The Zacks Industrial Products sector faced significant headwinds in 2024, owing to persistent softness in the manufacturing sector, supply-chain disruptions and inflationary pressure. The rising cost of raw materials and shortages of semiconductor, electrical and electronic components heavily affected industrial goods production. The persistence of high inflation in the United States further intensified the problem by increasing operational expenses and reducing profit margins.

Per the latest report published by the Federal Reserve, production at U.S. factories declined 0.3% in October while manufacturing output fell 0.5%. Also, capacity utilization declined to 77.1% in the same month, which is 2.6% below its long-run average rate.

What Lies in Store for Industrial Stocks in 2025?

Activities in the manufacturing sector have not been impressive over the past several months. Per the Institute for Supply Management’s report, the Manufacturing PMI (Purchasing Manager’s Index) touched 48.4% in November, contracting for the eighth consecutive month. However, the sector has been showing signs of gradual improvement.

In November, the New Order Index recorded 50.4%, increasing 3.3 percentage points from the previous month’s level. While supply-chain disruptions persist, especially related to the availability of electronic components, the situation has improved, as evident from the latest ISM report’s Supplier Deliveries Index, which reflected faster deliveries in November.

The uptick in new orders, especially for electronic products and machinery, in conjunction with the improvement in the supply chain, is expected to bolster manufacturing activity in 2025. While the recent recovery in orders hold promise, a significant increase is not expected over the near term given the persistence of inflationary pressure.

4 Top Industrial Stocks for 2025

Despite the industry-wide challenges, certain industrial companies defied the odds and delivered impressive performances in 2024. These include Zebra Technologies Corporation ZBRA, RBC Bearings Incorporated RBC, Applied Industrial Technologies, Inc. AIT and Powell Industries, Inc. POWL.

These companies have favorable fundamentals, which are likely to continue to reap benefits for their investors in 2025. The stocks, having a market capitalization of more than $1 billion, either sport a Zacks Rank #1 (Strong Buy) or carry a Zacks Rank #2 (Buy). Revenue and earnings estimates also look encouraging. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price Performance

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Zebra Technologies: Headquartered in Lincolnshire, IL, the company is the leading provider of enterprise asset intelligence solutions in the automatic identification and data capture solutions industry. The company has been benefiting from higher sales of mobile computing and data capture solutions. Recovery in demand for printing solutions and RFID products has also been boosting its performance. Driven by strength across its business, the company expects fourth-quarter 2024 net sales to increase in the band of 28-31% year over year.

The Zacks Consensus Estimate for ZBRA’s 2024 earnings and revenues indicates growth of 43% and 8.1%, respectively. The consensus estimate for current-year earnings has improved 10.6% over the past 60 days. This Zacks Rank #1 company has a trailing four-quarter average earnings surprise of 10.2%. Shares of ZBRA have gained 51.3% over the past year.

Powell Industries: Based in Houston, TX, Powell engages in manufacturing and supplying custom-engineered equipment and systems that are used for distributing, controlling and monitoring the flow of electrical energy. Several favorable trends across the oil, gas and petrochemical end markets, including growth in energy transition projects, such as biofuels, carbon capture and hydrogen, have been driving the company’s performance. Also, significant project awards, supported by high investments in LNG, related gas processing and petrochemical processes, have set POWL apart as a leading supplier of critical electrical infrastructure.

The Zacks Consensus Estimate for the company’s fiscal 2025 (ending September 2025) earnings and revenues indicates growth of 11.5% and 9.3%, respectively. The consensus estimate for fiscal 2025 earnings has improved 10.1% over the last 60 days. This Zacks Rank #1 company delivered a trailing four-quarter average earnings surprise of 57.5%. Shares of POWL have skyrocketed 175.2% in the past year.

RBC Bearings: Headquartered in Oxford, CT, RBC Bearings manufactures and distributes engineered bearings and precision components. The company is benefiting from strength in its Aerospace & Defense unit. Solid momentum
in the commercial aerospace market, driven by strong growth in orders from the aftermarket verticals, bodes well for the unit. An increase in demand for the company’s bearings and engineered component products in the defense market is also expected to be beneficial.

The Zacks Consensus Estimate for RBC’s fiscal 2025 (ending March 2025) earnings and revenues suggests growth of 12.7% and 5.1%, respectively. The consensus estimate for fiscal 2025 earnings has improved 0.5% over the past 60 days. This Zacks Rank #2 company has a trailing four-quarter average earnings surprise of 2.5%. Shares of the company have gained 20.2% over the past year.

Applied Industrial: Based in Cleveland, OH, the company is a distributor of value-added industrial products, including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. The company is benefiting from an increase in demand for fluid power MRO services across the U.S. manufacturing sector, driven by growing digitization and higher investment in maintenance operations.

The Zacks Consensus Estimate for AIT’s fiscal 2025 (ending June 2025) earnings and revenues implies growth of 0.1% and 0.9%, respectively. The consensus estimate for its fiscal 2025 earnings has improved 0.7% over the past 60 days. This Zacks Rank #2 company has a trailing four-quarter average earnings surprise of 4.9%. Shares of the company have rallied 51.1% over the past year.

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RBC Bearings Incorporated (RBC) : Free Stock Analysis Report

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