The industrials sector has delivered strong performance this year. Globally, the MSCI World Industrials Sector Index has surged by 15%, almost double the 7.6% gain of the MSCI All-Country World Investable Market Index, as of June 16. Closer to the domestic market, the S&P 500 Industrials Sector Index is up 8.7%, compared to a 2.6% increase in the broader S&P 500.
This outperformance has caught the attention of market experts, including J.P. Morgan’s senior analyst Stephen Tusa, who recently discussed the sector’s outlook in a mid-May interview with CNBC. Despite only modest growth in group earnings, Tusa noted that industrials have emerged as the top-performing industry year to date.
Tusa noted that while the sector is up in 2025, corporate earnings estimates have been revised down by 2–3%. The sector’s valuation has expanded back to its historical premium relative to the broader market, largely driven by multiple expansion rather than fundamental growth. He expects that some of the recent revisions may be reversed, with upcoming data likely to push earnings estimates higher again.
One key theme, according to the analyst, is pricing power. Industrial companies now seem to be much more aggressive and confident about price increases- somewhat like what they did during COVID-19-era supply chain disruption and inflationary environment. Some companies even implemented price increases before the tariffs actually came into force, demonstrating a proactive approach to margin protection. If input costs fall, those price increases could result in margin gains rather than being rolled back. Tusa believes roughly 75% of those increases are structural rather than temporary surcharges, which could fade depending on competition but won’t significantly erode profitability for value-added capital goods firms.
The analyst laid emphasis on the fact that demand stays the prime variable to be observed. According to the analyst, a good number of companies are expecting slight declines in volumes but are confident that they can be made up for through good prices. Far greater uncertainty would be how demand at the end market will behave through changes in tariff policies and macro-volatility.
Regarding capital expenditure (CapEx) trends, Tusa noted that despite recent volatility, most companies have maintained their spending plans steady. CapEx budgets across roughly $1 trillion in industries they tracked remain mostly unchanged, with some upside in data center and utility investments, and minor pullbacks in oil, gas, and chemicals.
With those insights, let’s explore the 10 most undervalued industrial stocks to buy according to analysts.
A technician inside a production line operating sophisticated machinery and components produced by a company.
Our Methodology
To identify the most undervalued opportunities within the U.S. industrial sector, we began by screening industrial companies with a market capitalization exceeding $2 billion. From this pool, we selected stocks trading at a forward price-to-earnings (P/E) ratio of 15 or lower and offering a potential upside of at least 20%, based on analyst price targets. We then ranked the top 10 qualifying stocks in ascending order of their potential upside. To provide additional insight into institutional investor interest, we also included hedge fund sentiment data using Insider Monkey’s Q1 2025 hedge fund holdings database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Note: All pricing data is as of market close on June 16.
10 Most Undervalued Industrial Stocks to Buy According to Analysts
10. FedEx Corp. (NYSE:FDX)
Forward PE: 11.6
Potential Upside: 21%
Number of Hedge Fund Holders: 62
FedEx Corp. (NYSE:FDX) is one of the 10 most undervalued industrial stocks to buy according to analysts. A weaker industrial economy has impacted FedEx’s growth, and the company had to lower its profit guidance early in the year due to higher-than-expected inflation and softening demand. Since its last earnings report in March, little has improved on that front, and the stock has reflected this weakness, falling 19.4% year-to-date.
However, Citi analyst Ariel Rosa remains constructive on the name. Rosa, in a note dated June 18, reiterated a Buy rating on the stock, with an unchanged $267 price target. She highlighted a series of strategic changes intended to strengthen its long-term position, which serves as the basis for her optimistic view. Her rating also reflects confidence in FedEx’s ability to improve efficiency and earnings despite near-term challenges.
The company is moving forward with its Network 2.0 plan, integrating its Express and Ground units to streamline operations. It is also preparing to spin off its Freight business, a move seen as unlocking more focused growth potential and value from this business.
In addition, FedEx continues to benefit from its DRIVE cost-cutting program, which has already delivered notable savings and is expected to support margin improvement over time. While the demand backdrop remains uncertain, especially with global trade slowing, Rosa believes FedEx’s restructuring efforts and leadership changes could pay off in the longer term.
FedEx Corp. delivers packages and freight to multiple countries and territories through an integrated global network. The Company provides worldwide express and freight delivery, ground small-parcels, less-than-truckload, supply chain management, customs brokerage services, trade facilitation, and electronic commerce solutions.
9. Delta Air Lines Inc. (NYSE:DAL)
Forward PE: 9.1
Potential Upside: 21%
Number of Hedge Fund Holders: 67
Delta Air Lines Inc. (NYSE:DAL) is one of the 10 most undervalued industrial stocks to buy according to analysts. On June 18, Bernstein analyst David Vernon revised his near-term view on Delta Air Lines, trimming the price target slightly to $60 from $61 while maintaining an Outperform rating.
The analyst’s downward adjustment to the target price reflect his latest hike in fuel cost estimates. He attributes the rise to the growing geopolitical risks and the on-going tensions between Iran and Israel. The analyst notes that while airlines can typically pass fuel costs onto consumers through higher fares, in such scenarios, the pricing power weakens, especially if geopolitical concerns hit traveler sentiment. Thus, it becomes difficult for companies to pass on the costs to consumers during supply-driven price shocks.
Bernstein also notes that the continued uncertainty in the Middle East could dampen demand during the summer travel period which is important for the sector. This adds another layer of complexity to forecasting near-term performance, prompting a more cautious stance in earnings estimates.
Despite these pressures, Vernon’s overall rating remains positive, suggesting confidence in Delta’s longer-term positioning and operational strength even as short-term headwinds persist.
Delta Air Lines Inc. provides scheduled air transportation for passengers, freight, and mail over a network of routes.
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