The Industrials sector has remained resolute whilst dealing with the wide-ranging challenges faced as a result of the Covid-19 pandemic so far. The crucial nature of some of the industries within the Industrials sector has meant that the typical demand and supply shocks that have been experienced across most sector groups have not been so profoundly felt. This has been beneficial for companies operating in the sector, who have better visibility over future revenues as a result.
Given the importance of the industry groups and the contractual nature of their work, the result has been a favourable performance when compared with the wider market. Since the start of the year, the Industrials FTSE All Share sector benchmark has witnessed a -10.92% decline, less than the -14.41% of the overall FTSE All Share over the same time period.
Nevertheless, regardless of the steadfast performance, Covid-19 poses serious risks and threats to the Industrials sector, the likes of which it has never seen before. Industry groups have responded to the changes brought about by the pandemic in different ways, some have proven to be more effective than others.
However, no matter how good the response has been, the fundamentals for the aviation, construction, engineering and transportation industries remain onerous. Costs are rising rapidly just as revenues continue to dissipate. The full impacts of the pandemic haven’t yet been fully quantified, but the numbers are likely to reveal a grim picture for the next few years.
Source: ONS
In this article we will examine the Industrials sector and its industry groups in more detail, assessing the performances of the industries so far. The article will also take a closer look at some valuation metrics of the industry groups and target a few of the top-ranking stocks within the sector to identify how these companies are responding to the sudden structural changes to the way in which the Industrials sector operates.
Performance of the Industry Groups
The collapse of aviation globally has unquestionably taken its toll on the Aerospace & Defence industry. It has been, by quite some distance, the worst performer in the Industrial sector, falling by -36.49%. Though, if we take a closer look at the constituents in the industry group, we can see that firms with greater…
