Industrial Services Sector Faces Headwinds as E-Commerce Momentum Builds

The Industrial Services space is navigating a complex landscape shaped by manufacturing weakness and escalating tariff pressures, though emerging opportunities in e-commerce present a potential growth outlet. The sector comprises equipment providers and maintenance, repair and operations (MRO) service specialists serving commercial, government, healthcare and manufacturing clients across North America, Europe and Asia-Pacific regions.

Market Headwinds Creating Near-Term Pressure

Manufacturing Downturn Weighs on Revenue

The manufacturing sector—which accounts for roughly 70% of the industry’s revenue—has been a significant drag on performance. The Institute for Supply Management’s manufacturing index contracted for 26 consecutive months through December 2024. While a brief recovery emerged in January and February (50.9% and 50.3% readings, respectively), the index slipped back into contraction by March at 48.2%, signaling nine months of consecutive decline.

The New Orders Index painted an equally troubling picture, remaining in contraction for three straight months in November after showing its last expansion in August at 51.4%. Since May 2022, when a 24-month expansion streak ended, the index has failed to deliver consistent growth momentum. Customer purchasing decisions remain cautious as businesses absorb the impact of tariff uncertainty.

Cost Inflation and Tariff Exposure

Input cost pressures are compounding revenue challenges. Labor shortages in specialized roles have driven steep wage costs, while freight and fuel expenses remain elevated. Industry participants are implementing pricing adjustments, supplier diversification strategies and productivity improvements to offset these headwinds. The threat of additional tariffs looms large, creating further margin compression risk for companies dependent on imported materials and components.

Valuation metrics reflect current industry struggles. The sector trades at 35.72X trailing 12-month EV/EBITDA, a substantial premium to the S&P 500’s 18.83X and the broader Industrial Products sector’s 25.54X. Over the past year, the Industrial Services industry has grown just 0.1% versus the sector’s 7.1% gain and the S&P 500’s 19.3% advance.

E-Commerce Emerges as Growth Catalyst

Despite near-term headwinds, the rise of e-commerce represents a pivotal tailwind for the sector. Customers increasingly demand tailored solutions with real-time information access and rapid product delivery through digital channels. E-commerce adoption is accelerating due to rising internet penetration, smartphone ubiquity and improving digital payment infrastructure.

Leading Industrial Services companies are capitalizing on this shift through aggressive digital transformation investments. Enhanced data analytics, sophisticated IT systems and improved logistics capabilities are enabling faster, safer and more personalized online shopping experiences. This structural shift should benefit well-positioned players for years to come.

Four Stocks Positioned for Recovery

Andritz (ADRZY): Strong Order Momentum Signals Demand Recovery

Andritz has demonstrated resilience through robust order growth. Third-quarter 2025 order intake surged 14.5% year-over-year, driven by strong demand in power generation, particularly within its Pulp & Paper, Hydropower, and Environment and Energy divisions. Order backlog reached the second-highest level in company history at 10.8% year-over-year growth.

The company projects 2025 revenues between €8.0 billion and €8.3 billion, with comparable EBITA margins expected at 8.6%-9.0%. Strategic acquisitions, including Allen-Sherman-Hoff, are expanding service capabilities and green technology offerings. Zacks Consensus Estimates for 2025 earnings have moved up 3% over the past 90 days, projecting 10% year-over-year growth, with 2026 estimates also up in recent weeks at 10% growth. ADRZY carries a Zacks Rank #2 (Buy).

Kion Group (KIGRY): Recovery Trajectory Emerging

Kion Group has observed strengthening customer demand across the first nine months of 2025. Both industrial trucks and warehouse automation markets appear to have moved beyond cyclical lows and are now on recovery paths, despite geopolitical uncertainties. Year-over-year order intake continues expanding across both operating segments.

In February 2025, the company announced an efficiency program targeting €140-€160 million in annual cost savings from 2026 forward. Debt reduction efforts remain on track. Share performance has reflected this momentum, gaining 42.8% over the past six months. Zacks Consensus Estimates for 2025 earnings have increased 10% over the past 90 days, projecting 16.2% year-over-year growth, with 2026 estimates suggesting 40.7% expansion. KIGRY carries a Zacks Rank #3 (Hold).

SiteOne (SITE): Market Share Expansion Play

SiteOne operates as the largest and only national full-product line wholesale distributor of landscape supplies, commanding a position three times larger than its nearest competitor. The company targets expansion from its current 18% market share within the $25 billion wholesale landscaping distribution market.

Strategic acquisitions—eight in 2025 alone—are broadening the customer base, expanding geographic reach and diversifying product offerings. Cost reduction initiatives, operational excellence programs and supply-chain optimization are driving margin expansion. Enhanced IT infrastructure and advanced data analytics capabilities support future growth. Shares have gained 5.2% over the past six months. Zacks Consensus Estimates for 2025 point to 24% year-over-year earnings growth, up 0.6% in the past 60 days, with 2026 estimates suggesting 26.4% expansion. SITE carries a Zacks Rank #3.

MSC Industrial (MSM): Profitability Return Signals Stabilization

MSC Industrial returned to daily sales growth in fiscal Q4 2025 across both Core Customer and total company segments. The company reported 5% earnings-per-share growth in the quarter, reflecting progress on its Mission Critical initiative. Management is prioritizing high-touch solutions, core customer reenergization and cost optimization as it enters fiscal 2026.

Long-term targets remain ambitious—delivering growth at least 400 basis points above the IP Index while expanding operating margins to mid-teens. Strategic acquisitions continue supporting market expansion and enhanced service offerings. Share performance has improved 2.9% over the past six months. Zacks Consensus Estimates for 2025 earnings have moved up 4% in the past 90 days, indicating 13.8% year-over-year growth, with 2026 estimates suggesting 12.3% expansion. The company has posted an average trailing four-quarter earnings surprise of 8.6%. MSM carries a Zacks Rank #3.

Investment Implications

While the Industrial Services sector faces genuine near-term challenges from manufacturing contraction and tariff uncertainty, the structural tailwind from e-commerce expansion offers compelling opportunities for well-managed operators. These four companies demonstrate operational resilience through order growth, cost discipline and strategic positioning within high-growth subsegments. Investors monitoring this space should focus on companies demonstrating both immediate execution and long-term adaptability.