Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. Unfortunately, this role also comes with a demand profile tethered to the ebbs and flows of the broader economy, and investors seem to be forecasting a downturn - over the past six months, the industry has pulled back by 3.5%. This drawdown is a far cry from the S&P 500’s 12.1% ascent.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here are two industrials stocks boasting durable advantages and one we’re steering clear of.
One Industrials Stock to Sell:
KB Home (KBH)
Market Cap: $3.27 billion
The first homebuilder to be listed on the NYSE, KB Home (NYSE: KBH) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Do We Think KBH Will Underperform?
- Demand cratered as it couldn’t win new orders over the past two years, leading to an average 24.4% decline in its backlog
- Earnings per share have dipped by 23% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
KB Home’s stock price of $53.82 implies a valuation ratio of 14x forward P/E. Check out our free in-depth research report to learn more about why KBH doesn’t pass our bar.
Two Industrials Stocks to Watch:
ITT (ITT)
Market Cap: $17.91 billion
Playing a crucial role in the development of the first transatlantic television transmission in 1956, ITT (NYSE: ITT) provides motion and fluid handling equipment for various industries.
Why Do We Love ITT?
- Annual revenue growth of 16.9% over the past two years was outstanding, reflecting market share gains this cycle
- Projected revenue growth of 23% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings growth has trumped its peers over the last two years as its EPS has compounded at 17% annually
ITT is trading at $200.31 per share, or 22.9x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
Johnson Controls (JCI)
Market Cap: $83.74 billion
Founded after patenting the electric room thermostat, Johnson Controls (NYSE: JCI) specializes in building products and technology solutions, including HVAC systems, fire and security systems, and energy storage.
Why Does JCI Stand Out?
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Share buybacks catapulted its annual earnings per share growth to 17%, which outperformed its revenue gains over the last two years
- Free cash flow margin grew by 9.9 percentage points over the last five years, giving the company more chips to play with
At $138.50 per share, Johnson Controls trades at 24.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
