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Manufacturing Grows for 32 Months: 5 Industrial Stocks to Buy

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Per the Institute for Supply Management’s latest report, Purchasing Managers’ Index (PMI) for April was at 52.8%. Even though it has dipped from the March reading of 55.3%, the manufacturing sector has been witnessing growth for 32 consecutive months, led by continued expansion in new orders, production activity and employment. The PMI has averaged 57.2% over the last 12 months. Notably, a reading above 50% indicates expansion in manufacturing sector. This instils optimism in the sector.

The New Orders Index registered 51.7% in April, indicating growth in new orders for the 40th consecutive month. Production Index was 52.3% in the month, improving for 32 straight months. The employment index was pegged at 52.4%, maintaining growth for the 31st consecutive month.

Continued improvement in residential and non-residential construction as well as infrastructure demand is driving the sector’s performance. Mining companies are also resuming their capital spending on the back of improvement in commodity prices. Further, the recently-passed tax reform has been acting as a catalyst by expediting manufacturing investment in factories, new equipment and other capital goods. Moreover, the manufacturing companies continue to combat cost inflation through pricing actions, cost control, increasing productivity and eliminating waste.

Sector Performance


Year to date, the Zacks Industrial Products sector has gained 9.5%, while the S&P 500 witnessed a 10.4% rise. The implementation of tariffs last year and the prolonged U.S.-China trade war have adversely impacted the industry.  

Earnings for the Industrial Products Sector, one of the 16 broad Zacks sectors, rose 1.2% in the first quarter of 2019. Per the latest Earnings Trends report, the sector is expected to log a decline of 1.3% in earnings in the second quarter of 2019. However, the decline is not limited to this sector alone. In the June-end quarter, nine of the 16 Zacks Sectors are expected to witness drop in earnings. In fact, the Industrial Sector’s decline is anticipated to be the least among all. The scenario will likely improve in the back half of the year, with projected 3.4% growth in earnings for the third quarter, followed by 10.3% rise in the fourth quarter.  

Our Picks

We have handpicked five industrial stocks which carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2, offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here. These companies also have positive earnings growth projections for the ongoing year and a positive earnings surprise history trend.

DMC Global Inc. (BOOM - Free Report) : This Boulder, CO-based company sports a Zacks Rank #1 and has a VGM Score of B, currently. The Zacks Consensus Estimate for 2019 earnings per share reflects year-over-year growth of 2.38%. The Zacks Consensus Estimate for earnings moved 49% north, over the past 90 days. The company delivered an average positive earnings surprise of 26.56%, over the past four quarters.

The Timken Company (TKR - Free Report) : This North Canton, OH-based company currently flaunts a Zacks Rank #1 and has a VGM Score of B. Timken reported an average positive earnings surprise history of 2.43%, over the preceding four quarters, and has a long-term earnings growth rate of 9.4%. The company’s Zacks Consensus Estimate for fiscal 2019 earnings moved 10% upward, over the past 90 days, indicating a year-over-year improvement of 26.3%.

AptarGroup, Inc. (ATR - Free Report) : This Crystal Lake, IL-based company recorded a positive average earnings surprise of 8.27%, over the last four quarters. The Zacks Consensus Estimate for fiscal 2019 earnings reflects growth of 8.75%. The estimate for fiscal 2019 moved up 3%, over the past 90 days. Currently, the stock carries a Zacks Rank #2 and has a VGM Score of B.

Myers Industries, Inc. (MYE - Free Report) : This Akron, OH-based company carries a Zacks Rank #2 and has a VGM Score of A, at present. The Zacks Consensus Estimate for the ongoing year’s earnings per share reflects year-over-year growth of 6.58%. The Zacks Consensus Estimate also inched up 1% over the past 90 days. It posted an average positive earnings surprise of 19.38%, over the last four quarters.

Tetra Tech, Inc. (TTEK - Free Report) : This Pasadena, CA-based company currently holds a Zacks Rank #2 and carries a VGM of A. The Zacks Consensus Estimate for the company’s fiscal 2019 earnings per share increased 2% in the past 90 days. The estimate reflects 15.15% year-over-year improvement. The company delivered an average positive earnings surprise of 8.22%, over the trailing four quarters.

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