3 Industrials Stocks with Open Questions

CSX Cover Image

Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. They are also bound to benefit from a friendlier regulatory environment with the Trump administration, and this excitement has led to a six-month gain of 47.9% for the sector - higher than the S&P 500’s 34.7% return.

Regardless of these results, investors should tread carefully. The diversity of companies in this space means that not all are created equal or well-positioned for the inescapable downturn. Taking that into account, here are three industrials stocks best left ignored.

CSX (CSX)

Market Cap: $67.1 billion

Established as part of the Chessie System and Seaboard Coast Line Industries merger, CSX (NASDAQ: CSX) is a transportation company specializing in freight rail services.

Why Do We Steer Clear of CSX?

  1. Flat unit sales over the past two years suggest it might have to lower prices to accelerate growth
  2. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
  3. 13.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position

CSX is trading at $36 per share, or 20x forward P/E. Check out our free in-depth research report to learn more about why CSX doesn’t pass our bar.

FedEx (FDX)

Market Cap: $57.18 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 Should You Dump FDX?

  1. Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
  2. Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
  3. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned

FedEx’s stock price of $242.50 implies a valuation ratio of 13x forward P/E. Read our free research report to see why you should think twice about including FDX in your portfolio.

TopBuild (BLD)

Market Cap: $11.09 billion

Established in 2015 following a spinoff from Masco Corporation, TopBuild (NYSE: BLD) is a distributor and installer of insulation and other building products.

Why Does BLD Fall Short?

  1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
  2. Projected sales growth of 3% 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 5% annually

At $396.24 per share, TopBuild trades at 19x forward P/E. If you’re considering BLD for your portfolio, see our FREE research report to learn more.

Stocks We Like More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

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