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5 Stocks to Buy on Continued Rise in Orders for Durable Goods
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Orders for U.S.-made factory goods jumped in June, the Commerce Department announced on Jul 27. The manufacturing sector has been struggling over the past several months amid persistent price pressure. However, the scenario finally appears to be improving as inflation continues to ease and prices cool.
The Commerce Department said that orders for goods made to last more than years jumped a solid 4.7% month over month in June to $302.5 billion, and beating economists’ expectations of a rise of 1.5%. May’s figures were also upwardly revised to 2%.
The growth was primarily driven by a robust jump in orders for transportation equipment, which rose 12.1% in June.
Excluding transportation, durable goods orders rose 0.6% to $115.3 billion. This was driven by a solid surge of 69.4% in orders for civilian aircraft and parts, which totaled $37.13 billion. Excluding defense, new orders for durable goods climbed 6.2%.
New orders for nondefense capital goods, excluding aircraft, which serves as a significant indicator for business investment, increased 0.2% in June, totaling $74.08 billion. This growth is closely monitored as it reflects the level of investment activity in the economy.
The manufacturing sector accounts for 11.3% of the U.S. economy. However, the sector has been facing challenges over an extended period, but signs of improvement are finally visible, with a steady increase in orders for the fourth consecutive month in June.
The Fed increased interest rates by 500 basis points on 10 occasions since March 2022 before pausing in June. However, the Fed once again raised interest rates by 25 basis points in July and remained open for more hikes depending on the economic data.
However, the central bank is also confident that the nation’s economy may have a soft landing as inflation has been cooling steadily since it peaked to a 40-year high in June 2022. The Consumer Price Index fell to 3% in June after peaking to 9.1% in June 2022.
In terms of inflation, the Personal Consumption Expenditures (PCE) and the core PCE increased by 2.6% and 3.8%, respectively, in the second quarter. This indicates a slight moderation compared to the rates of 4.1% for PCE and 4.9% for core PCE recorded in the first quarter.
Also, headline PCE inflation rose 3% year over year in June, hitting its lowest level in more than two years. Moreover, U.S. GDP grew an impressive 2.4% in the second quarter, following a rise of 2% in the first quarter.
The rebound is slow but steady, and the good sign is that orders are on the rise, which bodes well for the manufacturing sector.
Our Choices
Given this scenario, it will be prudent to invest in stocks with a favorable Zacks Rank that are poised to gain from solid factory orders. We narrowed down our search to five 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.
A. O. Smith Corporation (AOS - Free Report) is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS specializes in offering innovative, and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith’s expected earnings growth for the current year is 13.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last 60 days. AOS presently carries a Zacks Rank #2.
Caterpillar Inc. (CAT - Free Report) is the largest global construction and mining equipment manufacturer. Given that it serves a gamut of sectors — infrastructure, construction, mining, oil & gas and transportation — CAT is considered a bellwether of the global economy. Caterpillar has more than 4 million products with an extensive dealer network of 165 dealers spanning 191 countries.
Caterpillar’s expected earnings growth for the current year is 29.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. CAT currently sports a Zacks Rank #1.
Hubbell Incorporated (HUBB - Free Report) is engaged in the design, manufacture and sale of electrical and electronic products to commercial, industrial, utility and telecommunications markets. HUBB’s products include plugs, receptacles, connectors, lighting fixtures, high voltage test and measurement equipment, and voice and data signal processing components.
Hubbell Incorporated’s expected earnings growth for the current year is 41.1%. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the last 60 days. HUBB currently sports 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. AIT’s products are mainly sold to original equipment manufacturers, and maintenance, repair, and operations customers in Australia, North America, Singapore and New Zealand.
Applied Industrial Technologies’ expected earnings growth for the current year is 30.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 60 days. AIT currently has a Zacks Rank #2.
Barnes Group Inc. (B - Free Report) is a global diversified manufacturer and provider of highly engineered products, innovative solutions and differentiated industrial technologies. B’s product and solution offerings include plastic injection molding technologies, robotic grippers, automation components, fine-blanked solutions, high-performance precision components and engineering solutions.
Barnes Group’s expected earnings growth for the current year is 12.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. B presently carries a Zacks Rank #2.
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5 Stocks to Buy on Continued Rise in Orders for Durable Goods
Orders for U.S.-made factory goods jumped in June, the Commerce Department announced on Jul 27. The manufacturing sector has been struggling over the past several months amid persistent price pressure. However, the scenario finally appears to be improving as inflation continues to ease and prices cool.
The Commerce Department said that orders for goods made to last more than years jumped a solid 4.7% month over month in June to $302.5 billion, and beating economists’ expectations of a rise of 1.5%. May’s figures were also upwardly revised to 2%.
The growth was primarily driven by a robust jump in orders for transportation equipment, which rose 12.1% in June.
Excluding transportation, durable goods orders rose 0.6% to $115.3 billion. This was driven by a solid surge of 69.4% in orders for civilian aircraft and parts, which totaled $37.13 billion. Excluding defense, new orders for durable goods climbed 6.2%.
New orders for nondefense capital goods, excluding aircraft, which serves as a significant indicator for business investment, increased 0.2% in June, totaling $74.08 billion. This growth is closely monitored as it reflects the level of investment activity in the economy.
The manufacturing sector accounts for 11.3% of the U.S. economy. However, the sector has been facing challenges over an extended period, but signs of improvement are finally visible, with a steady increase in orders for the fourth consecutive month in June.
The Fed increased interest rates by 500 basis points on 10 occasions since March 2022 before pausing in June. However, the Fed once again raised interest rates by 25 basis points in July and remained open for more hikes depending on the economic data.
However, the central bank is also confident that the nation’s economy may have a soft landing as inflation has been cooling steadily since it peaked to a 40-year high in June 2022. The Consumer Price Index fell to 3% in June after peaking to 9.1% in June 2022.
In terms of inflation, the Personal Consumption Expenditures (PCE) and the core PCE increased by 2.6% and 3.8%, respectively, in the second quarter. This indicates a slight moderation compared to the rates of 4.1% for PCE and 4.9% for core PCE recorded in the first quarter.
Also, headline PCE inflation rose 3% year over year in June, hitting its lowest level in more than two years. Moreover, U.S. GDP grew an impressive 2.4% in the second quarter, following a rise of 2% in the first quarter.
The rebound is slow but steady, and the good sign is that orders are on the rise, which bodes well for the manufacturing sector.
Our Choices
Given this scenario, it will be prudent to invest in stocks with a favorable Zacks Rank that are poised to gain from solid factory orders. We narrowed down our search to five 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.
A. O. Smith Corporation (AOS - Free Report) is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS specializes in offering innovative, and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith’s expected earnings growth for the current year is 13.7%. The Zacks Consensus Estimate for current-year earnings has improved 2.9% over the last 60 days. AOS presently carries a Zacks Rank #2.
Caterpillar Inc. (CAT - Free Report) is the largest global construction and mining equipment manufacturer. Given that it serves a gamut of sectors — infrastructure, construction, mining, oil & gas and transportation — CAT is considered a bellwether of the global economy. Caterpillar has more than 4 million products with an extensive dealer network of 165 dealers spanning 191 countries.
Caterpillar’s expected earnings growth for the current year is 29.2%. The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the past 60 days. CAT currently sports a Zacks Rank #1.
Hubbell Incorporated (HUBB - Free Report) is engaged in the design, manufacture and sale of electrical and electronic products to commercial, industrial, utility and telecommunications markets. HUBB’s products include plugs, receptacles, connectors, lighting fixtures, high voltage test and measurement equipment, and voice and data signal processing components.
Hubbell Incorporated’s expected earnings growth for the current year is 41.1%. The Zacks Consensus Estimate for current-year earnings has improved 8.5% over the last 60 days. HUBB currently sports 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. AIT’s products are mainly sold to original equipment manufacturers, and maintenance, repair, and operations customers in Australia, North America, Singapore and New Zealand.
Applied Industrial Technologies’ expected earnings growth for the current year is 30.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 60 days. AIT currently has a Zacks Rank #2.
Barnes Group Inc. (B - Free Report) is a global diversified manufacturer and provider of highly engineered products, innovative solutions and differentiated industrial technologies. B’s product and solution offerings include plastic injection molding technologies, robotic grippers, automation components, fine-blanked solutions, high-performance precision components and engineering solutions.
Barnes Group’s expected earnings growth for the current year is 12.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the past 60 days. B presently carries a Zacks Rank #2.