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4 Industrial Stocks Poised to Continue Their Winning Streaks in 2021

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The U.S manufacturing sector has managed to deliver a rapid turnaround from the pandemic-induced disruptions witnessed in the earlier part of the year on pick-up in manufacturing activities spurred by the steady resumption of business and factory operations. Further, robust domestic and export demand for manufacturing products, the government’s financial stimulus packages and rate cuts will aid the sector in the upcoming period.

A Glimpse into Sector Performance & Projections

At the beginning of 2020, the U.S manufacturing sector was already battling waning global demand and the long-standing U.S.-China trade spats. On top of that, the COVID-19 pandemic dealt a blow with supply-chain disruptions, factory closures due to government restrictions worldwide, as well as energy market volatility. Per the Institute for Supply Management, the U.S Manufacturing Purchasing Managers’ Index (PMI) had plunged to 41.5% — the lowest reading since April 2009. The index remained below the 50 mark from March to May primarily due to the pandemic.

However, the PMI has picked up and remained above 50 for six straight months since June — which denotes expansion in manufacturing activities. Notably, the PMI logged 57.5% growth in November. The sector seems to have come out from this unprecedented crisis as evident from its ongoing recovery. This holds optimism for overall economic growth, as the manufacturing sector accounts for 11% of the U.S. economy. Further, the FDA’s approval for mass vaccination instills hope for fast recovery of the economy.

Industrial production in the United States is improving on solid expansion in manufacturing, especially production of motor vehicles and parts. According to the Federal Reserve, manufacturing output grew for the seventh straight month in November, after suffering a 16.5% decline from February to April.

Apart from the United States, manufacturing continues to expand in Europe and China. The IHS Markit Eurozone Manufacturing PMI came in at 53.8 in November. Manufacturing output grew for the fifth successive month in November. Meanwhile, the Official NBS Manufacturing PMI in China came in at 52.1 in November, marking the ninth consecutive month of expansion in factory activity as the economy continues to recover from the pandemic and ramped-up investments. Factory output, new orders and export sales also continue to improve.

Defying all the pandemic-induced odds, the Industrial Products sector has gained 17.4%, year to date, outperforming the S&P 500 Index’s gain of 15.2%.

Also, per the latest Earnings Trends report, the sector is expected to see year-over-year earnings growth of 22% in 2021, with the top line expected to be up 6%.

Investing in the Zacks Industrial Products sector will likely be a prudent option right now as the sector currently carries a Zacks Sector Rank of 4, which places it at the top 25% of the 16 Zacks sectors.

4 Industrial Stocks Set to Fly High Next Year

We have picked four Industrial stocks which are set to perform well in 2021 and are backed by a Zacks Rank #1 (Strong Buy) or 2 (Buy). These stocks have been up more than 20% so far this year and witnessing positive revisions, of late. You can see the complete list of today’s Zacks #1 Rank stocks here.

Packaging Corporation of America (PKG - Free Report) : Based in Lake Forest, IL, Packaging Corporation is the third largest producer of containerboard products and uncoated freesheet paper in North America. The company’s packaging business, which contributes around 85% of its revenues, is gaining from elevated demand for meat, fruit and vegetables, processed food, beverages, medicine, and other consumer products in the wake of the pandemic. Furthermore, the company is poised to gain from the e-commerce boom that will spur demand for boxes in the days to come. Its efforts to reduce debt levels and solid cash position will also stoke growth.

The company currently flaunts a Zacks Rank of 1. The Zacks Consensus Estimate for 2021 earnings has been revised 22.5% upward in 60 days’ time to $6.85, indicating year-over-year growth of 17.7%. Its shares have gained 20.4% in the year-to-date period.

AGCO Corporation (AGCO - Free Report) : Based in Duluth, GA, AGCO is a leading manufacturer and distributor of agricultural equipment and related replacement parts. The company is well placed to gain from improved farm income, stabilization of U.S farm sector and increasing replacement demand. The company continues to invest in premium technology and smart farming solutions in a bid to strengthen its product offerings. In addition, positive pricing, favorable material costs and cost-control initiatives will likely drive margins.

The Zacks Consensus Estimate for next year’s earnings is currently pegged at $6.16, suggesting a year-over-year jump of 19.6%, having moved 17.3% north over the past 60 days. This Zacks Rank #1 stock has appreciated 33.2%, so far this year.

Lincoln Electric Holdings (LECO - Free Report) : This Zacks Rank #2 (Buy) company is a manufacturer and reseller of welding and cutting products. The company is benefiting from focus on new product development, utilization of digital platforms and investments in the automation solutions market. Additionally, Lincoln Electric has been riding on several buyouts in a bid to expand offerings in its served markets. Also, the company’s cost-control actions will aid its margins in the near term.

Shares of this Cleveland, OH-based company have rallied 17.4% year to date. The Zacks Consensus Estimate for 2021 earnings has been revised 6.7% upward in 60 days’ time to $4.73 per share, calling for a year-on-year increase of 19.6%.

Timken Company (TKR - Free Report) : This North Canton, OH-based company is a global manufacturer of bearings, friction management products, and mechanical power transmission components for variety of end markets. The company is gaining from its cost-containment moves and solid manufacturing performance. Timken continues to pursue strategic acquisitions in an effort to broaden its capabilities across diverse markets, with focus on bearings, adjacent power transmission products and related services. Apart from this, the company’s recent announcement of making investments through 2022 to grow in the lucrative wind and solar Energy markets will drive growth in the days ahead.

The company currently carries a Zacks Rank #2. The Zacks Consensus Estimate for next year’s earnings is pinned at $4.79, having moved up 10.1% in the past 60 days. The consensus mark suggests a year-over-year rise of 15%. The stock has gained 36.6% in the year-to-date period.

Zacks Top 10 Stocks for 2021

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks>>