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Industrials businesses quietly power the physical things we depend on, from cars and homes to e-commerce infrastructure. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 14.3% over the past six months. This performance was worse than the S&P 500’s 6.2% loss.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. With that said, here is one industrials stock boasting a durable advantage and two that may face trouble.

Two Industrials Stocks to Sell:

MSC Industrial (MSM)

Market Cap: $4.20 billion

Founded in NYC’s Little Italy, MSC Industrial Direct (NYSE:MSM) provides industrial supplies and equipment, offering vast and reliable selection for customers such as contractors

Why Should You Dump MSM?

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. Demand will likely be weak over the next 12 months as Wall Street expects flat revenue

3. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 4.5% annually

MSC Industrial is trading at $75.42 per share, or 19.6x forward P/E. Check out our free in-depth research report to learn more about why MSM doesn’t pass our bar.

Avery Dennison (AVY)

Market Cap: $13.3 billion

Founded as Kum Kleen Products, Avery Dennison (NYSE:AVY) is a manufacturer of adhesive materials, display graphics, and packaging products, serving various industries.

Why Are We Out on AVY?

1. Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion

2. Free cash flow margin dropped by 3.7 percentage points over the last five years, implying the company became more capital intensive as competition picked up

3. Eroding returns on capital suggest its historical profit centers are aging

At $170.19 per share, Avery Dennison trades at 16.5x forward P/E. To fully understand why you should be careful with AVY, check out our full research report (it’s free).

One Industrials Stock to Watch:

AZZ (AZZ)

Market Cap: $2.69 billion

Responsible for projects like nuclear facilities, AZZ (NYSE:AZZ) is a provider of metal coating and power infrastructure solutions.

Why Are We Positive On AZZ?

1. Offerings and unique value proposition resonate with customers, as seen in its above-market 9.2% annual sales growth over the last two years

2. Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient

3. Incremental sales significantly boosted profitability as its annual earnings per share growth of 24% over the last two years outstripped its revenue performance