2 Diversified Operations Stocks to Gain on Promising Industry Trends

Industry Overview - The Zacks Diversified Operations industry is benefiting from strong performance in aerospace, defense, and oil & gas sectors, driven by growth in commercial aviation and demand in medical and life sciences [1][4] - Companies in this industry operate across various markets including oil and gas, industrial, electronics, aviation, and healthcare, providing equipment and solutions [3] Major Trends - Strong demand from defense and governmental sectors, along with increased exploration activities in oil and gas, is positively impacting the industry [4] - Continuous investments in innovation and technological advancements are expected to drive growth, with a focus on digitizing business operations to enhance productivity and cost management [5] Challenges - The manufacturing sector is experiencing persistent weakness, with the Manufacturing Purchasing Manager's Index at 46.5% in October, indicating contraction [6] - Supply-chain disruptions, particularly regarding electrical and electronic components, are a concern for industry participants, as reflected in slower deliveries [7] Industry Performance - The Zacks Diversified Operations industry holds a Zacks Industry Rank of 61, placing it in the top 24% of over 250 Zacks industries, indicating strong prospects [8] - The industry's earnings estimates for the current year have increased by 14.4% over the past year, reflecting positive analyst sentiment [9] - Over the past year, the industry has underperformed the S&P 500, rising 13.7% compared to the S&P 500's 36.6% growth [11] Valuation - The industry is currently trading at a forward P/E of 15.42X, compared to the S&P 500's 22.43X, indicating potential undervaluation [12] Notable Companies - PDD Holdings: A multinational commerce group with a strong e-commerce business model, showing a 16.2% increase in shares over the past year and a 0.5% upward revision in 2024 earnings estimates [12][13] - Federal Signal Corporation: This company has seen a 38.9% increase in shares over the past year, benefiting from strong aftermarket demand and effective pricing actions [14][15]