|
|
|
|
|||||
|
|
|
Industry Description
The Zacks Industrial Services industry comprises companies that provide industrial equipment products and MRO (maintenance, repair and operations) services. It includes routine maintenance, emergency maintenance and spare part inventory control, which keep a facility and its equipment in good operating condition. Industry participants serve a wide array of customers, ranging from commercial, government and healthcare to manufacturing. The industry's products (power tools, hand tools, cutting fluids, lubricants, personal protective equipment and consumables) are utilized in production and plant maintenance but are not directly related to customers’ core products or services. These companies reduce MRO supply-chain costs and improve customers' plant floor productivity by offering inventory management and process and procurement solutions.
Trends Shaping the Future of the Industrial Services Industry
Manufacturing Activity Contracts, Highlighting Industry Struggles: The manufacturing sector contributes around 70% to the industry's revenues. The Institute for Supply Management’s manufacturing index had been in contraction for 26 consecutive months until December 2024. The index expanded in January and February with readings of 50.9% and 50.3%, respectively. But this recovery was short-lived, with the index slipping into contraction again in March. The last reading of 48.2% in November marked nine months of contraction. The New Orders Index remained in contraction territory for three straight months in November. It had last shown expansion in August with a 51.4% reading, after six consecutive months of contraction. The index has not delivered consistent growth since the end of its 24-month expansion streak in May 2022. Customer spending remains subdued due to the impact of tariffs.
High Costs and Impact of Tariffs are Concerning: The industry has been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. Industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency and the diversification of the supplier base to mitigate some of these headwinds. The imposition of tariffs and retaliatory tariffs will also heighten costs for the industry.
E-commerce to be a Growth Driver:MRO demand is significantly impacted by the evolution of e-commerce. Customer demand for highly tailored solutions, with real-time access to information and rapid delivery of products, is rising. Customers want to execute their business activities in the most efficient way possible, which often means online. E-commerce is expected to surge due to rising Internet penetration, widespread smartphone adoption and the convenience of online shopping. Additionally, advancements in digital payments, logistics and personalization are making the online shopping experience faster, safer and more customer-centric. To capitalize on this trend, industrial service companies are heavily investing in improving their digital capabilities and increasing their e-commerce share.
Zacks Industry Rank Indicates Dull Prospects
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bearish prospects in the near term. The Zacks Industrial Services Industry, a 16-stock group within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #218, which places it in the bottom 10% of 243 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few Industrial services stocks that investors can add to their portfolio, it is worth taking a look at the industry’s stock-market performance and its valuation picture.
Industry Vs S&P 500 & Sector
The Industrial Services industry has underperformed its sector and the Zacks S&P 500 composite over the past year.
Over this period, the industry has grown 0.1% compared with the sector’s gain of 7.1%. The Zacks S&P 500 composite has moved up 19.3%.
Industry's Current Valuation
On the basis of the trailing 12-month EV/EBITDA ratio, a commonly used multiple for valuing Industrial Services companies, we see that the industry is currently trading at 35.72X compared with the S&P 500’s 18.83X and the Industrial Products sector’s trailing 12-month EV/EBITDA of 25.54X. This is shown in the charts below.
Over the last five years, the industry traded as high as 40.96X and as low as 24.47X, the median being 34.17X.
Four Industrial Services Stocks to Keep an Eye on
Andritz: The company’s order intake continued its positive trend, increasing 14.5% year over year in the third quarter of 2025. This was driven by strong demand in power generation, reflected in the Pulp & Paper, Hydropower, and Environment and Energy business areas. Order backlog at the third quarter end rose 10.8% year over year and reached the second-highest level in the company’s history. Supported by this and growth in demand for service and green technologies, revenues are projected to be between €8 billion and €8.3 billion ($9.42-$9.8 billion). Aided by its ongoing measures to increase competitiveness and improvements in revenue mix driven by growing service business, the comparable EBITA margin is expected at 8.6-9.0%. The company has been active on the acquisition front in 2025, boosting offerings. ANDRITZ recently acquired Allen-Sherman-Hoff, further strengthening its offerings of boiler solutions and aftermarket services, emission reduction technologies as well as recycling technologies, to name a few.
Headquartered in Graz, Austria, Andritz offers a broad portfolio of innovative plants, equipment, systems, services and digital solutions for different industries and end markets. The Zacks Consensus Estimate for ADRZY’s fiscal 2025 earnings has moved up 3% over the past 90 days. The estimate for 2025 indicates year-over-year growth of 10%. The estimate for 2026 has also moved up in the past 90 days and indicates 10% growth. ADRZY currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kion Group: The company has seen encouraging customer demand across the first three quarters of the year. Both the industrial trucks and warehouse automation markets appear to have moved past their cyclical lows and are now on a recovery trajectory despite ongoing geopolitical headwinds. Order intake continues to rise on a year-over-year basis across both operating segments. In February 2025, KION announced an efficiency program aimed at delivering sustainable annual cost savings of approximately €140–€160 million from 2026 onward. Additionally, the company has been steadily reducing its debt levels, which is commendable. The company's shares have gained 42.8% in the past six months.
Headquartered in Frankfurt am Main, Germany, Kion Group provides industrial trucks and supply-chain solutions in Western and Eastern Europe, the Middle East, Africa, North America, Central and South America, China, and the rest of the Asia Pacific. The Zacks Consensus Estimate for Kion Group’s fiscal 2025 earnings has moved up 10% over the past 90 days. The estimate indicates year-over-year growth of 16.2%. The estimate for 2026 has also moved up in the past 90 days and currently suggests year-over-year growth of 40.7%. KIGRY currently carries a Zacks Rank #3 (Hold).
SiteOne: The company is the largest and only national full-product line wholesale distributor of landscape supplies. SITE is three times larger than its closest competitor. The company remains focused on increasing its share from the current 18% of the $25 billion wholesale landscaping products distribution market. SiteOne has been enhancing its business through acquisitions to increase its customer base, broaden product lines and expand its geographic reach. SITE has made eight acquisitions so far in 2025. The company will also gain from its focus on cost reduction, driving operational excellence, product category management, enhancing supply-chain efficiency and strengthening pricing. SITE has been investing more in sophisticated information technology systems and data analytics. SITE shares have gained 5.2% in the past six months.
The Zacks Consensus Estimate for Roswell, GA-based SiteOne’s earnings for 2025 indicates year-over-year growth of 24%. The estimate has moved up 0.6% in the past 60 days. The estimate for 2026 has also moved up in the past 90 days and suggests a year-over-year growth of 26.4%. SITE currently carries a Zacks Rank of 3.
MSC Industrial: The company returned to daily sales growth in the fiscal fourth quarter 2025 in both the Core Customer and the total company. MSM also returned to growth in earnings per share, with a 5% increase reported in the quarter, reflecting progress on its Mission Critical initiative. The company started fiscal 2026 with a clear focus on maintaining momentum in high-touch solutions, reenergizing its core customer and optimizing costs, expecting to deliver profitable growth. Looking ahead, the company remains committed to its long-term goals of delivering growth at least 400 basis points above the IP Index and expanding operating margins to the mid-teens. To support these objectives, MSM continues to pursue strategic acquisitions aimed at strengthening its offerings and expanding into new and existing markets. MSC Industrial’s shares have gained 2.9% in the past six months.
The Zacks Consensus Estimate for Melville, NY-based MSM’s 2025 earnings has moved up 4% in the past 90 days. It currently indicates year-over-year growth of 13.8%. The estimate for 2026 has also moved up in the past 90 days and suggests year-over-year growth of 12.3%. The company has a trailing four-quarter earnings surprise of 8.6% on average. It currently carries a Zacks Rank of 3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
This article originally published on Zacks Investment Research (zacks.com).
| 5 hours | |
| Dec-22 | |
| Dec-18 | |
| Dec-18 | |
| Dec-17 | |
| Dec-16 | |
| Dec-15 | |
| Dec-11 | |
| Dec-10 | |
| Dec-10 | |
| Dec-03 | |
| Dec-03 | |
| Dec-02 | |
| Nov-25 | |
| Nov-17 |
Join thousands of traders who make more informed decisions with our premium features. Real-time quotes, advanced visualizations, backtesting, and much more.
Learn more about FINVIZ*Elite