Illinois Tool Works Inc.

(New York Stock Exchange)
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Bullish +75

3 Industrial Stocks to Buy Before the Next Wave of Spending Hits

AI-generated analysis

πŸ“ˆ Industrial production hit a six-year high in April, signaling a cyclical upturn for American factories.

🚜 Farm machinery maker Deere & Company projects 2026 marks the bottom of the current cycle with mid-single-digit net sales growth.

🌾 USDA predicts combined farm profits will reach $153.4 billion in 2026, stabilizing above 2024 levels after a lousy year.

πŸ—‘οΈ Waste Management (WM) generated $25.2 billion in revenue last year with $3.0 billion in net income across over 260 landfills.

🌍 Global municipal waste management is expected to grow from $250 billion now to $426 billion by 2050 due to population growth.

πŸ”§ Illinois Tool Works (ITW) operates a diversified portfolio including auto parts, packaging solutions, and electronics testing machines.

πŸ“‰ ITW shares are down 17% from their mid-February peak due to modest organic growth, rising costs, and geopolitical tensions.

πŸš€ Analysts expect steady single-digit revenue growth for ITW to continue with even faster profit growth in the coming years.

πŸ› οΈ ITW's low-capital-cost product lineup positions it as a primary beneficiary of increased industrial investments.

πŸ“‰ Deere & Company stock has underperformed since February despite management's positive outlook on the cyclical turnaround.

πŸ† The Motley Fool recommends Illinois Tool Works and Waste Management but does not currently recommend Deere & Company.

πŸ“ˆ Stock Advisor claims a total average return of 994% compared to 207% for the S&P 500 over its history.

πŸ€– AI stocks remain market darlings, yet industrial activity is ramping up independently of artificial intelligence trends.

🏭 The Federal Reserve's measure of domestic industrial production entering positive territory suggests factories are revving their engines again.

🚜 Farm equipment spending typically increases when commodity prices are high and profit margins are wide for farmers.

🌐 Waste Management operates over 500 transfer facilities, 100 recycling centers, and medical waste incinerators in addition to landfills.

🧩 ITW manages its diverse business arms independently to avoid the complexity of managing a single large conglomerate.

πŸ“… ITW is focused on evolving its business through 2030 driven by innovation and reliable execution.

⚠️ Investors are advised not to wait for a crystal clear sign of turnaround before buying into industrial stocks like Deere's.

🌱 The stronger the economy and greater industrial activity, the more waste is produced, creating opportunities for waste management firms.

Bullish Signals
  • Illinois Tool Works' longer-term strategy is driving consistent outperformance relative to the overall market.
  • The Federal Reserve's measure of domestic industrial production hit a six-year high in April, signaling a strong economic backdrop for industrial stocks.
  • USDA predicts combined farm profits will reach $153.4 billion in 2026, stabilizing above 2024 levels and creating a ripe environment for a cyclical turnaround in the farm-machinery industry.
  • Deere & Company projects mid-single-digit net sales growth for equipment operations this fiscal year as the current cycle bottom is reached.
  • Waste Management generated $3.0 billion in net income last year on $25.2 billion of business, representing a 14% increase.
  • The global municipal waste management business is poised to grow from $250 billion now to $426 billion by 2050, offering significant long-term growth potential.
  • Analysts remain confident in Illinois Tool Works, expecting steady single-digit revenue growth to continue for the next several years accompanied by even faster profit growth.
  • Illinois Tool Works' low-capital-cost product lineup positions it as a primary beneficiary of any uptick in industrial investments or sustained consumer spending growth.
Risk Factors
  • ITW shares have dropped 17% from their mid-February peak due to modest organic growth in Q4, rising costs, geopolitical tensions, and interest rate worries.
  • The company's diversified product lineup is described as complex to the point of being difficult to manage, though it has mitigated this by letting arms operate independently.
Full Analysis
The article identifies three industrial sector stocks as potential buys ahead of an anticipated wave of economic spending, with specific focus on Illinois Tool Works (ITW), Waste Management (WM), and Deere & Company (DE). The author argues that domestic industrial production has hit a six-year high and is poised for a prolonged secular shift, which will drive demand for industrial goods. Illinois Tool Works is highlighted as the primary recommendation due to its diversified product lineupβ€”including automobile parts, restaurant equipment, packaging solutions, and adhesivesβ€”which positions it as an early beneficiary of increased industrial investment. The company has outperformed the S&P 500 in the long run by making smart, big-picture decisions that sometimes result in short-term disappointment. Despite a recent 17% drop from its mid-February peak due to modest organic growth and rising costs, analysts remain optimistic about steady single-digit revenue growth and faster profit expansion through 2030. Waste Management is presented as a slow-moving but essential play on population growth and increasing waste production, with the global municipal waste management business projected to grow from $250 billion to $426 billion by 2050. Deere & Company is discussed in the context of a cyclical turnaround for farm machinery, with projections that 2026 marks the bottom of the current cycle and mid-single-digit net sales growth expected for equipment operations. The article concludes by noting that ITW and WM are recommended by The Motley Fool, while Deere was not included in their top 10 list.