The industrial sector, thanks to the AI boom and increased demand for infrastructure, has been one of the top gainers in the S&P 500 Index this year, with stocks up 15%, just slightly behind the IT sector. Against this backdrop, Barron's selected six stocks from the transportation, logistics, engineering and manufacturing sectors that have received one or more analyst upgrades over the past month. The publication recognizes that not all of them have performed well and not all are popular on Wall Street, but there may be "hidden gems" among them for investors willing to do some additional analysis.

Who made the list

- Elevator manufacturer Otis. Over the past month, the company has received a rating upgrade from JPMorgan and Wolfe Research. The former upgraded the rating from Neutral to Overweight and now advises investors to buy the company's shares, while the latter upgraded the rating from Underperform (below market) to Peer perform (on par with the market). JPMorgan believes the worst may be over for the company and its shares could be poised for a rally after a drawdown amid Donald Trump's duties. Otis shares have fallen nearly 5% since the beginning of the year and now trade at a price-to-earnings ratio for 2026 of 19.7 - below the S&P 500 average (21.4) and the historical value for the company itself (around 22), Barron's adds.

- CSX Railroad Company. It too has received two positive ratings in the past month, with Deutsche Bank and TD Cowen upgrading CSX stock from "hold" to "buy" after two of the largest U.S. railroad companies - Union Pacific and Norfolk Southern - announced a planned merger. If this merger is approved by regulators, a precedent for major deals has been set in the railroad industry and CSX itself could be a candidate for a takeover or merger, the publication said. Since the beginning of the year, CSX's market value has risen 11 percent, outperforming the main U.S. stock index, the S&P 500, by 1.5 percentage points.

- Truck manufacturer Paccar. Its revenue is expected to be about $27 billion in 2025, compared with nearly $32 billion a year earlier, but is forecast to rebound to $29 billion as early as 2026, Barron's writes. Analysts at Vertical Research Partners and Argus recently upgraded Paccar shares from "hold" to "buy," noting that the roughly 5% decline in quotes since the beginning of the year is a good buying opportunity in a downturn. They believe the current drawdown is fully in line with the "bottom" of the company's sales cycle.

- Engineering company Jacobs Solutions. KeyBanc analyst Sangita Jain upgraded her stock rating from Hold to Overweight from Buy, noting that Jacobs' business has become more attractive to investors following the spin-off of its government services division at the end of 2024 and the restructuring it has undergone. The stock is up 13.5% since the beginning of 2024.

- Logistics company Old Dominion Freight Line. The decline in business activity has had a negative impact on the shares of many logistics operators: the reduction in transportation volumes is putting pressure on prices and profitability, notes Barron's. Against that backdrop, Old Dominion shares have lost more than 15% since the beginning of the year. However, Vertical Research Partners analyst Jeffrey Kauffman saw the decline as an opportunity for entry and upgraded the stock from "hold" to "buy."

- Major industrial distributor Fastenal. Baird analyst Dave Manthi also upgraded Fastenal's stock from "hold" to "buy," noting that historically the best entry points for distributor stocks occur when the business activity index (PMI) dips below 50, signaling a slowdown in manufacturing demand. It just dropped from 49 to 48 in July, Barron's emphasized. Fastenal shares have soared more than a third since the start of the year, but Baird's target price of $55 a share suggests they are up another 13.5% from their Aug. 12 close.

This article was AI-translated and verified by a human editor

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