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Manufacturing Activity Heats Up: 4 Growth Stocks to Grab
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The U.S. manufacturing activity has picked up tempo as exhibited by the stellar performance of Institute for Supply Management (ISM) index in August 2018. The index increased 3.2% from July to 61.3% in August — the highest reading since 2004. This was driven by strong demand for U.S. manufacturing goods, the Tax Cuts and Jobs Act, which has helped to overcome the hurdles like supply chain bottlenecks, rising input prices, shortage of skilled labourers and global trade uncertainties.
Notably, the ISM manufacturing index has been well above 50% every month so far this year, reflecting increasing business strength, growing new orders, production and employment. In addition, focus on technical innovation and increasing product penetration in the emerging markets have acted as catalysts for the manufacturing industry’s growth.
We believe few economic indicators, including manufacturing data and industrial production, point toward healthy operating conditions in the manufacturing industry.
Upbeat Data Depicts Growth
ISM’s new orders index increased 4.9 percentage points to 65.1% in August, when compared to the 60.2% reported in July, indicating growth in new orders for the 32nd consecutive month. Also, ISM’s employment index grew 2 percentage points to 58.5% compared to the July reading of 56.5%. This indicates growth in employment in August for the 23rd consecutive month.
According to the ADP National Employment Report, private companies created 163,000 jobs in September 2018. The manufacturing industry created 19,000 jobs.
In addition, Industrial production — a measure of the level of output of manufacturing, mining and utilities sectors in a country — grew at an annual rate of 6% in second-quarter 2018. Furthermore, the U.S. GDP improved 4% in the quarter on the back of strong consumer and business spending.
Manufacturing to Grow Despite Tariffs
The U.S. manufacturing sector, which encompasses the machinery, food products, automobiles, furniture, and refined petroleum product industries, has bounced back strongly over the past few years. Currently, manufacturers remain focused on digital transformation to improve process efficiency and drive innovation. Although competition remains high, the sector is poised to gain from mergers and acquisitions (M&As).
According to the most recent forecast released at the Federal Open Market Committee meeting in June 2018, U.S. GDP growth will rise to 2.8% in 2018 and 2.4% in 2019. Unemployment rate is expected to drop to 3.6% in 2018 and 3.5% in 2019.
However, U.S. manufacturers remain concerned about their business activities due to tariffs on inputs which may compel them to raise prices. Moreover, the Trump administration’s endeavor to impose a fresh round of tariffs on Chinese goods worth $200 billion will further worsen the situation.
The latest report by International Monetary Fund states that the imposition of tariffs and retaliatory tariffs could cut 0.5% off global growth by 2020. Moreover, rising inflation, more stringent immigration policies and concerns regarding the NAFTA deal remain major obstacles for the manufacturing sector, along with trade-war tension between the United States and China.
Despite the uncertainty regarding the tariffs and their impacts, the manufacturing industry seems poised to rally on the back of sturdier market demand. Corporate spending across its customers has picked up, aided by the tax reform, increased government spending and rising oil prices. Also, the President’s long-awaited $1.5-trillion infrastructure program will likely expedite investments in factories, new equipment and other capital goods.
We, thus, believe investors will benefit by picking manufacturing stocks with solid growth potential to capitalize on the momentum in the industry.
4 Manufacturing Stocks With Growth Prospects
Growth investors look for stocks with aggressive earnings or revenue growth potential, which propel share prices. With the help of the Zacks Style Score system, we have identified four such manufacturing stocks. These stocks have a solid Zacks Rank and have also outperformed the industry’s performance over the past year.
Our research shows that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the growth investing space.
Here we put the spotlight on four manufacturing stocks that are poised for healthy growth:
Based in Racine, WI, Twin Disc, Incorporated (TWIN - Free Report) manufactures heavy duty off-highway power transmission equipment. Notably, the long-term growth prospects of this Zacks Rank #1 company are encouraging, given rising demand and its focus on restructuring activities, along with strategic acquisitions. Its recent acquisition of Veth Propulsion Holding, a Dutch global marine propulsion supplier, in a $58.6-million deal, will boost the company’s technological competency, resulting in top-line growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the company flaunts a Growth Score of A. Moreover, a 17% rise in estimate revisions over the past 60 days for current-year earnings add to the optimism in the stock. The stock has appreciated 46%, surpassing the industry’s growth of 12% in the past year.
Headquartered in Dublin, Ingersoll-Rand PLC (IR - Free Report) is a diversified industrial manufacturer serving customers in global commercial, industrial and residential markets. Focus on acquisitions and unique business strategies remain the company's growth drivers. Strength in commercial and residential Heating, Ventilation and Air Conditioning (HVAC), transport solutions and rental services businesses will continue to drive results of this Zacks #2 Ranked company.
The stock carries a Growth Score of B. Also, the company has been seeing an upward trend in earnings estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for current-year earnings has moved up 4.5%. The stock has gained 14% in the past year, ahead of the industry’s growth.
Headquartered in Irving, TX, Flowserve Corporation (FLS - Free Report) is the world's leading provider of fluid motion and control products and services. This Zacks Rank #2 company’s focus on realignment initiatives and balanced capital-allocation strategy will likely drive results. Additionally, its focus on investment in distribution channel and other industrial opportunities augurs well for long-term growth.
Flowserve has a Growth Score of B. Upward estimate revisions for current-year earnings add to the optimism. Over the past 60 days, the Zacks Consensus Estimate for current-year earnings has moved 5% north. The stock has rallied 34%, outperforming the industry’s gain in a year’s time.
Based in Lake Forest, IL, IDEX Corporation (IEX - Free Report) is best known for expertise in highly-engineered fluidics systems and components, as well as fire and safety products. Notably, the long-term growth prospect of this Zacks Rank #2 is based on solid orders and focus on diligent execution of productivity initiatives. Benefits from acquired assets also remain growth drivers.
Notably, the company carries a Growth Score of B. Additionally, a 2.7% rise in estimate revisions over the past 60 days for current-year earnings add to the optimism in the stock. Its shares have gained 26%, outpacing the industry’s gain of 12% over the past year.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
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Manufacturing Activity Heats Up: 4 Growth Stocks to Grab
The U.S. manufacturing activity has picked up tempo as exhibited by the stellar performance of Institute for Supply Management (ISM) index in August 2018. The index increased 3.2% from July to 61.3% in August — the highest reading since 2004. This was driven by strong demand for U.S. manufacturing goods, the Tax Cuts and Jobs Act, which has helped to overcome the hurdles like supply chain bottlenecks, rising input prices, shortage of skilled labourers and global trade uncertainties.
Notably, the ISM manufacturing index has been well above 50% every month so far this year, reflecting increasing business strength, growing new orders, production and employment. In addition, focus on technical innovation and increasing product penetration in the emerging markets have acted as catalysts for the manufacturing industry’s growth.
We believe few economic indicators, including manufacturing data and industrial production, point toward healthy operating conditions in the manufacturing industry.
Upbeat Data Depicts Growth
ISM’s new orders index increased 4.9 percentage points to 65.1% in August, when compared to the 60.2% reported in July, indicating growth in new orders for the 32nd consecutive month. Also, ISM’s employment index grew 2 percentage points to 58.5% compared to the July reading of 56.5%. This indicates growth in employment in August for the 23rd consecutive month.
According to the ADP National Employment Report, private companies created 163,000 jobs in September 2018. The manufacturing industry created 19,000 jobs.
In addition, Industrial production — a measure of the level of output of manufacturing, mining and utilities sectors in a country — grew at an annual rate of 6% in second-quarter 2018. Furthermore, the U.S. GDP improved 4% in the quarter on the back of strong consumer and business spending.
Manufacturing to Grow Despite Tariffs
The U.S. manufacturing sector, which encompasses the machinery, food products, automobiles, furniture, and refined petroleum product industries, has bounced back strongly over the past few years. Currently, manufacturers remain focused on digital transformation to improve process efficiency and drive innovation. Although competition remains high, the sector is poised to gain from mergers and acquisitions (M&As).
According to the most recent forecast released at the Federal Open Market Committee meeting in June 2018, U.S. GDP growth will rise to 2.8% in 2018 and 2.4% in 2019. Unemployment rate is expected to drop to 3.6% in 2018 and 3.5% in 2019.
However, U.S. manufacturers remain concerned about their business activities due to tariffs on inputs which may compel them to raise prices. Moreover, the Trump administration’s endeavor to impose a fresh round of tariffs on Chinese goods worth $200 billion will further worsen the situation.
The latest report by International Monetary Fund states that the imposition of tariffs and retaliatory tariffs could cut 0.5% off global growth by 2020. Moreover, rising inflation, more stringent immigration policies and concerns regarding the NAFTA deal remain major obstacles for the manufacturing sector, along with trade-war tension between the United States and China.
Despite the uncertainty regarding the tariffs and their impacts, the manufacturing industry seems poised to rally on the back of sturdier market demand. Corporate spending across its customers has picked up, aided by the tax reform, increased government spending and rising oil prices. Also, the President’s long-awaited $1.5-trillion infrastructure program will likely expedite investments in factories, new equipment and other capital goods.
We, thus, believe investors will benefit by picking manufacturing stocks with solid growth potential to capitalize on the momentum in the industry.
4 Manufacturing Stocks With Growth Prospects
Growth investors look for stocks with aggressive earnings or revenue growth potential, which propel share prices. With the help of the Zacks Style Score system, we have identified four such manufacturing stocks. These stocks have a solid Zacks Rank and have also outperformed the industry’s performance over the past year.
Our research shows that stocks with a Growth Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the growth investing space.
Here we put the spotlight on four manufacturing stocks that are poised for healthy growth:
Based in Racine, WI, Twin Disc, Incorporated (TWIN - Free Report) manufactures heavy duty off-highway power transmission equipment. Notably, the long-term growth prospects of this Zacks Rank #1 company are encouraging, given rising demand and its focus on restructuring activities, along with strategic acquisitions. Its recent acquisition of Veth Propulsion Holding, a Dutch global marine propulsion supplier, in a $58.6-million deal, will boost the company’s technological competency, resulting in top-line growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Notably, the company flaunts a Growth Score of A. Moreover, a 17% rise in estimate revisions over the past 60 days for current-year earnings add to the optimism in the stock. The stock has appreciated 46%, surpassing the industry’s growth of 12% in the past year.
Headquartered in Dublin, Ingersoll-Rand PLC (IR - Free Report) is a diversified industrial manufacturer serving customers in global commercial, industrial and residential markets. Focus on acquisitions and unique business strategies remain the company's growth drivers. Strength in commercial and residential Heating, Ventilation and Air Conditioning (HVAC), transport solutions and rental services businesses will continue to drive results of this Zacks #2 Ranked company.
The stock carries a Growth Score of B. Also, the company has been seeing an upward trend in earnings estimate revisions. Over the past 60 days, the Zacks Consensus Estimate for current-year earnings has moved up 4.5%. The stock has gained 14% in the past year, ahead of the industry’s growth.
Headquartered in Irving, TX, Flowserve Corporation (FLS - Free Report) is the world's leading provider of fluid motion and control products and services. This Zacks Rank #2 company’s focus on realignment initiatives and balanced capital-allocation strategy will likely drive results. Additionally, its focus on investment in distribution channel and other industrial opportunities augurs well for long-term growth.
Flowserve has a Growth Score of B. Upward estimate revisions for current-year earnings add to the optimism. Over the past 60 days, the Zacks Consensus Estimate for current-year earnings has moved 5% north. The stock has rallied 34%, outperforming the industry’s gain in a year’s time.
Based in Lake Forest, IL, IDEX Corporation (IEX - Free Report) is best known for expertise in highly-engineered fluidics systems and components, as well as fire and safety products. Notably, the long-term growth prospect of this Zacks Rank #2 is based on solid orders and focus on diligent execution of productivity initiatives. Benefits from acquired assets also remain growth drivers.
Notably, the company carries a Growth Score of B. Additionally, a 2.7% rise in estimate revisions over the past 60 days for current-year earnings add to the optimism in the stock. Its shares have gained 26%, outpacing the industry’s gain of 12% over the past year.
Best Electric Car Stock? You'll Never Guess It.
Zacks Research has released a report that may shock many investors. One stock stands out as the best way to invest in the surge to electric cars. And it's not the one you may think!
Much like petroleum 150 years ago, lithium battery power is set to shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge. With battery prices plummeting and charging stations set to multiply, revenues that were already at $31 billion in 2016 are expected to blast to over $67 billion by the end of 2022.
See Zacks Best EV Stock Free >>