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4 Stocks to Buy on Continued Expansion in Industrial Production

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Production level at U.S. factories is on the rise as the economy gets back to operation at full strength after being battered by the COVID-19 pandemic. This has seen manufacturing activity at factories steadily rising over the past few months.

April proved to be yet another great month, as higher demand for motor vehicles and other goods saw industrial production rising steadily for the fourth month. The jump comes despite multiple challenges like rising costs of raw materials and supply-chain crisis. Given this scenario, industrial stocks like Titan International, Inc. (TWI - Free Report) , AZZ Inc. (AZZ - Free Report) , Helios Technologies, Inc. (HLIO - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) are expected to benefit in the near term.

Industrial Production Rises in April

The Fed said on May 17 that industrial production increased 1.1% in April for the fourth consecutive month with gains of more than 0.8%. April’s gains follow a 0.9% jump in March, indicating that the economy is on track for steady growth.

Industrial production includes output at factories, mines and utilities. Manufacturing output for April increased 0.8%, matching the jump in March and surpassing expectations of a rise of 0.4%.

As a result, capacity utilization at U.S. factories increased 0.6% to 79.2% in April, recording its highest level since 2007. April’s jump was led by higher production of motor vehicles. Demand for motor vehicles has been on the rise, which has made manufacturers ramp up production.

Automobile production had declined last year due to a shortage of semiconductors and supply-chain crisis, but has picked up this year. Automobile manufacturers had one of their finest months in April, which gave a boost to the overall industrial output. In April, automobile manufacturing jumped a solid 3.9%.

Manufacturing Activity Rises Despite Challenges

U.S. industries have been performing well for a while now, with output increasing almost every month. During the pandemic, people spent more on goods and less on services at the height of the pandemic.

As demand for commodities increased, this helped the manufacturing sector flourish at a rapid pace.

As the economy reopened, people started spending once again on services. However, that still hasn’t affected manufacturing activity at U.S. factories given the steady demand for consumer goods.

However, there are different challenges now. Manufacturing, which accounts for 11.9% of the US GDP, has been struggling to cope with an extraordinarily tight labor market, while supply bottlenecks remain a problem as a result of COVID-induced lockdowns in China and the ongoing Russia-Ukraine war.

Even then, the manufacturing sector has managed to survive and is on solid ground. Besides automobiles, mining activity increased a solid 1.6% in April.

Higher crude oil prices, which pushed the cost of gasoline to record highs, are helping drive output at mines. Utilities production jumped 2.4% in April after a 0.3% decline in March.

The industrial sector's overall capacity utilization rose to 79% in April, up from 78.2% in the previous month, which is just 0.5% lower than the average from 1972 to 2021.

Our Choices

Given this scenario, it would be ideal to invest in the four 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.

Titan International, Inc. is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. TWI globally produces a broad range of products to meet the specifications of original equipment manufacturers and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets.

Titan International’s expected earnings growth for the current year is 84.7%. The Zacks Consensus Estimate for next-year earnings has improved 35.3% over the past 60 days.  TWI carries a Zacks Rank #1.

AZZ Inc. is a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services. AZZ provides its products to the markets of power generation, transmission, distribution and industrial in protecting metal and electrical systems used to build and enhance the world's infrastructure. AZZ Inc.’s AZZ Metal Coatings is a leading provider of metal finishing solutions for corrosion protection, including hot-dip galvanizing to the North American steel fabrication industry.

AZZ Inc.’s expected earnings growth for the current year is 14.7%. The Zacks Consensus Estimate for next-year earnings has improved 12.6% over the past 60 days.  AZZ sports a Zacks Rank #1.

Helios Technologies, Inc. is an industrial technology company. HLIO develops and manufactures hydraulic and electronic control solutions. Helios Technologies’ operating subsidiaries include Sun Hydraulics, Enovation Controls and Faster Group.

Helios Technologies’ expected earnings growth for the current year is 7.3%. The Zacks Consensus Estimate for next-year earnings has improved 0.7% over the past 60 days.  HLIO has a Zacks Rank #2.

Luxfer Holdings PLC is a materials technology company specializing in the design, manufacture and supply of high-performance materials, components and gas cylinders. LXFR had two divisions, Elektron and Gas Cylinders. Luxfer Holdings also offers recycling services and magnesium powders throughout its global networks.

Luxfer Holdings’ expected earnings growth for the current year is 11.6%. The Zacks Consensus Estimate for next-year earnings has improved 4.3% over the past 60 days.  LXFR has a Zacks Rank #2.