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Quarter-End Insights

Our Outlook for Industrials Stocks

Valuations climbed in the third quarter amid a steady, though still weak, end market backdrop.

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  • The U.S. industrial economy muddled along in the third quarter, with weakening industrial production growth and leading indicators. Construction spending remains an area of continued gains, however, and year-to-date U.S. light-vehicle sales are 14.7% higher than in 2011.
  • The Chinese construction markets continue to suffer, though stimulus spending could help in the short run for companies like  Joy Global (JOY) and  Caterpillar (CAT). Conversely, most industry companies don't expect much positive news from Europe in the near team.
  • After a stellar planting season for U.S. farmers, the worst drought in 25 years hit the region. We expect the environment to create some headwinds for farm equipment manufacturers, but the situation doesn't substantially alter our long-run projections for the firms.

Adam Fleck does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.