Manufacturing activity in the euro area remained sluggish since the coronavirus outbreak. International trade strains and a moribund automobile industry disrupted economic growth in the eurozone. Manufacturing output, regrettably, contracted at a steeper pace last month as demand continued to wane.

Compiled by S&P Global, the HCOB’s Eurozone Manufacturing PMI dropped to 46.1 in March from February’s reading of 46.5. The index stayed below the 50 mark, indicating contraction in factory output. The index notched a twelfth consecutive monthly decline in factory production in March.

However, manufacturing activity bounced back in the United States, crushing apprehensions about an impending recession. The manufacturing PMI of the Institute of Supply Management climbed to 50.3% in March from 47.8% in February. Thus, the business conditions on the manufacturing side of the economy are on the mend.

The pipeline for new orders remained robust while production picked up. Employment in manufacturing outlets also improved substantially. So, what’s leading to an uptick in manufacturing activity in the United States? Lest we forget, manufacturing took a beating for quite some time due to sticky inflation and a shift in spending trends from industrial products to services such as travel, dining out and other recreational activities.

However, a change in the Federal Reserve’s monetary policy stance led to a full-blown recovery in the manufacturing side of the economy. Fed Chair Jerome Powell wasn’t taken aback by the recent jump in the PCE index, while the central bank assured interest rate cuts later this year. The Fed’s dovish stance will reduce the cost of borrowing, a blessing in disguise for manufacturers as it will boost demand.

Thus, with the key measure of factory output picking up in the United States, industrial stocks, particularly, are well-poised to gain. This calls for investing in stocks such as H&E Equipment Services, Inc. (HEES Quick QuoteHEES - Free Report) , AZZ Inc. (AZZ Quick QuoteAZZ - Free Report) , Luxfer Holdings PLC (LXFR Quick QuoteLXFR - Free Report) and Powell Industries, Inc. (POWL Quick QuotePOWL - Free Report) .

These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down with a VGM Score of A or B. Here V stands for Value, G for Growth, and M for Momentum, and the score is a weighted combination of these three metrics. Such a score allows you to eliminate the negative aspects of stocks and select winners. You can see the complete list of today’s Zacks #1 Rank stocks here.

H&E Equipment Services is one of the largest integrated equipment services companies. HEES presently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 3.1% over the past 60 days. HEES’ expected earnings growth rate for the current year is 5%.

AZZ is a global provider of metal-coating services. AZZ currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its next-year earnings has increased 0.9% over the past 60 days. AZZ’s expected earnings growth rate for the current year is 23.6%.

Luxfer designs, manufactures and supplies high-performance materials. LXFR presently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its current-year earnings has increased 111.4% over the past 60 days. LXFR’s expected earnings growth rate for the current year is 21.3%.

Powell Industries is a metal-working shop that supports petrochemical facilities. POWL currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for its next-year earnings has increased 3.7% over the past 60 days. POWL’s expected earnings growth rate for the current year is 83%.

Shares of H&E Equipment Services, AZZ, Luxfer and Powell Industries have gained 21.2%, 33.7%, 14%, and 51.6%, respectively, year to date.

Image Source: Zacks Investment Research