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U.S. Factory Orders Remain Strong in March: 5 Top Picks
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On May 3, the Commerce Department reported that the U.S. factory orders for the month of March grew at 1.6%. The increase in March marked the seventh rise in the past eight months. This indicates that the U.S. manufacturing sector, which constitutes around 12% of its GDP, is increasing capital spending on the back of massive tax overhaul, deregulatory measures and strong domestic & global economy.
The worldwide demand for manufacturing products is on the rise. U.S. manufacturing industry is benefiting from strong global growth, which is leading to a sharp rise in factory orders. Against this backdrop, it will be prudent to invest in stocks that are poised to gain from the solid factory orders data.
Robust Factory Orders in March
factory orders in March rose by 1.6% ($7.8 billion) to $507.7 billion. This figure was better than the consensus estimate of growth of 1.3%, on par with the revised growth rate of 1.6% in February. New orders for manufactured goods increased $6.5 billion or 2.6% to $255.2 billion in March. This reflects the fourth increase in last five months.
Shipments of manufactured goods inched up 0.4% ($900 million) to $250.4 billion. This marked the tenth month of increase in the last eleven months. Transportation equipment rose 1.8% to $83.5 billion, driving overall growth. This was the fourth increase of transportation equipment in last five months.
Meanwhile, the ISM Manufacturing Index came in at 59.3%. Although the index slipped 1.5%, the signs are positive, as 17 of the 18 manufacturing industries registered growth. The March PMI figure also marks overall economic growth for the 107th consecutive month. (Read More: 5 Solid Stocks to Buy on Robust Durable Orders)
Immediate Concerns
The U.S. manufacturing sector is currently plagued with three concerns. The tariffs imposed on steel and aluminum has raised input costs. President Trump has levied tariffs worth $50 billion on China and is reportedly trying hard to impose another $100 billion of tariffs on the country. These massive tariffs on imported goods will raise input prices for manufactured products.
On April 30, the Department of Commerce reported that personal consumption expenditure (“PCE”) price index increased year-over-year to 2% in March, touching the central bank’s target for the first time in a year. This may force the central banks to raise interest rate consequently increasing the cost of funds.
Future Looks Bright Despite Concerns
However, newly introduced tax-reforms and deregulation policies are likely to act as major catalysts. The corporate tax rate was lowered from 35% to 21%. President Trump has also promised to remove 75% of the regulations during his tenure. Trump’s business-friendly policies ought to help the private employers. Nevertheless, the full effect of corporate tax cut is yet to appear in the economy.
Moreover, the government has taken a decision to spend a whopping $1.5 trillion on several infrastructure projects like constructing new roads, bridges, highways, railways and waterways across the country over a period of 10 years. This project will generate significant demand for manufacturing sector.
Our Top Picks
Many economists believe that investment growth is likely to pick up in the near term. Strong factory orders aided by steady demand for transportation equipment such as civil aircraft and defense-capital goods hint a bullish economic outlook. At this stage, investment in stocks likely to gain from strong factory orders is a lucrative option.
Chart below shows price performnace of our five picks in the last six months.
Herc Holdings Inc. (HRI - Free Report) the company provides equipment rental suppliers primarily in North America through its subsidiary.
Herc Holdings has expected earnings growth of 387.5% for current year. The Zacks Consensus Estimate for the current year has improved by 56% over the last 60 days.
Westinghouse Air Brake Technologies Corp. (WAB - Free Report) is one of North America's largest providers of value-added, technology-based products and services for freight rail, passenger transit and select industrial markets worldwide.
Westinghouse Air Brake Technologies has expected earnings growth of 12.2% for current year. The Zacks Consensus Estimate for the current year has improved by 0.8% over the last 60 days.
The Boeing Co. (BA - Free Report) is the world's largest aerospace company and a leading manufacturer of commercial jetliners and defense, space and security systems.
Boeing has an expected earnings growth rate of 20.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.6% over the last 60 days.
Lockheed Martin Corp. (LMT - Free Report) is a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
Lockheed Martin has an expected earnings growth rate of 19.7% for the current year. The Zacks Consensus Estimate for the current year has improved 2.7% over the last 60 days.
Wesco Aircraft Holdings Inc. distributes and provides supply chain management services to the global aerospace industry.
Wesco Aircraft Holdings hasan expected earnings growth rate of 20.3% for the current year. The Zacks Consensus Estimate for the current year has improved 1.4% over the last 60 days.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
U.S. Factory Orders Remain Strong in March: 5 Top Picks
On May 3, the Commerce Department reported that the U.S. factory orders for the month of March grew at 1.6%. The increase in March marked the seventh rise in the past eight months. This indicates that the U.S. manufacturing sector, which constitutes around 12% of its GDP, is increasing capital spending on the back of massive tax overhaul, deregulatory measures and strong domestic & global economy.
The worldwide demand for manufacturing products is on the rise. U.S. manufacturing industry is benefiting from strong global growth, which is leading to a sharp rise in factory orders. Against this backdrop, it will be prudent to invest in stocks that are poised to gain from the solid factory orders data.
Robust Factory Orders in March
factory orders in March rose by 1.6% ($7.8 billion) to $507.7 billion. This figure was better than the consensus estimate of growth of 1.3%, on par with the revised growth rate of 1.6% in February. New orders for manufactured goods increased $6.5 billion or 2.6% to $255.2 billion in March. This reflects the fourth increase in last five months.
Shipments of manufactured goods inched up 0.4% ($900 million) to $250.4 billion. This marked the tenth month of increase in the last eleven months. Transportation equipment rose 1.8% to $83.5 billion, driving overall growth. This was the fourth increase of transportation equipment in last five months.
Meanwhile, the ISM Manufacturing Index came in at 59.3%. Although the index slipped 1.5%, the signs are positive, as 17 of the 18 manufacturing industries registered growth. The March PMI figure also marks overall economic growth for the 107th consecutive month. (Read More: 5 Solid Stocks to Buy on Robust Durable Orders)
Immediate Concerns
The U.S. manufacturing sector is currently plagued with three concerns. The tariffs imposed on steel and aluminum has raised input costs. President Trump has levied tariffs worth $50 billion on China and is reportedly trying hard to impose another $100 billion of tariffs on the country. These massive tariffs on imported goods will raise input prices for manufactured products.
On April 30, the Department of Commerce reported that personal consumption expenditure (“PCE”) price index increased year-over-year to 2% in March, touching the central bank’s target for the first time in a year. This may force the central banks to raise interest rate consequently increasing the cost of funds.
Future Looks Bright Despite Concerns
However, newly introduced tax-reforms and deregulation policies are likely to act as major catalysts. The corporate tax rate was lowered from 35% to 21%. President Trump has also promised to remove 75% of the regulations during his tenure. Trump’s business-friendly policies ought to help the private employers. Nevertheless, the full effect of corporate tax cut is yet to appear in the economy.
Moreover, the government has taken a decision to spend a whopping $1.5 trillion on several infrastructure projects like constructing new roads, bridges, highways, railways and waterways across the country over a period of 10 years. This project will generate significant demand for manufacturing sector.
Our Top Picks
Many economists believe that investment growth is likely to pick up in the near term. Strong factory orders aided by steady demand for transportation equipment such as civil aircraft and defense-capital goods hint a bullish economic outlook. At this stage, investment in stocks likely to gain from strong factory orders is a lucrative option.
We narrowed down our search to five stocks with Zacks Rank #2 (Buy) and strong growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chart below shows price performnace of our five picks in the last six months.
Herc Holdings Inc. (HRI - Free Report) the company provides equipment rental suppliers primarily in North America through its subsidiary.
Herc Holdings has expected earnings growth of 387.5% for current year. The Zacks Consensus Estimate for the current year has improved by 56% over the last 60 days.
Westinghouse Air Brake Technologies Corp. (WAB - Free Report) is one of North America's largest providers of value-added, technology-based products and services for freight rail, passenger transit and select industrial markets worldwide.
Westinghouse Air Brake Technologies has expected earnings growth of 12.2% for current year. The Zacks Consensus Estimate for the current year has improved by 0.8% over the last 60 days.
The Boeing Co. (BA - Free Report) is the world's largest aerospace company and a leading manufacturer of commercial jetliners and defense, space and security systems.
Boeing has an expected earnings growth rate of 20.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.6% over the last 60 days.
Lockheed Martin Corp. (LMT - Free Report) is a global security and aerospace company principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.
Lockheed Martin has an expected earnings growth rate of 19.7% for the current year. The Zacks Consensus Estimate for the current year has improved 2.7% over the last 60 days.
Wesco Aircraft Holdings Inc. distributes and provides supply chain management services to the global aerospace industry.
Wesco Aircraft Holdings hasan expected earnings growth rate of 20.3% for the current year. The Zacks Consensus Estimate for the current year has improved 1.4% over the last 60 days.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>