- The industrials sector has outperformed the broader market thus far in the fourth quarter, and rising valuations keep most industrials in fairly valued to slightly overvalued territory, especially in the U.S. As a whole, the sector is trading at roughly a 7% premium to our fair value estimates. That said, a few companies on our list present opportunities for investors, including Kion Group (KGX), Stericycle (SRCL), and Fiat Chrysler (FCAU).
- U.S. auto sales may be done growing on a full-year basis for this cycle, but we remain upbeat on demand. Even if sales fall considerably from the mid-17 million unit level--to 16 million, for example--that's still a healthy level for profitability across the supply chain.
- New single-family home construction remains healthy, and we project new single-family starts will increase more than 6% this year. Homebuilder and building materials companies should continue to benefit from increased new-home demand.
- Rail traffic throughout North America remains lackluster. Total traffic year-to-date is down about 5%, with both intermodal units and carloads under pressure. That said, intermodal container demand should see improvement in the year ahead, and we continue to believe intermodal is the key secular volume growth driver for the rails, with help from truck-to-rail conversions.
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Matthew Young does not own shares in any of the securities mentioned above. Find out about Morningstar’s