water conservation for commercial and residential buildings. It is well-positioned to gain from solid demand for its intelligent water management solution – Nexa – which combines advanced sensing hardware, smart equipment and software with the company’s expertise in plumbing and hydronic systems. Also, WTS’ focus on augmenting growth through new product development and geographic expansion bodes well.

Shares of this Zacks Rank #2 company have gained 20.7% in the past year. WTS outpaced estimates in each of the trailing four quarters, the average earnings surprise being 10.9%. The Zacks Consensus Estimate for 2025 earnings has been revised 4.2% upward over the past 60 days.

Price and Consensus: WTS

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Parker-Hannifin Corporation (PH): Free Stock Analysis Report
 
Flowserve Corporation (FLS): Free Stock Analysis Report
 
Watts Water Technologies, Inc. (WTS): Free Stock Analysis Report
 
Helios Technologies, Inc (HLIO): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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