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5 Industrial Product Stocks to Buy on Stable Demand in March
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The Federal Reserve reported that industrial production rose 0.4% month over month in March, in line with the consensus estimate. The metric for February was revised upward to a gain of 0.4% over the previous month from an increase of 0.1% reported earlier. Year over year, total industrial production remained unchanged in March.
Manufacturing output increased 0.5% in March. The index fell 1.4% for mining and grew 2% for utilities. Capacity utilization increased to 78.4% in March compared with the downwardly revised 78.2% in February. However, the data was marginally below the consensus estimate of 78.5%.
U.S. Manufacturing Rebounds in March
U.S. manufacturing activities surprisingly rebounded in March, giving 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 in the past three months.
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 12.8%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. PH has a current dividend yield of 1.09%.
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 7.2%, 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 1.23%.
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 5.7% and 8.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days. IR has a current dividend yield of 0.1%.
W.W. Grainger Inc. (GWW - Free Report) has been gaining from volume growth in the High Touch Solutions segment and customer growth in the Endless Assortment segment. Backed by a solid 2023 performance, GWW anticipates earnings per share of $38.00-$40.50 for 2024. The guidance indicates year-over-year growth of 39.3% at the mid-point.
GWW projects net sales between $17.2 billion and $17.7 billion for the year. Total daily sales growth is expected to be 4.3-7.3%, backed by the ongoing momentum in both segments. GWW’s initiatives to manage inventory effectively, as well as its investments in e-commerce and digital capabilities, will drive profitability. Moreover, gains from an improved product mix and price-control efforts are helping GWW’s growth.
W.W. Grainger has an expected revenue and earnings growth rate of 6.1% 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. GWW has a current dividend yield of 0.8%.
Illinois Tool Works Inc. (ITW - Free Report) is benefiting from improving supply chains and underlying demand. Solid momentum in the Automotive OEM segment, driven by strong market share and penetration gains in the rapidly growing EV markets, is aiding ITW’s performance.
Decreasing cost of sales and enterprise initiatives are supporting ITW’s margin performance. Enterprise initiatives are expected to contribute 100 basis points to the operating margin in 2024. ITW’s efforts to add shareholder value are encouraging.
Illinois Tool Works has an expected revenue and earnings growth rate of 2.1% and 3.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. ITW has a current dividend yield of 2.23%.
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5 Industrial Product Stocks to Buy on Stable Demand in March
The Federal Reserve reported that industrial production rose 0.4% month over month in March, in line with the consensus estimate. The metric for February was revised upward to a gain of 0.4% over the previous month from an increase of 0.1% reported earlier. Year over year, total industrial production remained unchanged in March.
Manufacturing output increased 0.5% in March. The index fell 1.4% for mining and grew 2% for utilities. Capacity utilization increased to 78.4% in March compared with the downwardly revised 78.2% in February. However, the data was marginally below the consensus estimate of 78.5%.
U.S. Manufacturing Rebounds in March
U.S. manufacturing activities surprisingly rebounded in March, giving 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 in the past three months.
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 12.8%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. PH has a current dividend yield of 1.09%.
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 7.2%, 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 1.23%.
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 5.7% and 8.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 30 days. IR has a current dividend yield of 0.1%.
W.W. Grainger Inc. (GWW - Free Report) has been gaining from volume growth in the High Touch Solutions segment and customer growth in the Endless Assortment segment. Backed by a solid 2023 performance, GWW anticipates earnings per share of $38.00-$40.50 for 2024. The guidance indicates year-over-year growth of 39.3% at the mid-point.
GWW projects net sales between $17.2 billion and $17.7 billion for the year. Total daily sales growth is expected to be 4.3-7.3%, backed by the ongoing momentum in both segments. GWW’s initiatives to manage inventory effectively, as well as its investments in e-commerce and digital capabilities, will drive profitability. Moreover, gains from an improved product mix and price-control efforts are helping GWW’s growth.
W.W. Grainger has an expected revenue and earnings growth rate of 6.1% 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. GWW has a current dividend yield of 0.8%.
Illinois Tool Works Inc. (ITW - Free Report) is benefiting from improving supply chains and underlying demand. Solid momentum in the Automotive OEM segment, driven by strong market share and penetration gains in the rapidly growing EV markets, is aiding ITW’s performance.
Decreasing cost of sales and enterprise initiatives are supporting ITW’s margin performance. Enterprise initiatives are expected to contribute 100 basis points to the operating margin in 2024. ITW’s efforts to add shareholder value are encouraging.
Illinois Tool Works has an expected revenue and earnings growth rate of 2.1% and 3.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 60 days. ITW has a current dividend yield of 2.23%.