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3 Industrial Services Stocks to Buy as Industry Prospects Improve
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The near-term outlook for the Zacks Industrial Services industry appears encouraging, supported by rising e-commerce activity and a recent uptick in the production index. Industry participants are focused on strategic pricing, cost-reduction initiatives and enhancing productivity and efficiency to boost margins.
Companies such as Fastenal (FAST - Free Report) , MSC Industrial Direct Co., Inc. (MSM - Free Report) and ScanSource (SCSC - Free Report) are well-positioned to benefit from these trends. They are actively cutting costs, improving operational efficiency and investing in automation and digitization, moves that are expected to drive sustainable growth and strengthen their market position in the coming quarters.
Industry Description
The Zacks Industrial Services industry comprises companies that provide industrial equipment products and MRO (maintenance, repair and operations) services. It includes routine maintenance, emergency maintenance and spare part inventory control, which keep a facility and its equipment in good operating condition. Industry participants serve a wide array of customers, ranging from commercial, government and healthcare to manufacturing. The industry's products (power tools, hand tools, cutting fluids, lubricants, personal protective equipment and consumables) are utilized in production and plant maintenance but are not directly related to customers’ core products or services. These companies reduce MRO supply-chain costs and improve customers' plant floor productivity by offering inventory management and process and procurement solutions.
Trends Shaping the Future of the Industrial Services Industry
E-Commerce to be a Growth Driver: MRO demand is significantly impacted by the evolution of e-commerce. Customer demand for highly tailored solutions, with real-time access to information and rapid delivery of products, is rising. Customers want to execute their business activities in the most efficient way possible, which often means online. E-commerce is expected to surge due to rising Internet penetration, widespread smartphone adoption and the convenience of online shopping. Additionally, advancements in digital payments, logistics and personalization are making the online shopping experience faster, safer and more customer-centric. To capitalize on this trend, industrial service companies are heavily investing in improving their digital capabilities and increasing their e-commerce share.
Production Index Enters Expansion Territory: The manufacturing sector contributes around 70% to the industry's revenues. The Institute for Supply Management’s manufacturing index has been in contraction for the past seven months and registered 49.1% in September. It, however, marked a slight increase from the 48.7% in August. The Production Index entered expansion territory again (after contracting in August), registering 51%. Notably, the index had been above 50% (indicating expansion) in June and July. This looks promising for the industry.
Pricing Actions to Combat High Costs: The industry has been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. The imposition of tariffs and retaliatory tariffs will also heighten costs for the industry. Industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency and the diversification of the supplier base to mitigate some of these headwinds.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects in the near term. The Zacks Industrial Services Industry, a 19-stock group within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #77, which places it in the top 31% of 245 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few Industrial services stocks that investors can add to their portfolio, it is worth taking a look at the industry’s stock-market performance and its valuation picture.
Industry Vs S&P 500 & Sector
The Industrial Services industry has outperformed its sector but lagged the Zacks S&P 500 composite over the past year. Over this period, the industry has grown 6.5% compared with the sector’s rise of 5.1%. The Zacks S&P 500 composite has moved up 18.9%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Industrial Services companies, we see that the industry is currently trading at 36.39X compared with the S&P 500’s 18.64X and the Industrial Products sector’s forward 12-month EV/EBITDA of 19.85X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) TTM Ratio
Enterprise Value/EBITDA (EV/EBITDA) TTM Ratio
Over the last five years, the industry traded as high as 40.32X and as low as 24.34X, the median being 33.79X.
3 Industrial Services Stocks to Buy
ScanSource: The company recently announced a new resale relationship with Zoom Communications, Inc., which provides ScanSource partners with greater flexibility to deliver cloud-based collaboration technology solutions. Despite cautious technology spending weighing on revenues, the company’s shifting business mix, operational execution and cost-saving efforts have been driving stronger margins and cash flow. Debt reduction, shareholder returns and strategic acquisitions remain key priorities. Acquisitions of Resourcive and Advantix have been accretive to fiscal 2025 earnings. Resourcive delivers strategic IT sourcing solutions to the mid-market and enterprise businesses, while Advantix specializes in wireless enablement solutions. Looking ahead, the company maintains a strong acquisition pipeline and intends to pursue strategic investments in fiscal 2026 to accelerate growth and drive margin expansion. SCSC shares have appreciated 44.8% in the past six months.
The Zacks Consensus Estimate for Greenville, SC-based ScanSource’s fiscal 2025 earnings has moved north by 7.9% in the past 90 days. The consensus mark indicates year-over-year growth of 11%. SCSC has a long-term estimated earnings growth rate of 15% and currently sports a Zacks Rank #1 (Strong Buy).
Fastenal: The company is benefiting from steady daily sales growth, improved customer contract signings and leverage from its focus on eBusiness and Digital Footprint. In the second quarter of 2025, daily eBusiness sales rose 13.5%. Sales through Digital Footprint were 61% of total sales compared with 59.4% in the year-ago quarter. The company aims to lift its share from Digital Footprint further to 63-64% in 2025. Fastenal is also making concerted efforts to control costs and offset cost inflation, particularly in container and transportation costs. The strategies for the same include automating warehouses, increasing delivery efficiency through its trucking network and selling more private-label products with higher margins. This will aid the company to improve its efficiency and also boost margins. The company’s shares have gained 29.5% in the past six months.
The Zacks Consensus Estimate for the Winona, MN-based company’s fiscal 2025 earnings has moved up 1.8% in the past 90 days. The consensus mark indicates year-over-year growth of 11%. FAST has a long-term estimated earnings growth rate of 9.9% and currently carries a Zacks Rank #2 (Buy).
Price & Consensus: FAST
MSC Industrial: The company recently indicated that, supported by stronger-than-expected average daily sales in June and July, it expects fiscal fourth-quarter results (ended Aug. 31, 2025) to land in the upper half of its guided range. MSM had projected average daily sales growth between a decline of 0.5% and an increase of 1.5%, with an adjusted operating margin of 8.5–9%. In the prior fiscal third quarter, management highlighted positive trends, including sequential improvement among core customers, momentum in high-touch solutions and a growing productivity pipeline. Looking ahead, the company remains committed to its long-term goals of delivering growth at least 400 basis points above the IP Index and expanding operating margins to the mid-teens. To support these objectives, MSM continues to pursue strategic acquisitions aimed at strengthening its offerings and expanding into new and existing markets. MSC Industrial’s shares have gained 29.2% in the past six months.
The Zacks Consensus Estimate for Melville, NY-based MSM’s 2025 earnings has moved up 0.5% in the past 90 days. The company has a trailing four-quarter earnings surprise of 5.98% on average. It currently carries a Zacks Rank of 2.
Price & Consensus: MSM
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3 Industrial Services Stocks to Buy as Industry Prospects Improve
The near-term outlook for the Zacks Industrial Services industry appears encouraging, supported by rising e-commerce activity and a recent uptick in the production index. Industry participants are focused on strategic pricing, cost-reduction initiatives and enhancing productivity and efficiency to boost margins.
Companies such as Fastenal (FAST - Free Report) , MSC Industrial Direct Co., Inc. (MSM - Free Report) and ScanSource (SCSC - Free Report) are well-positioned to benefit from these trends. They are actively cutting costs, improving operational efficiency and investing in automation and digitization, moves that are expected to drive sustainable growth and strengthen their market position in the coming quarters.
Industry Description
The Zacks Industrial Services industry comprises companies that provide industrial equipment products and MRO (maintenance, repair and operations) services. It includes routine maintenance, emergency maintenance and spare part inventory control, which keep a facility and its equipment in good operating condition. Industry participants serve a wide array of customers, ranging from commercial, government and healthcare to manufacturing. The industry's products (power tools, hand tools, cutting fluids, lubricants, personal protective equipment and consumables) are utilized in production and plant maintenance but are not directly related to customers’ core products or services. These companies reduce MRO supply-chain costs and improve customers' plant floor productivity by offering inventory management and process and procurement solutions.
Trends Shaping the Future of the Industrial Services Industry
E-Commerce to be a Growth Driver: MRO demand is significantly impacted by the evolution of e-commerce. Customer demand for highly tailored solutions, with real-time access to information and rapid delivery of products, is rising. Customers want to execute their business activities in the most efficient way possible, which often means online. E-commerce is expected to surge due to rising Internet penetration, widespread smartphone adoption and the convenience of online shopping. Additionally, advancements in digital payments, logistics and personalization are making the online shopping experience faster, safer and more customer-centric. To capitalize on this trend, industrial service companies are heavily investing in improving their digital capabilities and increasing their e-commerce share.
Production Index Enters Expansion Territory: The manufacturing sector contributes around 70% to the industry's revenues. The Institute for Supply Management’s manufacturing index has been in contraction for the past seven months and registered 49.1% in September. It, however, marked a slight increase from the 48.7% in August. The Production Index entered expansion territory again (after contracting in August), registering 51%. Notably, the index had been above 50% (indicating expansion) in June and July. This looks promising for the industry.
Pricing Actions to Combat High Costs: The industry has been experiencing significant inflation levels, including higher prices for labor, freight and fuel. The companies are witnessing labor shortages for some positions and incurring steep labor costs to meet demand. The imposition of tariffs and retaliatory tariffs will also heighten costs for the industry. Industry players are focusing on pricing actions, cost-cutting measures, efforts to improve productivity and efficiency and the diversification of the supplier base to mitigate some of these headwinds.
Zacks Industry Rank Indicates Bright Prospects
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates encouraging prospects in the near term. The Zacks Industrial Services Industry, a 19-stock group within the broader Zacks Industrial Products sector, currently carries a Zacks Industry Rank #77, which places it in the top 31% of 245 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few Industrial services stocks that investors can add to their portfolio, it is worth taking a look at the industry’s stock-market performance and its valuation picture.
Industry Vs S&P 500 & Sector
The Industrial Services industry has outperformed its sector but lagged the Zacks S&P 500 composite over the past year. Over this period, the industry has grown 6.5% compared with the sector’s rise of 5.1%. The Zacks S&P 500 composite has moved up 18.9%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the forward 12-month EV/EBITDA ratio, a commonly used multiple for valuing Industrial Services companies, we see that the industry is currently trading at 36.39X compared with the S&P 500’s 18.64X and the Industrial Products sector’s forward 12-month EV/EBITDA of 19.85X. This is shown in the charts below.
Enterprise Value/EBITDA (EV/EBITDA) TTM Ratio
Enterprise Value/EBITDA (EV/EBITDA) TTM Ratio
Over the last five years, the industry traded as high as 40.32X and as low as 24.34X, the median being 33.79X.
3 Industrial Services Stocks to Buy
ScanSource: The company recently announced a new resale relationship with Zoom Communications, Inc., which provides ScanSource partners with greater flexibility to deliver cloud-based collaboration technology solutions. Despite cautious technology spending weighing on revenues, the company’s shifting business mix, operational execution and cost-saving efforts have been driving stronger margins and cash flow. Debt reduction, shareholder returns and strategic acquisitions remain key priorities. Acquisitions of Resourcive and Advantix have been accretive to fiscal 2025 earnings. Resourcive delivers strategic IT sourcing solutions to the mid-market and enterprise businesses, while Advantix specializes in wireless enablement solutions. Looking ahead, the company maintains a strong acquisition pipeline and intends to pursue strategic investments in fiscal 2026 to accelerate growth and drive margin expansion. SCSC shares have appreciated 44.8% in the past six months.
The Zacks Consensus Estimate for Greenville, SC-based ScanSource’s fiscal 2025 earnings has moved north by 7.9% in the past 90 days. The consensus mark indicates year-over-year growth of 11%. SCSC has a long-term estimated earnings growth rate of 15% and currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: SCSC
Fastenal: The company is benefiting from steady daily sales growth, improved customer contract signings and leverage from its focus on eBusiness and Digital Footprint. In the second quarter of 2025, daily eBusiness sales rose 13.5%. Sales through Digital Footprint were 61% of total sales compared with 59.4% in the year-ago quarter. The company aims to lift its share from Digital Footprint further to 63-64% in 2025. Fastenal is also making concerted efforts to control costs and offset cost inflation, particularly in container and transportation costs. The strategies for the same include automating warehouses, increasing delivery efficiency through its trucking network and selling more private-label products with higher margins. This will aid the company to improve its efficiency and also boost margins. The company’s shares have gained 29.5% in the past six months.
The Zacks Consensus Estimate for the Winona, MN-based company’s fiscal 2025 earnings has moved up 1.8% in the past 90 days. The consensus mark indicates year-over-year growth of 11%. FAST has a long-term estimated earnings growth rate of 9.9% and currently carries a Zacks Rank #2 (Buy).
Price & Consensus: FAST
MSC Industrial: The company recently indicated that, supported by stronger-than-expected average daily sales in June and July, it expects fiscal fourth-quarter results (ended Aug. 31, 2025) to land in the upper half of its guided range. MSM had projected average daily sales growth between a decline of 0.5% and an increase of 1.5%, with an adjusted operating margin of 8.5–9%. In the prior fiscal third quarter, management highlighted positive trends, including sequential improvement among core customers, momentum in high-touch solutions and a growing productivity pipeline. Looking ahead, the company remains committed to its long-term goals of delivering growth at least 400 basis points above the IP Index and expanding operating margins to the mid-teens. To support these objectives, MSM continues to pursue strategic acquisitions aimed at strengthening its offerings and expanding into new and existing markets. MSC Industrial’s shares have gained 29.2% in the past six months.
The Zacks Consensus Estimate for Melville, NY-based MSM’s 2025 earnings has moved up 0.5% in the past 90 days. The company has a trailing four-quarter earnings surprise of 5.98% on average. It currently carries a Zacks Rank of 2.
Price & Consensus: MSM