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5 Manufacturing Stocks to Buy as Industrial Production Rises

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Industrial production increased in April, marking the third consecutive month of gains. Gains were broad-based with advances coming from mining, utilities and factories. However, the increase in manufacturing output was notable. This is because factory-based production had remained flat in the preceding month.

Further, the Institute of Supply Management’s Semiannual Economic Forecast released earlier this month provides an optimistic outlook for manufacturing in 2018. The survey projects a considerable increase in manufacturing revenue, which is a major positive. This is why investing in manufacturing stocks looks like a profitable option at this point.

Third Consecutive Month of Gains

In April, industrial production increased by 0.7%, marking its third straight month of gains. Improvements were experienced across all sectors and the metric registered a year-over-year increase of 3.5%. However, the growth experienced in the two earlier months was revised downward. But output still increased by 2.3% over the first quarter.  

Coming to the individual components, the output for mining and utilities increased by 1.1% and 1.9%, respectively. Notably, manufacturing output increased by 0.5% in April after remaining unchanged in March. Overall, industrial production registered year-over-year growth of 3.5%. Capacity utilization came in at 78%, its highest level in three years.

Outlook for 2018 Encouraging

Earlier this month, the Institute of Supply Management provided an optimistic outlook for the manufacturing sector in its Spring 2018 Semiannual Economic Forecast. According to the survey’s respondents, the manufacturing sector is likely to experience 6.6% revenue growth during 2018. This is 1.5% higher than the forecast released in December 2017 and 2.5% higher than actual revenue growth for 2017.

Further, production capacity is expected to advance by 4.9% this year, marking an improvement over the 2.7% projection released in December 2017. The figure is also better than the 4.3% increase for 2017 as a whole. Additionally, manufacturing employment is expected to undergo a 1.8% year-over-year increase this year.

Our Choices

The increase in manufacturing output during the month of April is an encouraging sign, since this metric had remained static in March. Further, the Institute of Supply Management’s semiannual economic forecast provides an optimistic picture for manufacturing in 2018.

Investing in manufacturing stocks looks like a smart option at this point. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics. Each of these stocks has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar Inc. (CAT - Free Report) is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines.

Caterpillar has expected earnings growth of 53.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 16.3% over the last 30 days.

Graco Inc. (GGG - Free Report) is a leading provider of premium pumps and spray equipment for fluid handling in the construction, manufacturing, processing and maintenance industries.

Graco has expected earnings growth of 32% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.8% over the last 30 days.

Terex Corporation (TEX - Free Report) is a global manufacturer of lifting and material processing products and services.

Terex has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 14% over the last 30 days.

MSA Safety Incorporated (MSA - Free Report) is engaged in the development, manufacture and supply of safety products that protect people and facility infrastructures.

MSA Safety has expected earnings growth of 23.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.1% over the last 30 days.

Titan International, Inc. (TWI - Free Report) is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products.

Titan International has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 71.4% over the last 30 days.

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