The industrial sector is known as the backbone of economic growth, essential to innovation, infrastructure, and global competitiveness. From constructing critical infrastructure to enabling cutting-edge advancements, industrial companies shape the foundation of modern economies. In light of this context, leading investment bank Morgan Stanley analysts recently highlighted a significant opportunity in reshoring for U.S. industrials following a Republican sweep, with Donald Trump’s second presidency potentially amplifying the positive momentum.
Multi-industrial analyst Chris Snyder explains the pivotal role of reshoring in transforming the domestic industrial landscape, describing it as the strategic shift of manufacturing activity and spending back into regions where American companies excel with dominant market share and premium margins. The analyst highlights that despite the U.S. contributing just 16% to global industrial production, its firms capture a commanding 60% of the sector's revenue, reflecting their competitive edge in high-value markets.
Snyder points out that global manufacturing has historically grown at a 4% to 5% CAGR, creating a 2% annual headwind for U.S. industrial companies over the last 25 years as production shifted to lower-cost regions. However, these challenges are now subsiding, paving the way for stronger and more sustainable manufacturing activities back to U.S. soil. The analyst believes Trump’s second presidency could extend the reshoring momentum through policy initiatives, “bridging the gap to further tech advancements, which are a structural advantage for U.S. manufacturing versus low-cost producers.”
With expectations for a reshoring wave driven by the shifting political landscape, here’s a closer look at three industrial stocks on Morgan Stanley’s radar that investors can scoop up now for potential gains.
Industrial Stock #1: Fastenal Company
Minnesota-based Fastenal Company (FAST) stands out with its wide range of industrial supplies, from fasteners to safety and metal-cutting products, serving manufacturing, construction, and government sectors across 25 countries. With over 3,500 locations, including both branches and customized Onsite setups, Fastenal blends local expertise with cutting-edge technology to deliver tailored inventory and flexible solutions, like its Fastenal Managed Inventory (FMI) and digital services.
Backed by 17 regional distribution centers and a dedicated logistics fleet, the company’s "high-touch, high-tech" approach helps businesses optimize their supply chains and achieve savings. With a market cap of approximately $47.2 billion, Fastenal has gained roughly 37% over the past year and 29% on a YTD basis, slightly outshining the broader S&P 500 Index’s ($SPX) 31.8% annual return and 26% YTD growth.
With a 26-year track record of consecutive dividend increases, the Dividend Aristocrat is highly committed to its shareholders. On Nov. 22, Fastenal distributed a quarterly dividend of $0.39 per share. Its annualized dividend of $1.56 per share translates to an attractive 1.86% yield.
In fact, during Q3, the company returned almost $223.4 million to shareholders through dividends, marking a notable increase from the $199.8 million returned in the same quarter of 2023.
Fastenal’s shares popped more than 9% on Oct. 11 after the company’s Q3 earnings report. While net sales climbed 3.5% year over year to reach $1.9 billion, the results slightly missed analysts’ expectations. Earnings of $0.52 per share were in line with forecasts and held steady compared to the same period last year.
Moreover, during the quarter, Fastenal boosted its investment in property and equipment, net of sales proceeds, to $55.8 million, a notable increase from $42.9 million in the same quarter of fiscal 2023. This growth was driven by two key factors: stronger FMI spending fueled by robust signings and installations, particularly of high-end vending devices, and an uptick in investments for facility construction and upgrades.
For fiscal 2024, Fastenal anticipates its investment in property and equipment, net of sales proceeds, to range between $235 million and $255 million, a significant increase from $160.6 million in fiscal 2023. This expected growth is driven by several factors, including the completion of its Utah distribution center, higher spending on FMI hardware due to stronger signings, a shift toward more expensive machines, and increased outlays for IT.
Analysts tracking Fastenal project the company’s earnings to increase marginally year over year to $2.04 per share in fiscal 2024 and rise another 7.9% annually to $2.19 per share in fiscal 2025.
Despite Morgan Stanley’s bullish stance, Wall Street is cautious overall on FAST stock, with a consensus “Hold” rating. Out of the 15 analysts offering recommendations, three suggest a “Strong Buy,” 10 maintain a “Hold,” and two have a “Strong Sell” rating.
Industrial Stock #2: Vulcan Materials Company
Alabama-based Vulcan Materials Company (VMC) is one of the top domestic producers of construction aggregate and plays a crucial role in powering infrastructure, construction, and economic growth. The company dominates the market with its vast reserves of crushed stone, sand, and gravel, strategically located in high-growth regions across the U.S. Beyond aggregates, Vulcan excels in producing asphalt and ready-mixed concrete.
Valued at $37.1 billion by market cap, shares of VMC have delivered healthy gains of 37% over the past 52 weeks and 27.8% on a YTD basis.
Vulcan boasts a respectable 11-year track record of consecutive dividend hikes, reaffirming its commitment to shareholders. On Oct. 11, Vulcan declared a quarterly dividend of $0.46 per share, set to be distributed to its shareholders on Nov. 27.
In the third quarter, the company returned around $61 million to shareholders through dividends, marking a 6% increase compared to the same period last year. Its annualized dividend of $1.84 per share offers a modest 0.65% yield. The company maintains a conservative payout ratio of 26.31%, leaving ample room for further dividend increases.
Vulcan's Q3 earnings report on Oct. 30 fell short of Wall Street’s expectations, but the company's shares soared more than 6%, thanks to impressive margin expansion despite severe weather disruptions. The company reported total revenue of $2 billion and adjusted EPS of $2.22, reflecting year-over-year declines of 8% and 3.1%, respectively.
The company saw notable improvements in its margins, reporting a gross margin of 28.2% and an adjusted EBITDA margin of 29%. These figures represent a rise from the year-ago quarter’s 27% and 27.6% margins, respectively, highlighting the company’s effective cost management and operational efficiency despite broader challenges.
CEO Tom Hill said, “We continue to enhance our core through expansion of our industry-leading aggregates cash gross profit per ton, which increased 10 percent in the third quarter and has grown by double-digits for eight consecutive quarters.”
The CEO also added that the company’s recent acquisition of Wake Stone Corporation, a top aggregates producer, will expand Vulcan's presence in high-growth regions of the Carolinas.
Capital expenditures for Q3 totaled $104 million, reflecting the company’s commitment to strategic investments. And for fiscal 2024, the company plans to invest between $625 million and $650 million in maintenance and growth initiatives, reinforcing its commitment to long-term expansion and operational efficiency.
However, due to the decline in shipments and ongoing weather challenges in the fourth quarter, the company now projects full-year adjusted EBITDA to be approximately $2 billion.
Analysts tracking Vulcan Materials expect the company’s bottom line to jump 2.3% year over year to $7.16 per share in fiscal 2024, and grow another 23.6% annually to $8.85 per share in fiscal 2025.
VMC stock has a consensus “Moderate Buy” rating overall. Out of the 19 analysts offering recommendations, 12 suggest a “Strong Buy,” one recommends a “Moderate Buy,” and six maintain a “Hold” rating.
Industrial Stock #3: Rocket Lab USA
Founded in 2006, California-based Rocket Lab USA, Inc. (RKLB) has quickly become a leading end-to-end space company, delivering reliable launch services, satellite manufacturing, spacecraft components, and on-orbit management solutions that make space more accessible, affordable, and efficient. Rocket Lab designs the Electron small orbital launch vehicle and is developing the Neutron launch vehicle for large-scale constellation deployment.
Since its first successful orbital launch in 2018, Electron has become the second most frequently launched U.S. rocket, delivering 198 satellites for both public and private sectors. The company’s spacecraft platforms support NASA missions to the Moon and Mars and even the first private commercial mission to Venus. With a market cap of nearly $11.2 billion, shares of this spacecraft manufacturing company have skyrocketed a stunning 488% over the past year and 366% on a YTD basis.
Following the company’s impressive Q3 earnings report, shares of Rocket Lab shot up by 28.4% on Nov. 13. The company, which is a key rival to Elon Musk’s SpaceX, reported revenue of $104.8 million, marking 55% year-on-year growth, and topping Wall Street’s forecast of $102.4 million.
RKLB posted a loss per share of $0.10, slightly deeper than last year’s $0.08 loss, but still outperforming analysts’ expectations of an $0.11 loss per share. Moreover, Rocket Lab achieved several significant milestones in Q3 that underline its leadership in the space industry.
The company secured a major multi-launch service agreement for its Neutron rocket with a confidential satellite constellation customer, further cementing its position in medium launch markets. Rocket Lab also completed 12 Electron launches to date, setting a new record with more missions still to come, and inked $55 million in new Electron contracts, reinforcing its dominance in global launch services.
Adding to its achievements, Rocket Lab was selected by NASA for a groundbreaking study contract to explore a mission for retrieving samples from Mars and returning them to Earth.
Looking forward to Q4, with additional Electron launches planned for November and December alongside continued progress in its Neutron rocket and space systems, management anticipates revenue to range between $125 million and $135 million. While non-GAAP gross margin is forecast between 32% and 34%, the company projects its adjusted EBITDA loss for the quarter to land between $27 million and $29 million.
Overall, Wall Street is optimistic, with a consensus “Moderate Buy” rating for RKLB stock. Of the 13 analysts in coverage, eight advise a “Strong Buy,” and the remaining five recommend a “Hold.”
