Back to top

Image: Bigstock

4 Solid Stocks to Buy on Surge in Orders for Durable Goods

Read MoreHide Full Article

Rising costs have been a cause of concern lately but that still hasn’t impacted orders and production at U.S. factories. This has seen orders for long-lasting goods at U.S. factories growing at a steady pace. This, at the same time, reflects that despite inflationary pressures, the U.S. economy is still strong and higher demand for goods is driving orders.

Higher demand is an indication that people are willing to spend more despite the pressure of rising costs. Given this scenario, stocks like Titan International, Inc. (TWI - Free Report) Applied Industrial Technologies, Inc. (AIT - Free Report) , IDEX Corporation (IEX - Free Report) andNordson Corporation (NDSN - Free Report) are expected to gain in the near term.

Durable Goods Orders Rise

Although lower than estimated, orders for long-lasting, durable goods (intended to last at least three years) in U.S. factories rose 0.4% in April to reach $265.32 billion, the Commerce Department said on May 25.

Economists had predicted orders to rise 0.6%. However, it came in marginally lower, indicating that rising costs are yet to seriously impact U.S. factories.

Orders for durable goods, excluding transportation equipment, increased 0.3% in April. Orders for transportation equipment play a significant role in driving overall durable goods in April, after declining for two straight months.

In April, new orders for nondefense capital rose $0.4 billion, or 0.4%, to $83.4 billion. Shipments climbed $0.5 billion, or 0.6%, to $78.4 billion. Unfilled orders climbed $5 billion, or 0.8%, to $620.2 billion.

U.S. Economy Still on Solid Ground

April’s jump once again proves that despite inflationary pressures, the nation’s economy is on solid ground and is growing fast. Durable goods orders have increased in six of the last seven months.

At the same time, it proves that despite surging costs, people are unhesitant about spending, which is pushing demand for durable goods, thus giving a boost to orders.

Orders for non-defense capital goods, excluding aircraft, rose 0.3% in April compared to March, which was approximately in line with economists' expectations. Moreover, shipments for manufactured durable goods rose 0.1% or $0.3 billion to $264.3 billion in April. This follows a 1.1% rise in March. Shipments of manufactured durable goods have now increased in 11 of the past 12 months.

Furthermore, with inventories at historically low levels, core capital goods orders are projected to remain strong in the coming months, aiding the manufacturing sector, which accounts for 11.9% of the economy.

Our Choices

Given this scenario, it will be prudent to invest in stocks with a favorable Zacks Rank that are poised to gain from the solid durable goods orders. We narrowed down our search to four such stocks. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). 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 (OEMs) and aftermarket customers in the agricultural, earthmoving/construction and consumer markets.

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

Applied Industrial Technologies, Inc. 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. AIT is also well known in the market for its engineering, design and systems integration services. Moreover, Applied Industrial Technologies’ inventory management solutions and maintenance training services boost the value of end-users in the market.

Applied Industrial Technologies’ expected earnings growth rate for the current year is 31.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. AIT sports a Zacks Rank #1.

IDEX Corporation is an applied solutions company that specializes in a diverse range of applications such as fluid and metering technologies; health and science technologies; and fire, safety and other products built to customer specifications. Serving high-growth niche markets, IEX operates under three business segments, namely Fluid & Metering Technologies, Health & Science Technologies, and Fire & Safety/Diversified Products. IDEX Corporation sells its products to OEMs, as well as to direct end-use customers across the globe.

IDEX Corporation’s expected earnings growth rate for the current year is 22.1%. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the past 60 days. IEX has a Zacks Rank #2.

Nordson Corporation is one of the leading manufacturers as well as distributors of products and systems designed to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids. NDSN’s product line includes single-use components, stand-alone units for low-volume operations and microprocessor-based automated systems for high-speed, high-volume production lines. Nordson Corporationhas operations in over 35 countries.

Nordson Corporation’s expected earnings growth rate for the current year is 19.8%. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the past 60 days. NDSN has a Zacks Rank #2.