Faith in the path ahead.
After months of contraction, the industrial sector is regaining confidence heading into 2025.
“Cautious optimism is where we are today,” Goldman Sachs analyst Joe Ritchie said at the Goldman Sachs Industrials and Materials Conference last week. “Some companies are expecting further growth in 2025… It’s only a matter of time before that happens. It will be applied at some point in 2025.”
According to recent data from the Institute for Supply Management (ISM), the industry has contracted for the past eight consecutive months and 24 of the past 25 months.
The prolonged recession is weighing on stocks in the sector.
The industry’s biggest companies have had mixed results since the start of the year, with stocks like GE Aerospace (GE) and Eaton Corporation (ETN) leading the pack, while UPS (UPS) and Union Pacific (UNP) have fallen since the start of the year. did. date.
The cautious optimism stems from several factors, including President-elect Donald Trump’s policies. President Trump’s economic policies include deregulation, infrastructure investment, tax cuts and other strategies widely supported by the business community.
Eric Mendelsohn, co-president of HEICO, said he believes President Trump’s policies have increased investor confidence in the economy and created a “very positive environment” for the industrial sector.
Industry executives also have high hopes for Elon Musk’s influence on the next administration. Robert Cardillo, chairman of the board of Planet Federal and chief strategist at Planet Labs, said in a briefing that Mr. Musk’s influence is likely to be “good news” for the sector.
Planet Labs (PL) stock has soared since Election Day, along with the broader space industry. Shares have risen nearly 80% in the past month as investors bet the incoming administration will support the sector.
Looking ahead to 2025, Ritchie argues that companies that streamline their operations and refocus their portfolios will be best placed to grow. His top pick in this category was Parker Hannifin (PH), citing the company’s 10-year transformation initiative.
“It’s a great company and very well run. About two-thirds of its business is related to industrial activities, and about one-third of its business is related to aerospace and defense. They were able to perform incredibly well even when the market wasn’t in their favor,” Ritchie said.
He also said that well-known companies such as Honeywell (HON) and 3M (MMM) are taking appropriate steps to become more focused and “transform the margins of their business.”
story continues
