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 21.7% for the sector - higher than the S&P 500’s 10.1% return.
Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. On that note, here is one industrials stock boasting a durable advantage and two best left ignored.
Two Industrials Stocks to Sell:
GATX (GATX)
Market Cap: $6.40 billion
Originally founded to ship beer, GATX (NYSE: GATX) provides leasing and management services for railcars and other transportation assets globally.
Why Does GATX Worry Us?
- Number of active railcars has disappointed over the past two years, indicating weak demand for its offerings
- Negative free cash flow raises questions about the return timeline for its investments
- Limited cash reserves may force the company to seek unfavorable financing terms that could dilute shareholders
At $179.44 per share, GATX trades at 18.2x forward P/E. Read our free research report to see why you should think twice about including GATX in your portfolio.
C.H. Robinson Worldwide (CHRW)
Market Cap: $20.76 billion
Engaging in contracts with tens of thousands of transportation companies, C.H. Robinson (NASDAQ: CHRW) offers freight transportation and logistics services.
Why Do We Think Twice About CHRW?
- Annual sales declines of 5.4% for the past two years show its products and services struggled to connect with the market during this cycle
- Gross margin of 7.4% reflects its high production costs
- Shrinking returns on capital suggest that increasing competition is eating into the company’s profitability
C.H. Robinson Worldwide’s stock price of $175.71 implies a valuation ratio of 31.3x forward P/E. Check out our free in-depth research report to learn more about why CHRW doesn’t pass our bar.
One Industrials Stock to Buy:
Blue Bird (BLBD)
Market Cap: $1.55 billion
With around a century of experience, Blue Bird (NASDAQ: BLBD) is a manufacturer of school buses and complementary parts.
Why Is BLBD a Good Business?
- Annual revenue growth of 14.3% over the past two years was outstanding, reflecting market share gains this cycle
- Free cash flow margin increased by 20.1 percentage points over the last five years, giving the company more capital to invest or return to shareholders
- Returns on capital are climbing as management makes more lucrative bets
Blue Bird is trading at $49.03 per share, or 11.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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