3 Industrials Stocks with Warning Signs

Whether you see them or not, industrials businesses play a crucial part in our daily activities. 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 12% for the sector - higher than the S&P 500’s 5.4% return.

Although these companies have produced results lately, a cautious approach is imperative. When the cycle naturally turns, the losers can be left for dead while the winners consolidate and take more of the market. Taking that into account, here are three industrials stocks we’re passing on.

MasTec (MTZ)

Market Cap: $27.86 billion

Involved in the 1996 Olympic Games MasTec (NYSE:MTZ) is an infrastructure construction company that specializes in the telecommunications, energy, and utility industries.

Why Is MTZ Not Exciting?

1. Competitive supply chain dynamics and steep production costs are reflected in its low gross margin of 12.7%
2. Responsiveness to unforeseen market trends is restricted due to its substandard operating margin profitability
3. Free cash flow margin shrank by 5.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

At $357.85 per share, MasTec trades at 43.1x forward P/E. Dive into our free research report to see why there are better opportunities than MTZ.

Lockheed Martin (LMT)

Market Cap: $140 billion

Headquartered in Maryland, Famous for the F-35 aircraft, Lockheed Martin (NYSE:LMT) specializes in defense, space, homeland security, and information technology products.

Why Do We Steer Clear of LMT?

1. Annual sales growth of 2.8% over the last five years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
2. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.6% annually
3. Waning returns on capital imply its previous profit engines are losing steam

Lockheed Martin is trading at $606.55 per share, or 20.5x forward P/E. If you’re considering LMT for your portfolio, see our FREE research report to learn more.

TopBuild (BLD)

Market Cap: $10.92 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 Give Us Pause?

1. Muted 2% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
2. Gross margin of 29.8% reflects its high production costs
3. Earnings per share were flat over the last two years and fell short of the peer group average

TopBuild’s stock price of $388.11 implies a valuation ratio of 21.2x forward P/E. To fully understand why you should be careful with BLD, check out our full research report (it’s free).

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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.