The industrial sector could positively surprise investors in 2023. There's evidence to suggest that companies like 3M (NYSE: MMM), Caterpillar (NYSE: CAT), and Johnson Controls (NYSE: JCI) are set to generate significant improvements in cash flow generation this coming year.

Moreover, their current valuations are not reflecting the whole picture with regard to their underlying free-cash-flow generation. Therefore, investors should closely watch the industrial sector and all three of these stocks. 

Free cash flow (FCF) is what's left over from net income after working capital (cash used to run the business) and capital expenditures are taken out. In other words, it's the flow of money in a year that can be used to pay down debt, make acquisitions, or return to shareholders through share buybacks or dividends. As a result, it's one of the key metrics used to value stocks. 

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Source Fool.com