Back to top

Image: Bigstock

5 Must-Buy Stocks as Industrial Production Continues to Expand

Read MoreHide Full Article

The U.S. economy is recovering at a fast pace and one of its biggest proofs is that industrial production is growing almost every month. Although at a slower pace than expected, industry production rose in August as factories are scurrying to reach the maximum level of output.

Also, manufacturing activity rose despite plants being temporarily shut down due to the hurricanes. Given this situation, it is likely that industrial output is likely to continue growing as the economy reopens further.

Industrial Production Increases 

The Federal Reserve said on Sep 15 that industrial production rose 0.4% in August. Expectations were of a 0.5% rise but the good thing is that output at U.S. industries has been on the rise for the past few months. The jump in August follows a 0.8% increase in July and a 0.2% increase in June. Industrial production includes output at factories, mines and utilities.

Experts believe that industrial production could have been higher had the late-month shutdowns due to Hurricane Ida not hampered production. However, despite this unexpected shutdown, manufacturing activity grew 0.2% in August, while utilities increased 3.3%.

The jump in utilities was primarily due to higher production of air conditioners as demand has been high due to warm weather, according to the data. Capacity utilization for the industrial sector increased 0.2% in August to reach 76.4%.

US Economy Recovering at a Fast Pace

Manufacturing accounts for almost 11.9% of the total U.S. economy. The sector is getting support lately from the massive coronavirus relief stimulus, low interest rates and continued higher demand for goods. Moreover, the jump in August comes despite a surge in fresh COVID-19 cases.

It can thus be said that despite the growing fears of the Delta variant of the COVID-19, it hasn’t dented much of the confidence of people. And this has thus not posed as a deterrent in factories operating to   optimum capacity.

Moreover, the massive vaccination drive has given people both confidence and power to make purchases. This has been pushing demand for U.S. factory-made goods, thus helping manufacturers. Although a shade below expectations, the U.S. economy grew 6.5% in the second quarter, which proves the strength in the economy.

Also, manufacturing activity has been growing at a faster pace than expected. According to the Institute of Supply Management, manufacturing activity grew for the 15th consecutive month in August to 59.9 after contracting in April 2020.

Our Choices

Given this scenario, it would be ideal to invest in the five stocks we have picked below. 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.

Regal Beloit Corporation is a leading manufacturer of electrical and mechanical motion control products. The company offers an array of electric motors, blowers, electric generators, transfer switches, gearboxes, power generation components and controls.

The company’s expected earnings growth rate for the current year is 52.7%. The Zacks Consensus Estimate for current-year earnings improved 12.5% over the past 60 days. Regal Beloithas a Zacks Rank #1.

Applied Industrial Technologies, Inc. (AIT - Free Report) is a distributor of value-added industrial products — including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. The company made quite a few big acquisitions in the past few months. Last year, it acquired Advanced Control Solutions, known for providing automation products and engineered solutions on machine vision equipment and software. Earlier this year, the company acquired Gibson Engineering Company, Inc.

The company’s expected earnings growth rate for the current year is 12%. The Zacks Consensus Estimate for current-year earnings improved 6.2% over the past 30 days. The company has a Zacks Rank #2.

DXP Enterprises, Inc. (DXPE - Free Report) is a leading products and service distributor that adds value and total cost saving solutions to industrial customers throughout the United States, Canada, Mexico and Dubai.

The company’s expected earnings growth rate for the current year is 77.6%. The Zacks Consensus Estimate for current-year earnings has improved 70.9% over the past 30 days. The company has 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 said in July that it has completed the acquisition of CDS Visuals, a provider of software as a service (SaaS) 3D visualization solutions, customized for industrial applications, for an undisclosed sum.

The company’s expected earnings growth rate for the current year is 32.6%. The Zacks Consensus Estimate for current-year earnings improved 7.4% over the past 30 days. It has a Zacks Rank #2.

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 with its signature green and yellow color scheme. 

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 4.9% over the past 30 days. The company has a Zacks Rank #2.