Skip to Content
Quarter-End Insights

Industrials: Labor Shortages Driving Innovation

Growing interest in industrial automation and autonomous vehicles during a tight labor market bodes well for the industrials sector.

Mentioned: , , , , , ,
  • Prices in our industrials sector remain slightly overvalued on average, with a mean market-cap-weighted price/fair value estimate of 1.04, with a few notable values outlined below.
  • Interest in industrial automation and autonomous vehicles continued to accelerate during the quarter, as CEOs are faced with tight labor markets and stressed supply chains. Extending solutions beyond repetitive tasks on the factory floor, research and investment has ventured into increasingly complex territory such as autonomous agricultural and mining equipment.
  • The Internet of Things, or IoT, is gaining penetration in the industrials sector for its own productivity goals, increasing the prospects of margin expansion. As early adopters of this technology, industrials stand to disproportionately benefit.
  • Compelling automation and autonomous vehicle technologies are likely to foster new company formation and M&A. A raft of startups is gaining visibility with large corporations and venture investors alike.

With an unemployment rate of 3.9%, U.S.-based companies are forced to seek new pathways to enhance labor productivity. In the trucking sector, the problem is particularly acute, given a shortage of over 50,000 truckers, while the average age of existing truckers is 55. Likewise, 39% of  Boeing (BA) technicians are aged 50 and up. During a recent meeting with management, Boeing touted the benefits of automation, which include higher quality (improvements of 50%), improved throughput (2 times faster on 737 wings), and decreased manual labor (80% manual on wings to 80% automation). Similarly,  FedEx (FDX) recently discussed the limited deployment of fully autonomous forklifts in its highly automated sortation hubs.

Scott Pope does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.