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Industrial Production Revives In November: 5 Promising Picks

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Industrial production in the United States rebounded sharply in November 2019, as revealed in the recently released data by the Federal Reserve. The metric has gained 1.1% over the past month, marking the biggest improvement since October 2017.

The news is a healthy sign for manufacturing companies, which have been struggling with macro and micro issues of late.

Global uncertainties (including those related to Brexit), forex woes and trade tensions between the United States and China have been taking a toll on manufacturing companies. Notably, the tariff issues have hurt corporate margins in the past quarters. Also, cost-inflationary pressure, rising freight charges and others have added to the woes.

Reasons Behind Revival in Industrial Production

The Federal Reserve’s report shows that 1.1% month-over-month gain in industrial production came in after two successive months of decline. The manufacturing sector in the month gained 1.1%, mainly driven by rise in motor vehicles and parts that resulted from the end of the strike at General Motors Company’s GM factories.

Also, excluding the impact of motor vehicles and parts, manufacturing output in November increased 0.3%, and the overall industrial production grew 0.5%.

In addition, output of the utilities sector has improved 2.9% over the past month, while that for mining has decreased 0.2% due to a fall in drilling and other activities in the oil & gas industry.

In November, capacity utilization for the manufacturing sector was up 0.7 percentage point, and for utilities increased 2.1 percentage points, while that for mining declined 0.2 percentage point.

5 Promising Manufacturing Stocks

We believe that healthy industrial production data along with growth in housing starts in November (with 3.2% month-over-month gain and 13.6% year-over-year growth) and more job additions (with a fall of 10 basis points in the unemployment rate to 3.5% to November 2019) are good signs for the manufacturing sector.

Also, the U.S. government’s emphasis on infrastructure development, impetus to streamline business regulations and corporate tax overhaul will continue to be tailwinds. Further, the government’s efforts to lower tariff-related woes by reaching a phase-one trade deal with China will likely bode well.

We have picked five top-ranked manufacturing stocks that are likely to enhance your portfolio.

Actuant Corporation (EPAC - Free Report) : The Menomonee Falls, WI-based company currently sports a Zacks Rank #1 (Strong Buy). Its shares have rallied 26.8% so far in 2019. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, the Zacks Consensus Estimate for earnings has been unchanged for fiscal 2020 (ending August 2020) and has been raised 8.3% for fiscal 2021 (ending August 2021). The company’s earnings are projected to grow 15.2% in the next five years.

Tennant Company TNC: The Minneapolis, MN-based company presently sports a Zacks Rank #1. Also, it has a VGM Score of B.

The company’s stock price has increased 50.1% year to date. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised 5.2% for 2019 and 4.4% for 2020. In the next five years, the company’s earnings are predicted to grow 10%.

Worthington Industries Inc. WOR: The Columbus, OH-based company currently carries a Zacks Rank #2 (Buy) and has a VGM Score of B.

The company’s stock price has increased 24.9% year to date. Also, its earnings estimates have been revised up, reflecting positive sentiments for the stock. In the past 60 days, the Zacks Consensus Estimate for earnings has been raised 1.8% for fiscal 2020 (ending May 2020) and has been stable for fiscal 2021 (ending May 2021).

SPX FLOW, Inc. FLOW: The Charlotte, NC-based company currently carries a Zacks Rank #2. It has a VGM Score of B.

Year to date, the stock has gained 57.4%. Also, its earnings estimates have been revised up, reflecting positive sentiments. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised 5% for 2019 and 2% for 2020. In the next five years, its earnings are predicted to grow 9.2%.

SiteOne Landscape Supply, Inc. SITE: The Roswell, GA-based company currently carries a Zacks Rank #2.

The company’s stock price has increased 62% year to date. Also, its earnings estimates have been revised up, reflecting positive sentiments for the stock. In the past 60 days, the Zacks Consensus Estimate for its earnings has been raised 8.3% for 2019 and 3.5% for 2020.

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