For years, technology has dominated the stock market, and with good reason. The profound change since the turn of the century has been breathtaking, and many normal, everyday things now were not even considered them. Smartphones, cloud computing, streaming and so much more that are ubiquitous now were pretty much on the drawing board in 2000.

However, after a year that most of us will never forget, there is a rumble in the markets, and it’s called rotation. One area that many see as a destination for institutional and retail money is the industrial sector. Regardless of who wins the White House next week, infrastructure is on the docket, and the plan to fix the country’s aging roads, bridges, airports, power grids and more will be massive.

In a series of new reports, Goldman Sachs remains very bullish on four industrial leaders that already have posted third-quarter results. While all four stocks are rated Buy and are outstanding ideas for growth investors, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Armstrong World Industries

Investors may be interested in this company as a strong industrial idea for 2021. Armstrong World Industries Inc. (NYSE: AWI) designs, manufactures and sells ceiling systems primarily for use in the construction and renovation of residential and commercial buildings in the United States, Canada and Latin America.

Its products include suspended mineral fiber, soft fiber, fiberglass wool, and metal ceiling systems, as well as wood, wood fiber, glass-reinforced-gypsum and felt ceiling and wall systems; ceiling perimeters and trims, as well as grid products that support drywall ceiling systems; ceilings and walls for use in commercial settings; and acoustical and architectural cast ceilings, walls, facades, columns and moldings and structural solutions.

After the company beat the consensus forecast for the quarter, the analysts said this:

Third quarter beat driven by higher revenues, margins: Armstrong reported third quarter EPS of $1.07, above our estimate and FactSet consensus of $0.94. The outperformance was primarily driven by better-than-expected revenues (down 11% versus our 17% forecast), a $0.07 contribution to results, demonstrating a modest sequential recovery across its end markets in the quarter. Assuming no COVID-related construction site shutdowns, the company expects further sequential market improvement in the fourth quarter.

Shareholders receive a 1.35% dividend. Goldman Sachs has a $78 price target for the shares, just shy of the $78.88 Wall Street consensus target. Armstrong World Industries stock closed Wednesday at $59.20, down almost 6% on the day.

Caterpillar

This large cap leader was hit by trade worries in 2019, but has rallied nicely this year off the March lows. Caterpillar Inc. (NYSE: CAT) is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives. It is also one of the most valuable brands in the world.

The company principally operates through three primary segments (Construction Industries, Resource Industries and Energy & Transportation). It also provides financing and related services through its Financial Products segment.

The company reported mixed results, but the analysts are very positive for 2021:

Following Caterpillar’s mixed third quarter results, we raise our 2020-22 EPS by 4% on average as stronger Construction Industries sales forecasts are partly offset by lower Energy & Transportation margin forecasts. On the positive side, the quarter revealed a backlog inflection in Construction Industries, inventory destock approaching historical trough, a sequential improvement in pricing driving a 1% margin beat versus our estimate. Beyond the quarter, momentum is building for the company’s autonomous mining trucks (comments imply 60 units delivered in 4Q), and we note that Caterpillar has commercial hydrogen-powered turbines, positioning the company to participate in a hydrogen infrastructure investment cycle if adoption of hydrogen emerges.

Shareholders receive a 2.61% dividend. The Goldman Sachs price target is $180, and the consensus target is $150.18. Caterpillar stock closed Wednesday down just over 4% to $151.16.

This industrial giant also delivered the goods for the quarter, and the analysts are very positive going forward. Cummins Inc. (NYSE: CMI) designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products worldwide.

The Cummins Engine segment manufactures and markets a range of diesel and natural gas powered engines under the Cummins and other customer brands for the heavy-and medium-duty truck, bus, recreational vehicle, light-duty automotive, construction, mining, marine, rail, oil and gas, defense and agricultural markets. This segment also offers new parts and services, as well as remanufactured parts and engines.

Goldman Sachs is very positive after earnings:

We raised our 2020-2022E EPS estimates by +8% on average following third quarter results that revealed sharply higher Engine and Components margins at the trough of the cycle. At the same time, Cummins has gained share across its portfolio – highlighted by 1%-2% of share gains across China truck and construction equipment markets – and we see scope for further share shift for diesel products in coming years amid rising regulations and change in prioritization for truck OEM research and development budgets. In New Power, sales were up 100% driven by work on a North American electrolyzer, and management notes there are several bid opportunities in the market as well.

Investors receive a 2.46% dividend. The $280 Goldman Sachs price target is well above the $218.94 consensus figure. Wednesday closing print for Cummins stock was $213.59, after a drop of almost 3% for the day.

Raytheon Technologies

This stock is down a stunning 33% this year and also resides on the Conviction List. Raytheon Technologies Corp. (NYSE: RTX) is an industry leader in defense, government electronics, space, information technology and technical services.

With a history of innovation spanning 97 years, Raytheon provides state-of-the-art electronics, mission systems integration, C5I products and services, sensing, effects and mission support for customers in more than 80 countries.

Last year, United Technologies and Raytheon agreed to merge their businesses to create a new aerospace and defense powerhouse. The two companies received unanimous approval from their respective boards, and the merger is finally complete, with the new company now called Raytheon Technologies.

The stock has lagged defense peers and is offering solid upside. The analyst report noted this:

The company reported third quarter free cash flow well ahead of consensus. Revenue is in-line with similar rates of decline compared to the second quarter across the aerospace side, while defense revenues are shy of expectations. Margins improved sequentially, and the total segment adjusted operating margin was above consensus. Free cash is above our model and well ahead of consensus, with these revenue and core margin results combining with additional cost reduction and cash conservation action.

Shareholders receive a 3.36% dividend. Goldman Sachs has a stunning $86 price objective. The consensus target is $77.28, and Raytheon Technologies stock closed at $52.34, down over 7% on Wednesday.

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While technology investors may not be overly excited about the alpha prospects for the industrials, the reality is there could be a seismic shift in capital directed to the sector for 2021. All these top stocks are poised for a potentially big 2021, and now is perhaps the time to start adding shares as the results for the quarter are in.

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