This sector is conquering the market. Here are 4 stocks that could continue to grow.

The sector benefited from the Federal Reserve’s decision to stop raising interest rates to maintain dynamic economic growth. This favors sales to heavy equipment manufacturers, who should see sufficient demand from construction companies, commodity producers and manufacturers, while transportation companies will also see strong demand.

This forces Trivariate Research to modernize the sector from underweight to market weight. The call is based on the fact that industrial sectors are now seen fundamentally as growth resources. The increase in revenues will result from the demand for clean energy, which is replacing traditional energy and requiring more equipment and production capacity. Among other things, industrial automation means increased business spending on more efficient manufacturing products and consumables.

Together, this should help boost sales at a rate of several percentage points above gross domestic product, while profit margins could expand slightly as the costs of goods and labor rise at a slower rate than revenue growth. That’s why analysts expect the Industrial Select Sector ETF’s returns to grow at about 16% annually for the two years after this year.

The industry is not cheap. The industrial ETF trades at 21 times forward 12-month earnings, a hair above the S&P 500’s 20.7 times. The group’s earnings growth – several percentage points better than the entire S&P 500 – makes industrials can maintain high valuations for a long period of time.

Three-dimensionally checked industrial companies for companies with greater growth potential. Companies that made the list include Eaton
,

Deer
,

and Waste Management
,

All of these companies are expected to grow at double-digit annual rates over the next three years.

Parker Hannifin
,

The $68 billion maker of drive and control systems for hundreds of thousands of customers across sectors has also made the switch. It makes sense. Various companies in this market are producing more parts and increasing the capabilities of their products, so sales of these goods are expected to grow at a mid-single digit annual rate for at least the next five years, according to Grand View Research.

Parker Hannifin is expected to grow sales by about 5% annually over the next three years, to $23.5 billion by 2027, according to FactSet. The company could see a combination of higher prices and higher volumes, and since it generates more than $2 billion in free cash flow each year, it could increase its earnings by making small acquisitions, which it does most years.

“With $35 billion in deployable capital (over 5 years) and an active M&A path, we gain greater comfort that there are multiple paths to positive earnings revisions in the near future,” writes Mizuho Securities analyst Brett Linzey, who upgraded the stock to Buy from Neutral.

According to FactSet, this should help earnings grow 10% annually through 2027, when they should reach $34 per share. Linzey is even more optimistic. He believes the share price will top $35 in the next five years thanks to more deals.

However, the shares do not look expensive. It trades at just over 20 times earnings, which is a discount to comparable companies like Illinois Tool Works and RTX
.

Linzey writes that the market is undervaluing Parker Haniffin’s aviation business and that this value could increase as the segment continues to grow.

This is a great way to make profits.

write to Jacob Sonenshine at [email protected]