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5 Industrial Stocks to Gain as Biden Strikes Infrastructure Deal

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President Biden announced that a deal has been struck with a bipartisan group of senators for his long-awaited infrastructure proposal. It will overhaul the United States’ transportation, water and broadband infrastructure and would create millions of jobs. This development was well received by the stock markets. Stocks also gained on data that U.S. economic grew at a solid 6.4% rate in the first quarter of 2021, reflecting sustained economic recovery, reopening of establishments and continued government response related to the COVID-19 pandemic. It marked acceleration from growth of 4.3% in the fourth quarter of 2020. Also, per the U.S. Census Bureau, new orders for manufactured durable goods in May increased 2.3% — posting a gain for the 12th time in the last 13 months.

The Dow Jones Industrial Average ended 322.58 points higher, up 1%, to 34,196.82 on expectation that companies that would benefit from higher demand from the infrastructure spending. The S&P 500 was up 0.58% or 24.65 points to 4,266.49, higher than its previous record close of 4,255.15 set on Jun 14 following the Federal Reserve meeting. The Nasdaq Composite gained 97.98 points, or 0.7%, to 14,369.71, marking its 17th record close of 2021.

Biden’s $1.2 trillion plan includes $579 billion in new spending, focusing on physical infrastructure such as roads, bridges, rail, broadband internet, water and sewer pipes, and electric vehicles. This is the largest investment spending on infrastructure in a century. It earmarks a huge investment in public transit and the largest investment in rail since the creation of Amtrak.

The COVID-19 pandemic had dealt a severe blow to the U.S manufacturing sector last year as it led to factory closures worldwide, supply-chain disruptions, low demand and logistic costs. However, it has bounced back on the gradual resumption of global economic activities and reopening of businesses. Manufacturing activity has shown expansion so far this year.  Notably, U.S. industrial production increased 0.8% in May — the third straight month of growth. Manufacturing production advanced 0.9%, while production at mines rose 1.2%. The U.S. manufacturing sector is currently riding on back of the massive coronavirus relief stimulus, increased pace of vaccination, low interest rates and sustained higher demand for goods.

Government spending to rebuild roads, bridges and waterways will translate into fresh demand for makers of construction materials and equipment as well as infrastructure engineering and design companies. Given this scenario, it is ideal to invest in such stocks. We suggest five stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) and assure good returns.

Our Choices

Titan Machinery Inc. (TITN - Free Report) : West Fargo, ND based company owns and operates a network of full service agricultural and construction equipment stores in the United States and Europe. Construction equipment is purchased primarily for use in commercial, residential and infrastructure construction, as well as for agriculture, demolition, mining, energy production and forestry operation. The company is poised well to benefit from the higher demand stemming from infrastructure development. Higher farm income, improved farmer sentiment and replacement demand also bode well. Further, the operational improvements implemented over the past couple of years will boost its margins.

The Zacks Consensus Estimate for this year’s earnings has gone up 24% in the past 60 days. The estimate for the current year indicates year-over-year growth of 32%. The company has a trailing four-quarter earnings surprise of 350%, on average. The company has an estimated long-term earnings growth rate of 20%. Shares of the company, which currently sports a Zacks Rank #1, have gained 63.6% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar Inc. (CAT - Free Report) : Given that Caterpillar is the largest global manufacturer of construction and mining equipment, it is positioned to gain immensely from the increased spending on U.S. infrastructure. Its iconic yellow machines are seen in every construction project across the globe. The company is also anticipated to gain on strong demand in China, pick-up in manufacturing activity, strength in residential construction in the United States, solid construction demand in Brazil and improving mining fundamentals. Cost control measures will boost margins. Caterpillar continues to focus on customers and future by continuously investing in digital capabilities and developing the next generation of more productive and efficient products, which provides it a competitive edge.

The Zacks Consensus Estimate for the Deerfield, IL-based company’s ongoing-year earnings has moved up 18% over the past 60 days. The estimate for the current year indicates year-over-year growth of 46%. The company has a trailing four-quarter earnings surprise of 41.6%, on average. Notably, Caterpillar has an estimated long-term earnings growth rate of 12%. Shares of the company have gained 20.5% so far this year. It currently carries a Zacks Rank #2.

Deere & Company (DE - Free Report) : Headquartered in Moline, IL, Deere is the world’s largest producer of agricultural equipment but it also manufactures machines and service parts used in construction, earthmoving, material handling and timber harvesting. Further, the company manufactures and distributes road building equipment through its wholly-owned subsidiaries of the Wirtgen Group. Thus, it stands to benefit from the increased spending on infrastructure. Apart from this, Deere will gain from higher demand stemming from improving farm income driven by recovering agricultural commodity prices and the need to replace an ageing fleet. Strength in residential construction will also favor its top-line. Moreover, the company will benefit from concerted focus on launching products with advanced technologies and features. Deere is assessing cost structure by reviewing organization efficiency and footprint assessment, which in turn will help improve margins.

The Zacks Consensus Estimate for the company’s earnings for the ongoing fiscal indicates year-over-year growth of 106%. The Zacks Consensus Estimate for this year’s earnings has gone up 11.8% in the past 60 days. The company has a trailing four-quarter earnings surprise of 68%, on average. The company has an estimated long-term earnings growth rate of 20%. This Zacks #2 Ranked stock has gained 30.3% year to date.

Terex Corporation (TEX - Free Report) : The Norwalk, CT-based company is a global manufacturer of aerial work platforms, materials processing machinery and cranes. It  will also gain from the increase in demand for construction equipment. Terex is advancing well on its “Execute, Innovate, Grow” strategy that will help drive cash flow and profitability. It continues to invest in innovative products, expansion of manufacturing facilities and adding scope through acquisitions. The company strives to continuously develop product offerings by applying technology and investing in connected assets and digital capabilities to better serve customers. At the same time, it remains focused on maintaining strong liquidity and cash position. The company’s efforts to right size its cost structure will help bolster margins.

The Zacks Consensus Estimate for the company’s earnings for the ongoing year indicates year-over-year improvement of 1,854%. The estimate has moved north by 9.3% over the past 60 days. The company has a trailing four-quarter earnings surprise of 307%, on average. This Zacks #3 Ranked stock has gained 33.3% year to date.

The Manitowoc Company Inc. (MTW - Free Report) : Milwaukee, WI based company is a leading provider of engineered lifting solutions, including lattice-boom cranes, tower cranes, mobile telescopic cranes and boom trucks. It is well positioned to benefit from the higher demand for construction equipment. The company’s innovation pipeline remains robust, which will continue to aid it in leading the industry by providing differentiated products that add value to customers. The company remains committed to cash preservation and balance sheet management while funding critical programs for future growth.

The Zacks Consensus Estimate for the company’s earnings for the ongoing year indicates year-over-year growth of 231%. The estimate has gone up 61% in the past 60 days. The company has a trailing four-quarter earnings surprise of 67%, on average. The company has an estimated long-term earnings growth rate of 10%. This Zacks #3 Ranked stock has surged 85.4% year to date.

Zacks Investment ResearchImage Source: Zacks Investment Research

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>