Whether you see them or not, industrials businesses play a crucial part in our daily activities. Their momentum is also rising as lower interest rates have incentivized higher capital spending. As a result, the industry has posted a 19.1% gain over the past six months, beating the S&P 500 by 11 percentage points.

Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Keeping that in mind, here is one industrials stock poised to generate sustainable market-beating returns and two we’re passing on.

Two Industrials Stocks to Sell:

Clean Harbors (CLH)

Market Cap: $13.97 billion

Established in 1980, Clean Harbors (NYSE: CLH) provides environmental and industrial services like hazardous and non-hazardous waste disposal and emergency spill cleanups.

Why Are We Cautious About CLH?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Estimated sales growth of 3.2% for the next 12 months implies demand will slow from its two-year trend
3. Earnings per share lagged its peers over the last two years as they only grew by 5% annually

At $261.47 per share, Clean Harbors trades at 33.4x forward P/E. To fully understand why you should be careful with CLH, check out our full research report (it’s free).

Whirlpool (WHR)

Market Cap: $5.03 billion

Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.

Why Are We Out on WHR?

1. Disappointing unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. 6× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings

Whirlpool’s stock price of $89.08 implies a valuation ratio of 14x forward P/E. Dive into our free research report to see why there are better opportunities than WHR.

One Industrials Stock to Buy:

FTAI Aviation (FTAI)

Market Cap: $30.1 billion

With a focus on the CFM56 engine that powers Boeing and Airbus’s planes, FTAI Aviation (NASDAQ: FTAI) sells, leases, maintains, and repairs aircraft engines.

Why Is FTAI a Good Business?

1. Impressive 43.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 82.4% annually, topping its revenue gains
3. Cash-burning tendencies have improved over the last five years, showing it could become financially independent one day

FTAI Aviation is trading at $292.68 per share, or 47.1x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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