Since the outbreak in first-quarter 2020, the Covid-19 pandemic severely impacted manufacturing, marketing and finances of companies across sectors and nations. It changed the rules of operating businesses, with a lot more emphasis now being given to digital platforms, strengthening of supply-chains and the safety of workers.
Also, the governments took counter-measures to deal with the financial impacts of the pandemic. For the United States, the Federal Reserve lowered its interest rates to 0.1% in March. Stimuli packages too were extended. With all these and several other measures in place, companies in sectors, including industrial products, transportation and oil/energy started, showed some resilience in the third quarter. Narrowing down our discussion to industrial stocks, it is worth mentioning here that such stocks are broadly grouped under the Zacks Industrial Products sector. It currently is placed in the top 19% (with a rank of 3) of the Zacks 16 sectors. The sector lost its sheen in first-quarter 2020, decreasing 28%. Thereafter, it gained strength and increased roughly 63.9% so far. Notably, its revenues increased 6% sequentially in third-quarter 2020 as against 3.8% and 9.6% declines recorded in the second and first quarters, respectively. Earnings per share too expanded from 53 cents in the first quarter to 61 cents in the third quarter. What’s Driving Industrial Products’ Strength?
A number of factors added and are adding strength to industrial prospects amid the pandemic. In this regard, leading indicators are the country’s industrial production and the ISM’s manufacturing index. Notably, the industrial production in the United States advanced 0.4% month over month in November, while the manufacturing PMI stood at 57.5% (an index above 50% means expansion in manufacturing activities). This compares with a decline of 12.7% in industrial production and manufacturing index of 41.5% in April.
On the broader aspect, the revival in economic activities in the United States is lifting sentiments for the sector as a whole. The country is witnessing falling unemployment levels — which stood at 6.7% in November versus 14.7% in April; increase in housing starts; better international trade; and improved GDP — which advanced 33.4% in the third quarter on the back of multiple factors, including a rise in non-residential and residential fixed investment, exports, and personal consumption expenditure. Per our latest Earning Trend report, the sector’s earnings are expected to increase 11.1% in first-quarter 2021, while revenues are predicted to rise 3.4% year over year. This compares favorably with declines of 9.6% and 3% predicted for the sector’s fourth-quarter 2020 earnings and revenues, respectively. 5 Industrial Performers Amid Pandemic
We have chosen five industrial stocks that dealt with the pandemic woes bravely in 2020 and are also expected to exhibit healthy growth in the quarters ahead. Notably, the chosen stocks carry a Zacks Rank #1 (Strong Buy) or Rank #2 (Buy), and has a market capitalization greater than $2 billion and positive movements in share price.
You can see / the complete list of today’s Zacks #1 Rank stocks here. Deere & Company ( DE Quick Quote DE - Free Report) : The Moline, IL-based company is the largest producer of agricultural equipment in the world. It is poised to benefit from product innovation, healthy operating dynamics in the agriculture space, acquired assets and efforts to improve margins. Presently, its market capitalization is $84.4 billion. The shares of this Zacks Rank #1 company surged 54.6% in the past 12 months as compared with the Zacks Manufacturing - Farm Equipment industry’s growth of 50.9%. It delivered a positive earnings surprise for the quarters ended April, July and October this year. Notably, earnings beat in the last reported quarter was 65.97%. The company also paid out dividends of 76 cents per share in each of the three quarters. In the past 60 days, its earnings estimates have been raised 24.3% for fiscal 2021 (ending October 2021) and 25.8% for fiscal 2022 (ending October 2022). Illinois Tool Works Inc. ( ITW Quick Quote ITW - Free Report) : The company is a specialist in manufacturing highly engineered products and specialty systems. The Glenview, IL-based company is likely to benefit from demand recovery in end markets, diversified product offerings, enterprise strategies and innovation investments. The company currently carries a Zacks Rank #2 and has a market capitalization of $64.1 billion. In the past 12 months, the stock price grew 12.5% as compared with the Zacks Manufacturing - General Industrial industry’s growth of 9.3%. The company delivered better-than-expected results in the first three quarters of 2020. Notably, earnings surprise was 26.21% in the last reported quarter. Also, dividend payouts of $1.07 per share were made by the company in the first two quarters of 2020, while $1.14 per share payment was made in the third quarter. In August 2020, the quarterly dividend rate was hiked by 6.5%. In the past 60 days, the company’s earnings estimates have increased 6.7% for 2020 and 4.9% for 2021, reflecting bullish sentiments for its prospects. Ball Corporation ( BLL Quick Quote BLL - Free Report) : The company supplies metal packaging to household products, beverage and personal care industries. It is based in Broomfield, CO, and has a $30.2-billion market capitalization. Focus on product innovation, strengthening aerospace backlog, the growing popularity of aluminum packaging and cost-reduction measures are boons. The company presently carries a Zacks Rank #2 and has gained 43.3% in the past 12 months as compared with the Zacks Containers - Metal and Glass industry’s growth of 38.5%. Earnings performances were better than expected in the first three quarters of 2020. Notably, earnings beat was 15.58% in the last reported quarter. A dividend worth 15 cents per share was paid out to shareholders in each of the three quarters. In the past 60 days, the company’s earnings estimates have increased 5.8% for 2020 and 4.4% for 2021. Packaging Corporation of America ( PKG Quick Quote PKG - Free Report) : The Lake Forest, IL-based company is one of the leading producers of uncoated freesheet paper and containerboard products in North America. Strengthening businesses in pharmaceutical, food and beverages markets as well as growth in the e-commerce platform and solid product offerings are advantageous for the company. Its market capitalization is presently $12.9 billion. The company presently sports a Zacks Rank #1 and has gained 21.8% in the past 12 months as compared with the Zacks Containers - Paper and Packaging industry’s growth of 12.4%. It reported better-than-expected results in the first three quarters of 2020. Notably, earnings beat was 15.44% in the last reported quarter. It rewarded shareholders handsomely with dividend payments of 79 cents per share in each of the three quarters. Notably, the quarterly dividend rate has been hiked by 27% in December. In the past 60 days, the company’s earnings estimates have increased 9.8% for 2020 and 23.4% for 2021. Such upward movements in estimates strengthen the view of healthy growth prospects for the company. Fortune Brands Home & Security, Inc. ( FBHS Quick Quote FBHS - Free Report) : The Deerfield, IL-based company manufactures and sells home and security products. Solid product offerings, strengthening the U.S. housing market, growth investments and cost-control measures are boons for the company. It currently carries a Zacks Rank #2 and has a $12.4-billion market capitalization. In the past 12 months, the company’s shares have gained 36.3% as compared with the Zacks Security and Safety Services industry’s growth of 11.4%. Its financial performances in the first three quarters of 2020 were above expectations. The earnings surprise in the last reported quarter was 12.26%. Dividend payouts of 24 cents per share were made in each of the first three quarters of 2020. Also, the company hiked the quarterly dividend rate by 8.3% in December 2020. Notably, its earnings estimates are pegged at $4.09 for 2020 and $4.75 for 2021, reflecting growth of 5.1% and 9.4% from the respective 60-day-ago figures.
Zacks Top 10 Stocks for 2021
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