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Why the Industrial Products Sector Beat the Market Yesterday

Sejuti Banerjea

As far as sectors go, this isn’t the best place to be in. The Zacks Sector rank is 13 out of 16, that’s the bottom 19%. And yet, this is the group of companies that grew on a very bad day when the S&P 500 dropped 0.94%, Dow 30 0.87%, Nasdaq 1.18% and Russell 2000 0.82%.

With a year to date return of 11.3% and a 62% earnings beat ratio so far this quarter, the industrial products sector is a mixed bag.

The Office Supplies industry within industrials has returned 16.8% YTD and posted an earnings beat ratio of 100% so far. Zacks #1 (Strong Buy) ranked Ennis EBF and Zacks #2 (Buy) ranked Avery Dennison Corp. AVY are investment opportunities here. EBF earnings are expected to grow 13.95% this year after the recent upward revision post earnings. Both 2019 and 2020 estimates for AVY are up post earnings. Both companies have a VGM score B.


The Uniform and Related segment within industrials has returned 11.6% YTD and posted mixed results so far. Zacks #2 ranked Cintas Corp. CTAS is an opportunity here. The company is expected to post earnings growth of 12.3% this year on revenue that will grow 6.1%.


The Containers - Paper and Packaging industry within industrials has returned 10.77% YTD and generated an earnings beat ratio of 75% so far. Zacks #2 ranked Sealed Air Corp. SEE jumped over 9% yesterday in response to a very strong earnings report. The company has a VGM score B.


The Pollution Control industry within industrials has returned 9.6% YTD and posted an earnings beat ratio of 100% so far. Zacks #2 ranked Heritage-Crystal Clean, Inc. HCCI and Sharps Compliance Corp. SMED are opportunities here. HCCI revenues are expected to increase around 8% this year, but its earnings are expected to jump 67.8%. Similarly, SMED is expected to see earnings growth of 158% on revenue that will grow around 6%. HCCI and SMED have VGM Score A.


The Manufacturing - Construction and Mining industry has returned 4.2% YTD and has not posted an earnings beat this quarter. Zacks #2 ranked H&E Equipment Services, Inc. HEES is expected to generate revenue and earnings growth of 8.9% and 9.9%, respectively in 2019. The company, which has a VGM score B, will report at the end of the month.

And that isn’t all. If you’re willing to take a little bit of risk, there’s Zacks #1 ranked Alarm Holdings ALRM and Axon Enterprise AAXN in the Security & Services industry. Both stocks have been smashing estimates over the past year with average four-quarter beats of 27.3% for ALRM and 391.7% for AAXN. They are expected to report by month’s end, so estimates may get revised around then. Both have a growth score A.



We’re likely not at the bottom of the selloff, so there will be a few days of uncertainty, especially considering the fact that the U.S. and China don’t appear closer to a deal. And that’s one thing that could be bad news for the sector. The other factor is positive, i.e. the Fed taking a moderate stand on interest rates. So the names with positive VGM scores would be safer.

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