Transportation, construction, aerospace, defense, and more comprise one of the foundational sectors of the modern U.S. economy: the industrial sector. Yet many industrial companies are struggling as the COVID-19 pandemic has disrupted life and business as we know it.

Whether it's proven stability and dividend growth, massive upside, or a potential turnaround to profit from, United Parcel Service (NYSE:UPS), Virgin Galactic (NYSE:SPCE), and Southwest Airlines (NYSE:LUV) offer compelling choices in the industrial sector right now.

Virgin Galactic's SpaceShipTwo Unity flying in New Mexico Airspace for the first time.

Image Source: Virgin Galactic.

The proven winner

UPS has proven that it can grow its top and bottom lines, even in a pandemic. Its shares have soared to a new all-time high as its businesses-to-consumer (B2C) revenues surge in lockstep with a boom in e-commerce. UPS is now the largest U.S.-based industrial company by market capitalization, and there's reason to believe it will hold that title for years to come.

One reason UPS was so well-prepared for the surge in e-commerce from the COVID-19 pandemic was the October 2019 launch of its UPS Digital Access Program. A direct response to the growth in its B2C segment, the program helps small and medium-sized businesses (SMBs) by offering them previously unavailable discounted shipping rates and logistics solutions. It's meant to help level the playing field between large and small e-commerce platforms so that all companies can access a sophisticated order management, fulfillment, and delivery process. Notably, the Digital Access Program helped UPS add 120,000 new SMB accounts during the second quarter. These contributed to a 65.2% increase in U.S. B2C sales for the period, which helped the company grow earnings by 8.6% at a time when many industrials are experiencing some of their worst quarters in years. 

The blowout Q2 extends an impressive five-year run for UPS that has featured a 25% increase in annual revenue, a 33% increase in adjusted net income, and a 32% increase in the dividend it pays. The board has boosted that payout by 500% over the course of the past 20 years. UPS's current yield of 2.5% and its track record for earnings and dividend growth make it one of the safest dividend stocks on the market today.

Growth potential

Virgin Galactic which went public through a reverse merger in October of last year, may be the hottest industrial stock right now. For years, the accomplishments of Blue Origin, and even more so, SpaceX, have been nothing short of remarkable. However, because neither of those companies is publicly traded, Virgin Galactic offers arguably the purest and simplest way to invest in the potential of commercial space flight and space tourism.

Virgin Galactic is still more of a concept than a revenue-generating company. However, it did end the second quarter with $360 million in cash on the books and has since raised another $460.2 million through a secondary public offering of 23.6 million shares at $19.50 per share.

Virgin Galactic will primarily target the 2 million or so people with $10 million or more in net worth, since space tourism isn't cheap. It also hopes to at some point begin providing a high-speed point-to-point travel service that could become an alternative to private jets.

Positioned for a turnaround

Southwest Airlines is arguably the best pick for those who want to invest in the eventual turnaround of the now-struggling airline industry. Although its business has taken a beating this year, it remains the strongest major U.S. airline from a balance sheet perspective.

LUV Debt To Capital (Quarterly) Chart

LUV Debt To Capital (Quarterly) data by YCharts

The company has done an impressive job of reducing its daily cash burn from $30 million per day in April to just $16 million per day in June. After initially taking $3.2 billion in aid from the Payroll Support Program, Southwest has declined another $2.8 billion loan from the U.S. government, signaling it thinks it has enough liquidity to weather the storm. 

Southwest lost an average of $23 million per day in the second quarter, or $1.5 billion in total. It now says it expects to burn through an average of around $20 million in cash per day in the third quarter. With liquidity of $15.5 billion, $12 billion in unencumbered assets, and $400 million in cost savings expected in the fourth quarter, Southwest has a relatively high margin of safety that should give it about two more years where it could operate at current levels without taking on more debt. However, Southwest's debt has more than doubled in the past year and is now at record high levels.

There's no sugarcoating the dire situation that the U.S. airline industry is in at this time. But if you're interested in investing in the airline industry over the long term, then Southwest looks to be the safest option.

Take your pick

UPS, Virgin Galactic, and Southwest Airlines offer three completely different ways to invest in the industrial sector. UPS is a proven winner and a solid dividend stock. Virgin Galactic is entirely unproven, but with just a $3.7 billion market capitalization, its upside could be enormous over the long term. As for Southwest Airlines, the company has a decades-long track record that shows it to be capable of getting through tough times. That track record, combined with the actions it has taken and the results it is producing, makes Southwest a natural way to play a turnaround in the airline industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.