Industrial Stocks Could Surge During Earnings Season
Business surveys and anecdotal evidence are pointing toward the possibility of some upside surprise for the industrial sector in the third and fourth quarter. There's a strong case that some industrial companies are set to see their customers building inventory after running it down during the summer. As such, 3M (NYSE: MMM), Pentair (NYSE: PNR), and Stanley Black & Decker (NYSE: SWK) look well set up to bring investors good news when they report later this month.
The current recession is unusual, in the sense that there's never been such a sudden cessation of economic activity. And that's creating an unusual set of dynamics in the industrial sector. One such dynamic is that retailers and distributors have seen fit to hold off on inventory purchases until the blue skies of recovery become absolutely clear.
As such, companies that sell to distributors and retailers, like the three mentioned above, saw sales fall dramatically in the spring. The weakness went on as their customers continued to sell down their existing inventory without replenishing it. However, the good news is that survey data, company guidance, and anecdotal evidence are suggesting a strong recovery is imminent.
Source Fool.com