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Manufacturing PMI Expands in March After 16 Months: 5 Picks
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U.S. manufacturing activities surprisingly rebounded in March, indicating yet another example of the solid fundamentals of the economy. The Institute of Supply Management (ISM) reported that its U.S. manufacturing index came in at 50.3%, beating the consensus estimate of 48.6%. The metric for February was 47.8%. Notably, any reading above 50% indicates expansion in manufacturing activities.
The manufacturing sector is the second-largest component of the U.S. economy, constituting around 10-12% of the GDP. During the pandemic era, in contrast to the other sectors, manufacturing activities expanded for 28 consecutive months.
However, as the economy reopened and inflation skyrocketed on the complete devastation of the global supply-chain system, manufacturing activities contracted for 16 successive months. Finally, the manufacturing purchasing managers’ index (PMI) was back on the expansion trajectory in March 2024.
The New Orders Index moved back into expansion territory at 51.4% in March compared with 49.2% recorded in February. The March reading of the Production Index was 54.6% against February’s figure of 48.4%. The Prices Index came in at 55.8% compared to the reading of 52.5% in February. The Backlog of Orders Index was 46.3% in March, flat with February. The Employment Index was 47.4%, up 1.5% month over month.
Our Top Picks
We have narrowed our search to five manufacturing stocks with strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Moreover, these companies are regular dividend payers. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Parker-Hannifin Corp. (PH - Free Report) is benefiting from higher demand from distributors and end users across the oil and gas, material handling, cars and light trucks, and farm and agriculture markets in the North American region within the Diversified Industrial segment.
Higher volume across all businesses, especially the commercial and military aftermarket businesses bolstered PH’s Aerospace Systems unit. Synergies from the Meggitt buyout are also aiding PH. Benefits from the Win strategy are driving PH’s margins.
Parker-Hannifin has an expected revenue and earnings growth rate of 4.4% and 12.3%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the last 30 days. PH has a current dividend yield of 1.07%.
Hubbell Inc. (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 has an expected revenue and earnings growth rate of 9% and 7.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. HUBB has a current dividend yield of 1.17%.
Ingersoll Rand Inc. (IR - Free Report) is set to gain from a healthy demand environment, solid product portfolio and innovation capabilities. Higher orders for compressors, and power tool and lifting are driving the growth of the Industrial Technologies & Services unit of IR. Benefits from acquired assets are aiding the Precision & Science Technologies segment. IR’s ability to generate strong cash flows supports its capital deployment strategy.
Ingersoll Rand has an expected revenue and earnings growth rate of 5.6% and 8.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the last 60 days. IR has a current dividend yield of 0.1%.
A. O. Smith Corp. (AOS - Free Report) is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS is benefiting from higher shipments driven by improving supply chains.
Higher water heater volumes in North America and higher kitchen product sales in China are supporting AOS’ North America segment’s performance. The introduction of kitchen appliance products in China is driving AOS’ revenues in the Rest of the World segment.
A.O. Smith has an expected revenue and earnings growth rate of 3.9% and 6.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. AOS has a current dividend yield of 1.44%.
Crane Co. (CR - Free Report) manufactures and sells engineered industrial products in the Americas, Europe, the Middle East, Asia, and Australia. CR has three segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials.
Crane has an expected revenue and earnings growth rate of 8% and 11.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days. CR has a current dividend yield of 0.61%.
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Manufacturing PMI Expands in March After 16 Months: 5 Picks
U.S. manufacturing activities surprisingly rebounded in March, indicating yet another example of the solid fundamentals of the economy. The Institute of Supply Management (ISM) reported that its U.S. manufacturing index came in at 50.3%, beating the consensus estimate of 48.6%. The metric for February was 47.8%. Notably, any reading above 50% indicates expansion in manufacturing activities.
The manufacturing sector is the second-largest component of the U.S. economy, constituting around 10-12% of the GDP. During the pandemic era, in contrast to the other sectors, manufacturing activities expanded for 28 consecutive months.
However, as the economy reopened and inflation skyrocketed on the complete devastation of the global supply-chain system, manufacturing activities contracted for 16 successive months. Finally, the manufacturing purchasing managers’ index (PMI) was back on the expansion trajectory in March 2024.
The New Orders Index moved back into expansion territory at 51.4% in March compared with 49.2% recorded in February. The March reading of the Production Index was 54.6% against February’s figure of 48.4%. The Prices Index came in at 55.8% compared to the reading of 52.5% in February. The Backlog of Orders Index was 46.3% in March, flat with February. The Employment Index was 47.4%, up 1.5% month over month.
Our Top Picks
We have narrowed our search to five manufacturing stocks with strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Moreover, these companies are regular dividend payers. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
Parker-Hannifin Corp. (PH - Free Report) is benefiting from higher demand from distributors and end users across the oil and gas, material handling, cars and light trucks, and farm and agriculture markets in the North American region within the Diversified Industrial segment.
Higher volume across all businesses, especially the commercial and military aftermarket businesses bolstered PH’s Aerospace Systems unit. Synergies from the Meggitt buyout are also aiding PH. Benefits from the Win strategy are driving PH’s margins.
Parker-Hannifin has an expected revenue and earnings growth rate of 4.4% and 12.3%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the last 30 days. PH has a current dividend yield of 1.07%.
Hubbell Inc. (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 has an expected revenue and earnings growth rate of 9% and 7.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. HUBB has a current dividend yield of 1.17%.
Ingersoll Rand Inc. (IR - Free Report) is set to gain from a healthy demand environment, solid product portfolio and innovation capabilities. Higher orders for compressors, and power tool and lifting are driving the growth of the Industrial Technologies & Services unit of IR. Benefits from acquired assets are aiding the Precision & Science Technologies segment. IR’s ability to generate strong cash flows supports its capital deployment strategy.
Ingersoll Rand has an expected revenue and earnings growth rate of 5.6% and 8.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the last 60 days. IR has a current dividend yield of 0.1%.
A. O. Smith Corp. (AOS - Free Report) is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS is benefiting from higher shipments driven by improving supply chains.
Higher water heater volumes in North America and higher kitchen product sales in China are supporting AOS’ North America segment’s performance. The introduction of kitchen appliance products in China is driving AOS’ revenues in the Rest of the World segment.
A.O. Smith has an expected revenue and earnings growth rate of 3.9% and 6.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. AOS has a current dividend yield of 1.44%.
Crane Co. (CR - Free Report) manufactures and sells engineered industrial products in the Americas, Europe, the Middle East, Asia, and Australia. CR has three segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials.
Crane has an expected revenue and earnings growth rate of 8% and 11.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days. CR has a current dividend yield of 0.61%.