4 Diversified Operations Stocks to Watch Despite Industry Headwinds

The Zacks Diversified Operations industry has been grappling with persistent weakness in the manufacturing sector. Industry participants have also been facing concerns due to the ongoing impact of supply chain issues, particularly regarding the availability of electrical and electronic components.

However, the industry is benefiting from the strength across the aerospace, defense and oil & gas industries. Growth in the commercial aviation sector, higher infrastructure development, product innovation efforts and technological advancements in business operations are acting as other tailwinds. Honeywell International Inc. HON, 3M Company MMM, Grupo Cibest S.A. CIB and ITT Inc. ITT are likely to capitalize on the opportunities.

About the Industry

The Zacks Diversified Operations industry includes companies that operate in various end markets, including oil & gas, industrial, electronics, power, aviation, technology, finance, healthcare, chemical, non-residential construction and transportation. Such companies manufacture and provide equipment and solutions, including bioprocessing products, molecular testing-related products, gas and steam turbines, generators, commercial jet engines and engineered fluid-process equipment. Industry players also provide related services to a large customer base. A few companies offer services in the agriculture, marine and telecommunications markets and are engaged in providing environmental and safety solutions. The diversified market operators have a vast global presence, with exposure in the United States, Japan, India, China, Canada and other countries.

Major Trends Shaping the Future of the Diversified Operations 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 tenth successive month in December 2025. Per the Institute for Supply Management’s (ISM) report, the Manufacturing PMI (Purchasing Manager’s Index) touched 47.9% in December. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index contracted, registering 47.7% in the same month.

Supply-Chain Disruptions: Supply-chain disruptions, especially related to the availability of electrical and electronic components, have been concerning for the industry participants of late. This is evident from the latest ISM report’s Supplier Deliveries Index, which reflected slower deliveries in December 2025. Supply-chain issues, if not controlled, might hinder the growth of diversified operation companies going forward.

Strength in the Aerospace and Defense Markets: The prospects of multi-sector companies are closely linked to the operating conditions of end markets. Some factors that are currently favoring the industry are robust demand from the aerospace and defense sectors, higher exploration activities in the oil and gas industry and infrastructure development. With commercial and military aircraft programs expected to continue benefiting from strength in air travel and steady government support, industry players with exposure in these markets are poised to maintain strong demand momentum. Also, solid  demand for several products and equipment in the consumer & professional, and home & building product markets bodes well for some industry participants.

Investments in Innovation & Technological Advancements: The industry participants’ constant focus on innovation, product upgrades and the development of new products to stay competitive in the market should drive growth. With the gradual development of business models and cutting-edge technologies, several industry players have been banking on digitizing their business operations for a while now. Digitization enables industry participants to boost their competitiveness through enhanced operational productivity, product quality and better cost management.

Zacks Industry Rank Suggests Bleak Prospects

The Zacks Diversified Operations industry, housed within the broader Zacks Conglomerates sector, currently carries a Zacks Industry Rank #179. This rank places it in the bottom 27% of 244 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bleak prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of weak 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 the current year have moved down 2.1% in the past year.

We will present a few stocks that you may want to retain in your portfolio. It is worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Lags the S&P 500

In the past year, the Zacks Diversified Operations industry has underperformed the Zacks S&P 500 composite. The industry has risen 1% compared with the S&P 500 Index’s 18.9% growth.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward P/E (F12M), which is a commonly used multiple for valuing diversified operations stocks, the industry is currently trading at 14.22X compared with the S&P 500’s 23.25X.

Over the past five years, the industry has traded as high as 22.76X and as low as 12.37X, with a median of 15.08X, as the chart below shows:

Price-to-Earnings Ratio Versus S&P 500

4 Diversified Operations Stocks to Keep a Close Eye On

Grupo Cibest: Based in Colombia, the company is engaged in providing money market accounts, checking and savings accounts, fixed-term deposits, time deposits and investment products. CIB is benefiting from the positive trend in the mortgage loan portfolio, driven by favorable commercial strategies in Colombia. Also, an increase in checking accounts, driven by the robust performance of the corporate segment, bodes well for it.

The Zacks Consensus Estimate for this Zacks Rank #1 (Strong Buy) company’s 2025 earnings has increased 12.8% in the past 60 days. Its shares have surged 107.3% in the past year. It beat estimates in each of the last four reported quarters, delivering an average earnings surprise of 10.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: CIB

3M: Based in St. Paul, MN, 3M operates as a diversified technology firm. It has manufacturing operations across the globe and serves a diversified customer base throughout the world. The company stands to gain from strong momentum in the Safety and Industrial segment, driven by strength in personal safety, industrial specialties, industrial adhesives and tapes, abrasives and electrical markets. Strength in the electronics, aerospace and defense, commercial branding and automotive markets, driven by demand for new products and expanding sales coverage, is aiding its Transportation and Electronics segment.

Shares of this Zacks Rank #3 (Hold) company have gained 23.6% in the past year. The Zacks Consensus Estimate for 3M’s 2025 earnings has increased 0.2% in the past 60 days. The company beat estimates in each of the last four reported quarters, delivering an average earnings surprise of 4.8%.

Price and Consensus: MMM

Honeywell: Based in Charlotte, NC, Honeywell is a global diversified technology and manufacturing company with a wide range of products and services. Its diversified portfolio includes aerospace products and services, energy-efficient products and solutions for businesses and process technology. HON is gaining strength in its commercial aviation aftermarket business, driven by solid demand in the air transport market and supply-chain improvements. Strength in its defense and space business, owing to stable U.S. and international defense spending volumes and sustained demand from the current geopolitical climate, has also been proving beneficial.

Although shares of the Zacks Rank #3 company lost 6.9% in the past year, they rose 6.8% in the past month. The Zacks Consensus Estimate for Honeywell’s 2025 earnings has inched up 0.2% in the past 60 days. HON beat estimates in each of the last four reported quarters, delivering an average earnings surprise of 8.7%.

Price and Consensus: HON

ITT: Headquartered in Stamford, CT, ITT is a global leader in multiple high-technology engineering and manufacturing industries. The company is poised to benefit from strength in the short-cycle business within the energy and industrial markets. Growth in demand for parts, pumps, services and valves is aiding the company. Higher flow control components and connector solution sales within the aerospace and defense markets are also supporting its performance.

The Zacks Rank #3 company’s shares have risen 25.9% in the past year. The Zacks Consensus Estimate for ITT’s 2025 earnings has increased approximately 1% in the past 60 days. The company beat estimates in each of the last four reported quarters, delivering an average earnings surprise of 2.6%.

Price and Consensus: ITT

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Honeywell International Inc. (HON): Free Stock Analysis Report
 
3M Company (MMM): Free Stock Analysis Report
 
ITT Inc. (ITT): Free Stock Analysis Report
 
Grupo Cibest S.A. - Sponsored ADR (CIB): Free Stock Analysis Report

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

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