Last year wasn’t particularly kind for industrial stocks. Buffeted by multiple headwinds, the sector struggled before faring better toward the end of the year. Now, a new survey indicates that the sector may already be slipping into a recessionary phase even as clouds gather over broader markets. Naysayers are already predicting that gloomy days are ahead for the economy as a whole.

However, there is significant evidence that the economy will continue to chug along at a steady pace. Additionally, specific subsectors of the broader industrials sector are performing well and are expected to continue gaining going forward. This is why it makes good sense to pick select industrial stocks, especially those poised to beat estimates in their upcoming earnings releases. 

Dismal Indicators

Most of the traditional economic indicators for industrials have been showing signs of sectoral weakness. The ISM manufacturing index declined from November’s 48.6% to 48.2% in December, the lowest reading since the last month of 2008’s recession. Construction spending declined 0.4% in November. Additionally, industrial production declined for the third straight month in December.

Now, fresh figures from the Corbin Perception Industrial Sentiment Survey show that 70% of the respondents are negatively disposed toward the prospects of the industrials sector. China’s economic slowdown, a rising dollar and weakening commodities are some of the concerns being raised. This is a survey of 39 analysts and investors who together handle nearly $2.3 trillion worth of assets across the world.

Is There an Upside?

But it isn’t that the sector is bereft of any positives. Aerospace, auto and construction are some of the industries which have registered strong performances last year. Only recently, the International Air Transport Association (IATA) raised its forecast for profitability of airlines.

Additionally, non-farm payroll data released in January showed strong gains for construction in December. Among recently released indicators, existing home sales numbers have been encouraging. Most importantly, Markit Flash PMI for January came in at 52.7, which indicates expansion. Also, this figure is higher than December’s final reading of 51.2.

Our Choices

As of now, this earnings season has offered better-than-expected results. For the 72 S&P 500 members that have reported till now, total earnings have increased 1.4% on a yearly basis. Revenues have increased by 0.8%, with 70.8% beating EPS estimates. Industrials may yet avoid suffering a third consecutive quarter of declining earnings.

Additionally, select subsectors and companies have shown creditable performance over last year and are likely to do so going ahead. We have narrowed down our search based on a good Zacks Rank and Zacks Earnings ESP. The Zacks Earnings ESP compares the most accurate estimate to the broad consensus, looking to find stocks that have seen big revisions as of late, suggesting that analysts have recently become more bullish on the company’s earnings prospects.

And when you add this solid Zacks Rank to a positive Earnings ESP, a positive earnings surprise happens nearly 70% of the time. So it seems pretty likely that the following stocks could see another beat at their next reports, especially if recent trends are any guide.

Autoliv, Inc. (ALV - Analyst Report) manufactures occupant restraint systems for automobiles and has a product portfolio consisting primarily of safety airbags, seat belts and steering wheels.

Autoliv has a Zacks Rank #2 (Buy) and the current Earnings ESP is +8%. Its last EPS surprise was 7% and the one before that was 5.2%. Average EPS surprise over the last four quarters is 8.7%. The company is expected to report earnings on Jan 29, 2016.

Visteon Corporation (VC - Snapshot Report) is a designer, producer and manufacturer of connected car solutions and vehicle cockpit electronic products. 

Visteon Corp has a Zacks Rank #2 and the current Earnings ESP is +9.38%. Its last EPS surprise was 75% and the previous EPS surprise was 31%. Average EPS surprise over the last four quarters is 224.4%. The company is expected to report earnings on Feb 25, 2016.

Sealed Air Corporation (SEE - Analyst Report) offers product protection, food safety and facility hygiene solutions on a global basis.

Spectra Energy Partners has a Zacks Rank #2 (Buy) and the current Earnings ESP is +2%. Its last EPS surprise was 22.8% and the previous EPS surprise was 11.1%. Average EPS surprise over the last four quarters is 22%. The company is expected to report earnings on Feb 10, 2016.

Orchids Paper Products Company (TIS - Snapshot Report) produces tissue paper products for the away from home and at home markets within the U.S.

Orchids Paper Products has a Zacks Rank #2 and the current Earnings ESP is +2.4%. Its last EPS surprise was 15.4% and the previous EPS surprise was 9.7%. The company is expected to report earnings on Feb 3, 2016.