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5 Top Stocks to Buy as Industrial Output Continues to Expand

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The U.S. economy is making a steady recovery and signs are that things will be back on track soon given the pace of vaccination. This has seen manufacturing activity and industrial production growing at a decent pace.

In fact, industrial production increased in April after taking a battering last year. Although the growth was modest compared to March, the pace has been steady and the momentum is likely to continue in the coming months too as the economy reopens further.

Industrial Production Rises

The Federal Reserve said on May 14 that industrial production increased 0.7% in April. Industrial production includes output at factories, mines and utilities. The gains were modest compared to a 2.4% rise in March but the sector is set to perform well in the coming months too.

Manufacturing output increased 0.4%in April. Manufacturing accounts for 11.9% of the total U.S. economy and is gaining strength because of the massive fiscal stimulus that has been pumped in. Moreover, people’s demand has shifted to goods from services because of the coronavirus pandemic, which is further aiding the sector.

Utility production climbed 2.6% after declining sharply in March. Production at mines also rose 0.7% in April.

Economy Recovering Faster Than Expected

The U.S. economy is expanding at a fast pace and people are more confident as states have started relaxing restrictions. Also, the vaccination drive has gathered steam and mask restrictions are being relaxed.

The economy grew a robust 6.4% in the first quarter, which proves its underlying strength. Moreover, economists expect economic expansion at a double-digit pace in the second quarter, which is likely to be driven by strong industrial and manufacturing output.

Also, the Institute of Supply Management said earlier this month that manufacturing activity jumped to a reading of 60.7%. Although growth came in lower than expectations, and below the 37-year high achieved in March, manufacturing activity has now increased for the 11th consecutive month.

Our Choices

Given this scenario, it is ideal to invest in these five stocks. All these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company (DE - Free Report) is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand.

The company’s expected earnings growth rate for the current year is 84.2%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. The company has a Zacks Rank #2 (Buy).

Caterpillar Inc. (CAT - Free Report) is the largest global manufacturer of construction and mining equipment. Given that it serves a gamut of sectors — infrastructure, construction, mining, oil & gas, and transportation — the company is considered a bellwether of the global economy.

The company’s expected earnings growth rate for the current year is 35.2%. The Zacks Consensus Estimate for current-year earnings has improved 10.5% over the past 60 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corporation (AGCO - Free Report) is a leading manufacturer and distributor of agricultural equipment and related replacement parts. The company offers a full product line of farm equipment through a wide network of dealers and distributors across 140 countries.

The company’s expected earnings growth rate for the current year is 54.6%. The Zacks Consensus Estimate for current-year earnings has improved 18.9% over the past 60 days. AGCO Corporationcarries a Zacks Rank #2.

TriMas Corporation (TRS - Free Report) is a diversified global designer, manufacturer and distributor of engineered and applied products that serve a variety of industrial, commercial and consumer end markets worldwide.

The company’s expected earnings growth rate for the current year is 38.3%. The Zacks Consensus Estimate for current-year earnings has improved 20.6% over the past 60 days. TriMas Corporation sports a Zacks Rank #1.

Dover Corporation (DOV - Free Report) is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment.

The company’s expected earnings growth rate for the current year is 21.9%. The Zacks Consensus Estimate for current-year earnings has improved 7.1% over the past 60 days. The company has a Zacks Rank #2.

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