Despite the industrial sector playing a less outsized role in the American economy, it still is a major force in global economy. The industrial sector simply refers to companies at the heart of the economy. They produce goods and services for various industries such as aerospace, construction, mining, transportation and manufacturing. However, not all industrial businesses are doing well these days. Certain companies that were once industrial titans have fallen into a pattern of inconsistent growth and earnings. Meanwhile, others have had trouble adjusting to the uncertain economic environment in which we find ourselves today. Below are three industrial stocks to sell that investors should stay away from to avoid serious damage to their portfolio.
Dow (DOW)
One of the industrial stocks to sell is Dow (NYSE:DOW). Famous in recent years for Warren Buffet’s $3 billion investment. Dow is a leading producer of specialty chemicals, plastics and materials. The chemicals company’s earnings reports have been a sort of whirlwind in the past few years. The pandemic had sent revenue plummeting as economic activity domestically and internationally collapsed. In 2021, year-over-year (YOY) revenue growth jumped to 42.6% off the back of a reviving economy and lower energy prices. However, 2022 marked another year for slowed growth due to higher natural gas prices.
This kind of oscillatory trajectory makes sense for chemical companies who are dependent on low natural gas prices to fuel their processes. Still, with the macroeconomic outlook as uncertain as it is and crude prices predicted to move upward for the remainder of the year, Dow lowered its forecast for the second half of 2023. That alone should not give investors much to hope for the near and medium-term.
Caterpillar (CAT)
If you have ever seen construction site heavy machinery, such as bulldozers or compactors, you have probably heard of Caterpillar (NYSE:CAT). The company is a leading manufacturer of construction and mining equipment, engines and turbines. Shares have only risen 14% year-to-date, which is not phenomenal given where much of the market has landed. Caterpillar’s less than exciting performance most likely stems from investors trying to figure whether the company can continue to meaningfully grow as it has done in past two years. In 2021, YOY top-line growth jumped to 22.1%, and revenues also grew 16.6% by the end of 2022.
On the flipside, revenue from China has historically counted for around 5-10% of total revenue. Though there have been some recent encouraging signs regarding the recovery of the world’s second largest economy, China’s construction sector has plenty of room to improve before a full recovery is declared. Until then, current investors should not expect much from the industrial equipment giant in terms of financial performance or share appreciation.
Boeing (BA)
Boeing (NYSE:BA) is another company among industrial stocks to sell. The company is a leading manufacturer of commercial and military aircraft, satellites and rockets. However, Boeing is facing a crisis of confidence from its customers, regulators and investors after two fatal crashes of its 737 MAX jet in 2019 and 2020. Although Boeing has resumed deliveries of the 737 MAX after a 20-month grounding, it still faces reputational challenges from delays in both its 737 and 777 programs. Recently, Boeing issued a report about a supplier, Spirit Aerosystems (NYSE:SPR), had improperly drilled holes on certain 737 MAX models. This caused delays in deliveries, and ultimately impacted the aircraft manufacturer’s annual delivery targets. Moreover, 777 MAX delays have led Emirates to shrink its orderbook.
Boeing’s shares have erased their progress since the start of the year and given all the controversies and delays in aircraft manufacturing, it’s hard to see how the company can make a meaningful turnaround in short run.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
