The manufacturing sector is one of the pillars of the global economy, producing goods and services that are essential for various industries and consumers. However, the sector is facing multiple challenges in 2023, as the worsened economic outlook, rising geopolitical risks, and volatility in the energy and commodities markets will put pressure on manufacturers’ performances. This pressure has led to the emergence of manufacturing stocks to sell.
In this deteriorating global context, not all manufacturing stocks are created equal. Some may have strong fundamentals and competitive advantages that can help them weather the storm, while others may be vulnerable to external shocks and internal weaknesses that can erode their value.
Here are three manufacturing stocks that are ticking time bombs in September 2023, and why investors should avoid them.
General Motors (GM)
General Motors (NYSE:GM) is one of the largest automakers in the world but has been in some unflattering headlines recently. On September 15th, the United Auto Workers union simultaneously began striking at GM, Ford (NYSE:F), and Chrysler auto plants. While Ford has made some concessions and a deal seems to be in the works, the strike has only been prolonged at GM plants. In particular, over the weekend, the strike was expanded to include 38 parts distribution centers operated by GM, Jeep, and Ram across 20 different states.
The strike, whether it is prolonged, or the management team ultimately gives into the union’s demands, could have grave consequences for America’s largest automaker. General Motors has been one of the most aggressive players in the electric vehicle space, aiming to sell more than 1 million EVs annually by 2025 and achieve an all-electric portfolio by 2035. However, there are fears that if GM gives into the union and offers substantial wage increases, the automaker could lose its competitiveness to pure-play electric vehicle companies such as Tesla (NASDAQ:TSLA).
These factors could weigh on GM’s stock performance in the coming months, as investors may lose confidence in its ability to overcome its challenges and deliver robust growth. This helps make it one of those manufacturing stocks to sell.
Boeing (BA)
Boeing (NYSE:BA) is a stock that’s been going through a crisis of confidence in terms of its manufacturing capabilities, despite over decades the company has developed itself into a leading manufacturer of commercial and military aircraft, satellites, and rockets. In 2019 and 2020. there were 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, delays in the highly anticipated 737X and 777X programs, which would compete with Airbus’s A320neo and A350, respectively, have come to again tarnish the manufacturer’s reputation. Plaguing Boeing’s 737X program are manufacturing drawbacks concerning improperly drilled holes on the new aircraft.
These delays and manufacturing inadequacies have not only blighted Boeing’s share performance but have also raised the aircraft manufacturer’s forward price-to-earnings ratio to levels well beyond what’s reasonable, which could leave Boeing’s stock at risk of a severe devaluation if things do not turn around quickly.
3M (MMM)
3M Company (NYSE:MMM) is a diversified manufacturer of various industrial products, consumer goods, health care products, and safety equipment. Unfortunately, the manufacturer’s stock has not had a great year thus far. Shares have dramatically plummeted 21.7% since the beginning of the year and have the potential to go down even further as the company continues to face a number of litigations and a genuine slowdown in its organic growth. In 2022, total sales declined 3.2% Y/Y due to lesser-than-expected sales in its consumer-facing end-market and a divestiture related to its Food Safety business. Additionally, in both first and second-quarter earnings reports, revenue came in lower than the same periods in 2022.
Furthermore, controversies from polluting drinking water with toxins to manufacturing earplugs that caused hearing loss for U.S. Army servicemen have led to billions of dollars of litigation costs and lowered earning potential for shareholders. Despite what 3M’s “adjusted” profitability metrics might tell you, the company is not in a good spot these days and further controversies or reduction in revenue could send the stock hurtling to new lows.
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.
