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Industrial Production Rises in May: 5 Stocks Worth Buying
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After two consecutive months of decline, industrial production in the United States exhibited growth in May 2020, as revealed in the recently released data by the Federal Reserve. The news is quite encouraging, especially when the companies are trying to recover from the disruption caused by the pandemic.
Going by numbers, the metric rose 1.4% month over month, reflecting the highest monthly gain since the beginning of 2020. Industrial production in the United States declined 0.4% in January, 4.6% in March and 12.5% in April, while the same inched up 0.1% in February.
Also, the stock markets have shown signs of recovery, with the S&P 500 growing 7.3% since May 2020 to date, while the NASDAQ and NYSE have risen 11.3% and 6.9%, respectively. The DOW Industrial index grew 8% during the same timeframe. In addition, the Zacks Industrial Products sector has risen 11.8% since the beginning of May 2020.
What Led to Monthly Hike in Industrial Production?
Per the official report, the index gained mainly from 3.8% growth in the manufacturing sector — with significant rise witnessed in the manufacturing of aerospace, nonmetallic mineral, transportation equipment, furniture and other products. Also, production in plastics, rubber, printing, leather and apparel industries increased.
On the flip side, the output from the mining sector decreased 6.8% from the previous month. Further, output for the utilities sector slipped 2.3% due to weakness in electric and gas utilities.
In May, capacity utilization for the manufacturing sector was at 62.2%, up 2.2 percentage points from the previous month. However, capacity utilization for the mining sector fell 5.8 percentage points to 75.4%, while that for the utilities sector was down by 1.8 percentage points to 69.1%.
The Road Ahead
It is worth mentioning here that the country’s industrial production still reflects a 15.4% fall from its pre-pandemic levels and a 15.3% decline from the year-ago comparable month. Several companies operating in the manufacturing space are still wary about the uncertainties related to the pandemic.
For instance, Emerson Electric Co. (EMR - Free Report) predicts a year-over-year organic sales decline of 7-9% for fiscal 2020 (ending September 2020) due to lower product demand. Also, Donaldson Company, Inc. (DCI - Free Report) is wary about the pandemic-related impacts on its operations and therefore suspended projections for both fiscal 2020 (ending July 2020) and 2021 (ending July 2021).
However, many companies are exhibiting growth and are well-placed to deal with the pandemic-related woes. We have picked five industrial products stocks that can be of interest to investors in the prevalent uncertain environment. A price chart of the selected ticker is provided below:
Past Three-Month Price Performance
Altra Industrial Motion Corp. : The Braintree, MA-based company currently sports a Zacks Rank #1 (Strong Buy). It specializes in manufacturing and distributing various motion control, electromechanical power transmission, and automation products.
In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 181.8% and 26% for the second quarter and 2020, respectively. Also, the company delivered positive earnings surprise of 47.73% in the last quarter.
Applied Industrial Technologies, Inc. (AIT - Free Report) : The Cleveland, OH-based company currently sports a Zacks Rank #1. It distributes value-added industrial products — including bearings, power transmission products, specialty flow control solutions and others — to original equipment manufacturers (“OEM”), and maintenance, repair and operations (“MRO”) customers.
The company’s shares have gained 96.4% in the past three months. Also, the Zacks Consensus Estimate for its earnings has been raised 25.9% for the fourth quarter (ending June 2020) and 4.8% for fiscal 2020 (ending June 2020) in the past 60 days. Its earnings surprise in the last quarter was a positive 2.00%.
Lakeland Industries, Inc. (LAKE - Free Report) : The Decatur, AL-based company currently flaunts a Zacks Rank #1. It makes and distributes protective clothing for use in public protective clothing and industrial markets.
The company’s shares have gained 22.7% in the past three months. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 140.9% for the second quarter (ending July 2020) and 198.7% for fiscal 2021 (ending January 2021). In the last reported quarter, the company recorded a positive earnings surprise of 568.75%.
MSC Industrial Direct Company, Inc. (MSM - Free Report) : The Melville, NY-based company presently carries a Zacks Rank #2 (Buy). It engages in distributing MRO and metalworking products.
The company’s shares have gained 37.1% in the past three months. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 31.8% for the third quarter (ended May 2020, results are awaited) and by 7% for fiscal 2020 (ending August 2020). The company’s earnings surprise in the last quarter was a positive 2.04%.
SiteOne Landscape Supply, Inc. (SITE - Free Report) : The Roswell, GA-based company currently sports a Zacks Rank #1. It engages in distributing landscape supplies.
The company’s shares have surged 84.2% in the past three months. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 28.1% for the second quarter and 78% for 2020. Its earnings surprise in the last quarter was a positive 23.64%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Industrial Production Rises in May: 5 Stocks Worth Buying
After two consecutive months of decline, industrial production in the United States exhibited growth in May 2020, as revealed in the recently released data by the Federal Reserve. The news is quite encouraging, especially when the companies are trying to recover from the disruption caused by the pandemic.
Going by numbers, the metric rose 1.4% month over month, reflecting the highest monthly gain since the beginning of 2020. Industrial production in the United States declined 0.4% in January, 4.6% in March and 12.5% in April, while the same inched up 0.1% in February.
Also, the stock markets have shown signs of recovery, with the S&P 500 growing 7.3% since May 2020 to date, while the NASDAQ and NYSE have risen 11.3% and 6.9%, respectively. The DOW Industrial index grew 8% during the same timeframe. In addition, the Zacks Industrial Products sector has risen 11.8% since the beginning of May 2020.
What Led to Monthly Hike in Industrial Production?
Per the official report, the index gained mainly from 3.8% growth in the manufacturing sector — with significant rise witnessed in the manufacturing of aerospace, nonmetallic mineral, transportation equipment, furniture and other products. Also, production in plastics, rubber, printing, leather and apparel industries increased.
On the flip side, the output from the mining sector decreased 6.8% from the previous month. Further, output for the utilities sector slipped 2.3% due to weakness in electric and gas utilities.
In May, capacity utilization for the manufacturing sector was at 62.2%, up 2.2 percentage points from the previous month. However, capacity utilization for the mining sector fell 5.8 percentage points to 75.4%, while that for the utilities sector was down by 1.8 percentage points to 69.1%.
The Road Ahead
It is worth mentioning here that the country’s industrial production still reflects a 15.4% fall from its pre-pandemic levels and a 15.3% decline from the year-ago comparable month. Several companies operating in the manufacturing space are still wary about the uncertainties related to the pandemic.
For instance, Emerson Electric Co. (EMR - Free Report) predicts a year-over-year organic sales decline of 7-9% for fiscal 2020 (ending September 2020) due to lower product demand. Also, Donaldson Company, Inc. (DCI - Free Report) is wary about the pandemic-related impacts on its operations and therefore suspended projections for both fiscal 2020 (ending July 2020) and 2021 (ending July 2021).
However, many companies are exhibiting growth and are well-placed to deal with the pandemic-related woes. We have picked five industrial products stocks that can be of interest to investors in the prevalent uncertain environment. A price chart of the selected ticker is provided below:
Past Three-Month Price Performance
Altra Industrial Motion Corp. : The Braintree, MA-based company currently sports a Zacks Rank #1 (Strong Buy). It specializes in manufacturing and distributing various motion control, electromechanical power transmission, and automation products.
The company’s shares have gained 146.2% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 181.8% and 26% for the second quarter and 2020, respectively. Also, the company delivered positive earnings surprise of 47.73% in the last quarter.
Applied Industrial Technologies, Inc. (AIT - Free Report) : The Cleveland, OH-based company currently sports a Zacks Rank #1. It distributes value-added industrial products — including bearings, power transmission products, specialty flow control solutions and others — to original equipment manufacturers (“OEM”), and maintenance, repair and operations (“MRO”) customers.
The company’s shares have gained 96.4% in the past three months. Also, the Zacks Consensus Estimate for its earnings has been raised 25.9% for the fourth quarter (ending June 2020) and 4.8% for fiscal 2020 (ending June 2020) in the past 60 days. Its earnings surprise in the last quarter was a positive 2.00%.
Lakeland Industries, Inc. (LAKE - Free Report) : The Decatur, AL-based company currently flaunts a Zacks Rank #1. It makes and distributes protective clothing for use in public protective clothing and industrial markets.
The company’s shares have gained 22.7% in the past three months. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 140.9% for the second quarter (ending July 2020) and 198.7% for fiscal 2021 (ending January 2021). In the last reported quarter, the company recorded a positive earnings surprise of 568.75%.
MSC Industrial Direct Company, Inc. (MSM - Free Report) : The Melville, NY-based company presently carries a Zacks Rank #2 (Buy). It engages in distributing MRO and metalworking products.
The company’s shares have gained 37.1% in the past three months. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 31.8% for the third quarter (ended May 2020, results are awaited) and by 7% for fiscal 2020 (ending August 2020). The company’s earnings surprise in the last quarter was a positive 2.04%.
SiteOne Landscape Supply, Inc. (SITE - Free Report) : The Roswell, GA-based company currently sports a Zacks Rank #1. It engages in distributing landscape supplies.
The company’s shares have surged 84.2% in the past three months. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised by 28.1% for the second quarter and 78% for 2020. Its earnings surprise in the last quarter was a positive 23.64%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>