Industry Description
The Zacks Electronics – Testing Equipment industry comprises companies offering advanced instruments, electronic testing equipment solutions, thermal management systems, electrical connectors, motors and various test solutions. The major end markets served by this industry are consumer, automobile, industrial, aerospace and defense, healthcare, semiconductors and communications, to name a few. Industry participants have been making technological advancements to gain traction among semiconductors, vehicles, machinery, smartphones and medical device manufacturers, who are constantly increasing their spending on electronic components.
4 Trends Shaping the Future of Electronics - Testing Equipment Industry
Solid Adoption of Motion Control & Test Systems is Positive: The rising utilization of precision motion-control solutions and automatic test systems in motion-control devices and testing products, particularly in the aerospace, automation, medical and military markets, is an upside. Commercial motor and autonomous vehicles will likely continue to hike the demand for vehicle-tracking systems, fleet-management solutions and other private fleet applications, which are part of the industry’s key offerings.
Secular Growth, Niche Strength, and Sustainability-Driven Demand Aids Growth: Secular growth is driven by exposure to long-term themes like automation, healthcare, aerospace, semiconductors, and energy transition. Industry players operate in niche, mission-critical segments where products are essential to performance and safety. This supports strong pricing power, customer attachment, and consistently high margins compared to broader industrial peers. Sustainability and energy transition trends are creating new demand for products that improve efficiency, reduce emissions, and support renewable energy adoption, providing an additional long-term growth driver.
Recurring Revenues Boost Free Cash Flow Generation Ability: A meaningful portion of revenue comes from recurring streams such as aftermarket services, calibration, maintenance, and spares. This improves earnings visibility and reduces volatility across cycles. Asset-light business models require relatively low capital expenditure, resulting in high free cash flow conversion. This supports shareholder returns, reinvestment, and acquisition strategies.
Macroeconomic Headwinds Pose Concerns: Due to the challenging macroeconomic scenario, enterprises are reluctant to sign multi-year deals worldwide. The industry is seeing supply chain volatility along with the negative impact of tariffs. These trends do not bode well for the industry participants.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Electronics – Testing Equipment industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #96 at present, which places it in the top 39% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all the member stocks, indicates dim near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. The industry’s earnings estimates for 2026 have moved north by 6.5% since July 31, 2025.
Given the bullish scenario, there are a number of stocks currently worth watching. But before we present those stocks, let us look at the industry’s recent stock-market performance and the valuation picture.
Industry Underperforms S&P 500 & Sector
The Zacks Electronics – Testing Equipment industry has underperformed the S&P 500 and the broader sector over the past year. The industry has climbed 23.6% over this period against the S&P 500’s appreciation of 33.1% and the broader sector’s return of 54%.
One-Year Price Performance
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Industry's Current Valuation
Based on the forward 12-month price-to-earnings ratio (P/E), a commonly used multiple for valuing the Electronics – Testing Equipment stocks, the industry is currently trading at 26.17X, higher than the S&P 500’s 22.10X and the sector’s 25.56X.
Over the past five years, the industry has traded as high as 26.64X and as low as 20.50X, with a median of 23.83X, as the chart below shows.
Forward 12-Month P/E Ratio
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2 Testing Equipment Stocks to Watch
AMETEK: This Zacks Rank #3 (Hold) company is benefiting from strong order growth, record backlog ($3.58 billion) and acquisitions.
In 2025, AME completed the acquisitions of FARO Technologies and Kern Microtechnik for approximately $1 billion, acquiring approximately $400 million in annual sales. These, along with the LKC Technologies acquisition, are driving AMETEK’s Electronic Instruments Group segment performance.
AMETEK expects 2026 sales to increase mid- to high single digits on a percentage basis, with organic sales expected to increase low to mid-single digits. The company expects earnings between $7.87 per share and $8.07 per share, suggesting 6-9% year-over-year growth.
The Zacks Consensus Estimate for 2026 earnings has been steady at $8.04 per share over the past 30 days, indicating year-over-year growth of 8.2%. Shares of AMETEK have climbed 11.5% year to date.
Price & Consensus: AME
Fortive: This Zacks Rank #3 company is benefiting from a diversified portfolio across automation, digitization and electrification.
The company remains focused on executing the Fortive Accelerated strategy across growth, capital discipline and investor trust. Fortive continues to accelerate new product introduction velocity, including solutions targeting high-growth verticals. In the fourth quarter of 2025, recurring revenues grew, driven by continued strength in Fluke's maintenance software and deeply embedded data, as well as AI-enhanced software capabilities across iOS and AHS segments.
Fortive expects 2026 adjusted earnings between $2.90 per share and $3 per share, indicating 9% year-over-year growth at the midpoint. The Zacks Consensus Estimate for 2026 earnings has been revised a penny downward in the past 30 days to $2.94 per share, indicating year-over-year growth of 8.5%. Shares of Fortive have climbed 11.9% year to date.
Price & Consensus: FTV
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
