4 Industrial Manufacturing Stocks to Gain on Robust Industry Trends

About the Industry

The Zacks Manufacturing – General Industrial industry comprises companies that produce a wide range of industrial equipment. Some industry players offer power transmission products, bearings, engineered fluid power components and systems, industrial rubber products, vapor-abrasive blasting equipment, vehicle-powered truck refrigeration systems, adhesive, gel coat equipment, flow-control components and linear motion components. Industrial manufacturing companies also reconstruct and assemble pumps, valves, speed reducers and hydraulic motors. The companies provide services to original equipment manufacturing and maintenance, repair and overhaul customers. These end users belong to the mining, oil and gas, forest products, agriculture and food processing, fabricated metals, chemicals and petrochemicals, transportation and utilities industries.

Major Trends Shaping the Future of the Manufacturing General Industrial Industry

Strength in the Manufacturing Sector: The industry has been benefiting from an increase in manufacturing activities. After witnessing a contraction in economic activities for 10 successive months till December 2025, the manufacturing sector expanded for the seventh consecutive month in July, the highest reading recorded since May 2022. Per the Institute for Supply Management’s (ISM) report, the Manufacturing Purchasing Manager’s Index touched 55.6% in July. A figure more than 50% indicates an expansion in manufacturing activity. Also, the New Orders Index expanded, registering 56.7% in the same month.

Investments in Innovation & Technological Advancements: The industry participants’ constant focus on innovation, product upgrades and the development of new products to stay competitive in the market should drive growth. With the gradual development of business models and cutting-edge technologies, several industry players have been banking on digitizing their business operations for a while now. Digitization enables industry participants to boost their competitiveness through enhanced operational productivity, product quality and better cost management.

Acquisition-Based Growth Strategy: The industry players rely on an acquisition-based growth strategy to broaden their customer base and enhance their product portfolio. This helps them foray into new markets and solidify their competitive position. Exposure to various end markets helps industrial manufacturing companies offset risks associated with a single market.

Rising Costs Hurt Margins: Industry participants have been encountering input cost inflation and other expenses, which have been denting profitability. Also, supply-chain issues might increase raw material and other logistics expenses. The latest ISM report’s Supplier Deliveries Index reflects slower deliveries for the eighth straight month in July. The rise in expenses, along with a tough labor market, poses a threat to margins. However, companies have been focused on cost management initiatives to mitigate cost-related challenges. These efforts include simplifying operations, improving supply-chain efficiency and applying disciplined pricing strategies.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Manufacturing – General Industrial industry, housed within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #67. This rank places it in the top 27% of 247 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

Given the industry’s bright near-term prospects, we will present a few promising stocks for your portfolio. But before that, it is worth taking a look at the industry’s stock market performance and current valuation.

Industry Lags Sector and the S&P 500

The Zacks Manufacturing – General Industrial industry has underperformed the broader sector and the Zacks S&P 500 composite index over the past year. Over this period, the industry has grown 7.4% compared with the sector and the S&P 500 Index’s rise of 20.6% and 22.7%, respectively.

One-Year Price Performance

Industry's Current Valuation

On the basis of forward 12-month Price-to-Earnings (P/E), which is a commonly used multiple for valuing manufacturing stocks, the industry is currently trading at 22.11X compared with the S&P 500’s 20.5X. It is also above the sector’s P/E ratio of 21.19X.

In the past five years, the industry has traded as high as 25.05X and as low as 15.95X, with the median being 21.44X, as the chart below shows.

Price-to-Earnings Ratio vs. SP500

Price-to-Earnings Ratio vs. Sector

4 Manufacturing-General Industrial Stocks Leading the Pack

Generac: Headquartered in Waukesha, WI, Generac is engaged in manufacturing backup and prime power generation systems for residential and C&I applications, solar + battery storage solutions, advanced power grid software platforms and services, energy management devices and controls, along with engine and battery-powered tools and equipment. The company is benefiting from solid momentum in the Commercial & Industrial (C&I) segment driven by data center demand, mobile product strength and international growth. Generac expects its entry in the data-center vertical to be a solid business opportunity in the long term amid accelerating investment in data centers and the proliferation of Artificial Intelligence.

This Zacks Rank #1 (Strong Buy) company outpaced estimates in two of the trailing four quarters and missed in the other two, the average earnings surprise being 13.7%. Shares of Generac gained 11.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: GNRC

Dover: Situated in New York, Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. Dover is poised to gain from solid order booking, which is being driven by strong demand across the majority of its business and its ability to produce and ship despite several operating challenges. Solid new order intake also continues to aid growth for Dover.

This Zacks Rank #2 (Buy) company reported better-than-expected results in each of the last four quarters, the earnings surprise being 1.8%, on average. DOV’s shares surged 13.6% in the past year.

Price and Consensus: DOV

Applied Industrial: Applied Industrial 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’s Service Center segment is gaining from increased technical MRO spending and internal sales initiatives.  Rising demand and backlog conversion across automation and fluid power are aiding Applied Industrial’s Engineered Solutions segment. AIT carries a Zacks Rank of 2.

The company reported better-than-expected results in each of the last four quarters, the earnings surprise being 4.3%, on average. Applied Industrial’s shares surged 35% in the past year.

Price and Consensus: AIT

Flowserve: Based in Irving, TX, Flowserve is a manufacturer and aftermarket service provider of comprehensive flow control systems globally. The company’s Flowserve Pump Division segment is benefiting from solid momentum in the aftermarket business. The increase in bookings across the energy and general industries' end markets is aiding the Flow Control Division unit’s performance, which bodes well for Flowserve.

This Zacks Rank #2 company reported better-than-expected results in each of the last four quarters, the earnings surprise being 11.2%, on average. FLS’ shares surged 51.1% in the past year.

Price and Consensus: FLS

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This article originally published on Zacks Investment Research (zacks.com).

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