Industrial production in the United States improved last month, with output slowly recovering from the slump of last spring due to the outbreak of coronavirus. The
Federal Reserve recently mentioned that total industrial production that includes output at factories, utilities and mining increased at a seasonally adjusted 1.1% in October after a revised 0.4% drop in September. It has also recovered from the substantial decline witnessed between February and April.
However, output at factories improved for the sixth straight month in October. U.S. factory output continued to improve from the pandemic-driven shutdown period, increasing 1% in October from the prior month. Notably, manufacturing constitutes the largest component of industrial production.
It’s worth pointing out that gains in factory output came in despite bottlenecks, including supply chain disruptions and reduction in capital investments, to name a few. Nevertheless, the index for durable manufacturing as well as nondurables advanced 0.9% and 1.2%, respectively. Particularly, among durable goods, output for aerospace and miscellaneous transportation equipment improved considerably.
Incidentally, production capabilities of manufacturing units also improved. Capacity utilization, particularly, for manufacturing increased 0.7% to 71.7% in October, which is 11.6% higher than its low in pandemic-marred April, added the Federal Reserve.
Talking about the broader manufacturing sector, the
Institute for Supply Management (ISM) has already reported that its index of factory activity jumped to a reading of 59.3% in October, up 3.9% from September and touched the highest level in nearly 17 years. The reading was well above analysts’ expectation of 55.8%.
After stupendous growth in the July-September quarter, the economy is now expected to grow at a slower pace. After all, government aids to pep up the economy have dried up and a new rescue package is not expected anytime soon. But the improvement in factory output as well as activities last month indicates that the U.S. manufacturing sector will continue to remain in good shape in the fourth quarter.
The ISM added that its forward-looking new orders index expanded for the fifth straight month in October. The index read 67.9% in October, up from 60.2% in September. October’s new orders reading, by the way, was the highest since January 2004. And with uptick in orders, employment at manufacturing hubs also improved. The ISM’s employment index came in at 53.2% in October, up 3.6% from September, increasing for the sixth successive month.
Last of all, the manufacturing sector is anticipated to perform well in the near future banking on advancement in the latest technologies that should help manufacturers built cost-effective plants. Least we forget, the race to a coronavirus vaccine has heated up and if a vaccine gets an emergency approval soon, manufacturing activities will certainly improve further (read more:
3 Stocks to Win Big as Race for Coronavirus Vaccine Heats Up). Top 5 Gainers
With factory production in addition to overall activities improving in October and widely expected to remain so in the near future, top manufacturing firms are surely positioned to boost their profit margins. Thus, we have selected five such manufacturers that have also made the most of the upbeat factory numbers last month. These stocks flaunt a Zacks Rank #1 (Strong Buy) and 2 (Buy).
AAR Corp. ( AIR Quick Quote AIR - Free Report) provides various products to the aviation and defense industries. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up more than 100% over the past 60 days. The company’s expected earnings growth rate for the next year is 68.5%. Wabash National Corporation ( WNC Quick Quote WNC - Free Report) is one of the leading manufacturers of semi-trailers in North America. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 78.3% over the past 60 days. The company’s expected earnings growth rate for the next quarter is 225%. Delta Apparel, Inc. ( DLA Quick Quote DLA - Free Report) is a vertical manufacturer of knitwear products for the entire family. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed more than 100% over the past 60 days. The company’s expected earnings growth rate for the next year is 69.4%. You can see the complete list of today’s Zacks #1 Rank stocks here. Unifi, Inc. ( UFI Quick Quote UFI - Free Report) engages in the manufacture and sale of recycled and synthetic products made from polyester and nylon. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved more than 100% north over the past 60 days. The company’s expected earnings growth rate for the next year is 23.3%. Clearwater Paper Corporation ( CLW Quick Quote CLW - Free Report) produces pulp and paperboard at six facilities across the country. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has risen 2.6% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%. Zacks Names “Single Best Pick to Double”
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