The industrial sector is gaining confidence heading into 2025 after months of contraction, according to top business leaders and industry analysts.
“Cautious optimism is where we are today,” Goldman Sachs analyst Joe Ritchie told me at the Goldman Sachs Industrial and Materials conference last week. “Several companies expect better growth in 2025… It’s only a matter of time before this happens. Sometime in 2025 there will be a change.”
Recent data from the Institute for Supply Management (ISM) shows that the sector has contracted for the past eight consecutive months and 24 of the past 25 months.
The prolonged slump has weighed on the sector’s shares. Since the start of the year, the sector’s largest companies have posted mixed performances, with stocks like GE Aerospace (GE) and Eaton Corporation (ETN) among the top performers, while UPS (UPS) and Union Pacific (UNP) have seen a rise this year. showed a decline. date.
The cautious optimism stems from several factors, including the agenda of newly-elected President Donald Trump. Trump’s economic policies include strategies that are widely supported by the business community, such as deregulation, infrastructure investments and tax cuts.
HEICO co-chairman Eric Mendelson told me he sees Trump’s policies increasing investor confidence in the economy, creating a “very positive environment” for the industrial sector.
Industry executives are also largely encouraged about Elon Musk’s influence on the new administration. Robert Cardillo, chairman of Planet Federal’s board of directors and chief strategist of Planet Labs, told me at the conference that Musk’s impact will likely be “good news” for the industry.
Shares of Planet Labs (PL), along with the broader space industry, have soared since Election Day. The stock has risen nearly 80% in the past month as investors bet the incoming administration will support the sector.
Looking ahead to 2025, Ritchie says companies that have streamlined their operations and refocused their portfolios are best positioned for growth. His top pick in the sector is Parker-Hannifin (PH), citing the company’s decade-long transformation initiative.
“It’s a great company and very well run… About two-thirds of the business is related to industrial activities, and about a third of the business is related to aerospace and defense. They have been able to perform incredibly well, even at a time when the industrial markets had no tailwind for them,” said Richie.
He also said household names like Honeywell ( HON ) and 3M ( MMM ) are taking the right steps to become more focused and “transform the company’s margins.”
