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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 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
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.
Acquisition-Based Growth Strategy: The industry participants bank on an acquisition-based growth strategy to expand their customer reach and product offerings. This helps them foray into new markets and solidify their competitive position. Exposure to various end markets helps tool manufacturing companies offset risks associated with a single market.
Weakness in the Manufacturing Sector: 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, the manufacturing sector contracted in March, April and May. Per the Institute for Supply Management’s (ISM) report, the Manufacturing Purchasing Manager’s Index touched 48.5% in May, down from 48.7% in April. A figure less than 50% indicates a contraction in manufacturing activity. Also, the New Orders Index remained in the contraction territory for the fourth consecutive month, registering 47.6% in May.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Manufacturing – General Industrial industry, housed within the broader ZacksIndustrial Products sector, currently carries a Zacks Industry Rank #66. This rank places it in the top 27% of 245 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright 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.
Given the industry’s bright near-term prospects, we will present a few promising stocks for your portfolio. But before that, it is worth taking a look at the industry’s stock market performance and current valuation.
Industry Lags Sector & the S&P 500
The Zacks Manufacturing – General Industrial industry has underperformed both the broader sector and the Zacks S&P 500 composite index over the past year. Over this period, the industry has grown 2.9% compared with the sector and the S&P 500 Index’s rise of 4.3% and 9.3%, respectively.
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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 20.51X compared with the S&P 500’s 21.71X. However, it is above the sector’s P/E ratio of 18.93X.
In the past five years, the industry has traded as high as 26.56X and as low as 15.97X, with the median being 21.23X, as the chart below shows.
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4 Manufacturing-General Industrial Stocks Leading the Pack
Ferguson Enterprises: Based in Newport News, VA, FERG is engaged in providing plumbing and heating products to residential and non-residential customers. The company stands to gain from strength in the non-residential markets, driven by continued investment in infrastructure and increased manufacturing activities. Also, steady performance in the residential market, supported by new construction and repair & remodeling activities, bodes well for it.
The Zacks Consensus Estimate for this Zacks Rank #1 (Strong Buy) company’s fiscal 2025 (ending July 2025) earnings has been revised upward by 7% to $9.45 per share in the past 60 days. Its shares have gained 10.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Helios Technologies: Headquartered in Sarasota, FL, Helios supplies engineered motion control and electronic controls technology solutions in the Americas, the Middle East, Africa, Europe and the Asia Pacific. HLIO is benefiting from solid momentum across the health and wellness end markets. Also, the company’s focus on product innovation bodes well for future growth.
This Zacks Rank #1 company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 11.6%. The consensus estimate for 2025 earnings has been revised 17.8% upward over the past 60 days.
Crane Company: Based in Stamford, CT, Crane Company manufactures and delivers specialized industrial solutions and components through sales representatives and industrial distributors. CR is well-positioned to gain from its OEM business, driven by higher commercial aircraft build rates. Increase in demand in the chemical, pharmaceutical, industrial and cryogenic end markets is aiding the company’s performance as well.
Shares of this Zacks Rank #2 (Buy) company have gained 21.9% in the past year. CR outpaced estimates in each of the trailing four quarters, the average earnings surprise being 5.6%. The Zacks Consensus Estimate for 2025 earnings has been revised 1.8% upward over the past 60 days.
DXP Enterprises: Based in Houston, TX, DXP Enterprises is involved in the distribution of maintenance, repair and operating products, equipment and services across the United States and Canada. The company is benefiting from increased sales in the Service Centers and Innovative Pumping Solutions segments. Also, price increases from vendors and suppliers, as well as the acquisitions in the water and wastewater markets, are expected to bolster DXPE’s growth.
The Zacks Consensus Estimate for this Zacks Rank #2 company’s 2025 earnings has been revised upward by 0.4% to $5.30 per share in the past 60 days. Its shares have surged 76% in the past year.
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This article originally published on Zacks Investment Research (zacks.com).
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