Whether you see them or not, industrials businesses play a crucial part in our daily activities. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 8% over the past six months. This performance was disappointing since the S&P 500 stood firm.

Some companies can grow regardless of the economic backdrop, but the odds aren’t great for the ones we’re analyzing today. Keeping that in mind, here are three industrials stocks that may face trouble.

Teledyne (TDY)

Market Cap: $23.84 billion

Playing a role in mapping the ocean floor as we know it today, Teledyne (NYSE:TDY) offers digital imaging and instrumentation products for various industries.

Why Does TDY Worry Us?

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. Earnings growth underperformed the sector average over the last two years as its EPS grew by just 4.2% annually
3. ROIC of 7.5% reflects management’s challenges in identifying attractive investment opportunities, and its shrinking returns suggest its past profit sources are losing steam

Teledyne is trading at $508.80 per share, or 23.7x forward price-to-earnings. If you’re considering TDY for your portfolio, see our FREE research report to learn more.

Kimball Electronics (KE)

Market Cap: $421.6 million

Founded in 1961, Kimball Electronics (NYSE:KE) is a global contract manufacturer specializing in electronics and manufacturing solutions for automotive, medical, and industrial markets.

Why Do We Think KE Will Underperform?

1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
2. Earnings per share have contracted by 10.5% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
3. Poor free cash flow margin of -0.7% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends

Kimball Electronics’s stock price of $17.17 implies a valuation ratio of 11x forward price-to-earnings. To fully understand why you should be careful with KE, check out our full research report (it’s free).

FedEx (FDX)

Market Cap: $58.38 billion

Sporting one of the largest air cargo fleets in the world, FedEx (NYSE:FDX) is a global provider of parcel and cargo delivery services.

Why Are We Out on FDX?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 2.6% annually over the last two years
2. Projected sales growth of 1.2% for the next 12 months suggests sluggish demand
3. Earnings per share lagged its peers over the last two years as they only grew by 1.9% annually

At $243.01 per share, FedEx trades at 11.2x forward price-to-earnings. Read our free research report to see why you should think twice about including FDX in your portfolio, it’s free.

Stocks We Like More

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.