Every time you refresh your brokerage app, another semiconductor stock appears to jump 10%.
But it’s not just the chip stocks that are brimming with bullish potential and bits of gains; the industrial sector is also involved. And with earnings season in full swing, some companies in the space are using past estimates, raising guidance, and giving their investors more reasons to celebrate.
The industrial sector still trails the energy and technology sectors the most so far in 2026. But Industrial Select Sector SDPR Fund NYSEARCA: XLI is up more than 10% year-to-date (YTD), and several sector-specific catalysts continue to drive significant earnings growth.
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Physical AI Buildout: One of the current investment trends for 2026 has been the shift from software to hardware in the AI industry. Hyperscaler capex projections continue to reach nosebleed levels, but the barriers are no longer digital. Data centers require power generation, cooling systems, transformers, quality control equipment, and a host of components to ‘install’ intelligence. These physical constraints have been useful in industries that build infrastructure around more complex models.
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Mega Cap Tech Rotation: Even without building a data center, industries can be beneficiaries of run-of-the-mill industry cycles. While semiconductors are currently leading the rally, investors are circling out of high-priced, high-value technology stocks and into cheaper sectors like industrials. In addition to providing better value, money managers also understand that the AI revolution will be supported by significant physical infrastructure.
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Defense Growth Lagging: The wars in Iran and Ukraine have created a tense situation as Europe and the US both seek to increase defense spending and replenish depleted resources. Defense contractor backlogs are reaching record levels, such as Lockheed Martin Corp.’s nearly $200 billion order book. NYSE: LMTwhich will provide consistent income for years to come.
Three industries reported earnings during the past week, each with their own market-beating numbers. But how much more is left? Let’s analyze the reports and see which companies can sustain their momentum.
WW Grainger: Strong Profits Drive Technological Momentum
WW Grainger Today
WW Grainger
- 52 week interval
- $906.52
▼
$1,286.56
- Dividend Yield
- 0.80%
- The P/E ratio
- 33.53
- Target Value
- $1,199.13
“For those who do” is the famous tag line of industrial supplier WW Grainger Inc. NYSE: GWWbut management did it in Q1 with a surprise earnings report.
The company beat analysts’ estimates for both EPS and revenue in Q1 2026, with the latter up more than 10% year-over-year (YOY).
Both the Endless Assortment and High-Touch segments grew in the quarter, and management raised full-year sales guidance and increased dividends by 10%, marking its 55th consecutive year of profit growth.
However, it was not a flawless conference call. Management warned that Q2 margins could be squeezed by inventory and fuel costs, and the Section 232 tariff situation remains very fragile.
GWW shares fell as much as 10% following the release, although they gave back some of those gains over the next few days.
Management noted the expected temper for Q2, but tech momentum remains strong. The Relative Strength Index (RSI) is firmly in bullish territory, and the stock appears to have support at its 50-day moving average, which crossed above the 200-day moving average in February.
Rockwell Automation: The Story of AI Growth Coming Out of the Edge
Rockwell Automation Today
Rockwell Automation
- 52 week interval
- $298.70
▼
$463.48
- Dividend Yield
- 1.21%
- The P/E ratio
- 47.57
- Target Value
- $438.70
Rockwell Automation Inc. NYSE: ROK is one of the first AI companies.
The $50 billion tech giant has been helping customers automate industrial processes, and advances in AI and machine learning are accelerating revenue.
Rockwell reported Q2 2026 financial results on May 5, beating EPS and revenue estimates by 13% and 3.5%, respectively.
The $2.24 billion in revenue for the quarter represents roughly 12% YOY growth, and management raised full-year 2026 sales guidance to a 5-9% growth range, with midpoint EPS of $12.80.
After the report, the stock received 11 target increases from analysts, including a new Street-high of $525 from Morgan Stanley. Analysts now see Rockwell as a beneficiary of several emerging AI trends, including factory automation and data center energy efficiency.
Technological trends are also pointing very upward; stocks are now trading above both the 50-day and 200-day moving averages, and the Moving Average Convergence Divergence (MACD) has increased significantly since the end of March.
Powell Industries: Crucial Cog in Data Center Infrastructure
Powell Industries Today
Powell Industries
- 52 week interval
- $54.75
▼
$328.00
- Dividend Yield
- 0.12%
- The P/E ratio
- 59.90
- Target Value
- $236.67
The markets have learned to trust Powell, but we’re not talking about the Federal Reserve Chairman here.
Powell Industries Inc. NASDAQ: POWL is a mid-sized electrical engineering company that missed EPS and revenue estimates when it reported Q2 2026 financial results on May 5.
However, investors care more about the future than the past, and Powell’s track record and clean balance sheet have seen the stock achieve a nearly 190% YTD gain and a nearly 400% gain over the past year.
A backlog of $1.8 billion is expected to provide cash flow through fiscal year 2028, and the company currently sits at $545 million without debt, which has management exploring capacity expansion.
If there’s one concern for POWL investors, it’s that the rally seems overextended. The stock has enjoyed strong support at the 50-day moving average since the start of its rally last year, but is now trading a few standard deviations above the trend.
The MACD is still bullish but looks increasingly unstable, with the MACD and signal lines moving away from each other. A short-term pullback may not be such a bad thing following a gain of over 30% in the past month, and it will give new investors a better entry point into the stock which is now trading at a whopping 55x forward earnings and 10x sales.
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