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5 Stocks to Make the Most of Record-High US Factory Data

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Manufacturers of late are having a tough time securing raw materials and qualified laborers. Despite such bottlenecks, U.S. factories are humming. After all, a measure of factory activity in the United States jumped to a record high in June. Citing a Reuters article, IHS Markit’s flash U.S. manufacturing PMI climbed to a reading of 62.6 in June following May’s reading of 62.1. Now, that was the highest reading ever recorded by the survey since it began covering all manufacturing activities in October 2009, added the Reuters article.

An increase in the pace of coronavirus vaccination and trillions of dollars of stimulus packages have improved the well-being of individuals and improved manufacturing activities as well. In fact, the U.S. manufacturing sector is experiencing strong demand for goods, and manufacturers are undoubtedly finding it difficult to keep pace. But strong demand is no doubt a good problem to have.

Nonetheless, strength in the manufacturing sector increased expectations of double-digit economic growth in the second quarter. Notably, factory production jumped more than estimated last month. Industrial output advanced at a seasonally adjusted rate of 0.8% in May and easily surpassed economists’ expectations, noted the Federal Reserve.

In fact, manufacturing output that largely constitutes the overall industrial output rose 0.9% from the prior month, mostly due to an improvement in the output of motor vehicles and parts, the Federal Reserve added. As quoted in a MarketWatch article, the output of motor vehicles and parts jumped 6.7% in the month of May following a drop of 5.7% in the prior month, indicating that semiconductor shortage isn’t impacting auto production anymore.

By the way, the Institute of Supply Management (ISM) also confirmed that factory activity has gained steam at present, thanks to the re-opening of the economy, the lifting of coronavirus-led curbs, and an increase in pent-up demand boosting orders. The ISM’s index of U.S. factory activity, as mentioned in another Reuters article, came in at 61.2 in May, up from a reading of 60.7 in the prior month. The reading is more than economists’ expectations, and a reading above 50 does confirm expansion in the manufacturing sector.

Thus, with the key measure of U.S. factory activity hitting a record high along with other upbeat manufacturing numbers, it’s prudent to invest in top manufacturers that can make the most of the bullish trend and ramp up profits. We have, thus, selected five such stocks that possess a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Tennant Company (TNC - Free Report) designs, manufactures and markets floor cleaning equipment. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 19.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 49.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alcoa Corp. (AA - Free Report) produces and sells bauxite, alumina, and aluminum products in the United States and internationally. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 13.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 509.5%.

Barnes Group, Inc. (B - Free Report) is a global diversified manufacturer and provider of highly engineered products, innovative solutions and differentiated industrial technologies. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 6.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 16.5%.

AGCO Corporation (AGCO - Free Report) is a leading manufacturer and distributor of agricultural equipment and related replacement parts. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 18.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 54.6%.

Deere & Company (DE - Free Report) is the world’s largest producer of agricultural equipment. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 11.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 105.9%.

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