Coronavirus, officially named as COVID-19, is presently threatening the economies worldwide. Having originated in Wuhan, a city in the Hubei Province of China, the virus has spread in at least 80 countries, including South Korea, Italy and Iran. Fatal cases have crossed the 3,200 mark, while an increasing number of infected cases is being recorded daily.
China's economy, which was already engaged in a trade war (related to the imposition of import tariffs) with the United States, is now trying aggressively to deal with the virus outbreak. The Shanghai Composite index has lost 2.5% since mid-January. Prime concerns are the impacts of the virus on production capabilities and consumer spending.
Notably, the country’s official data suggests that manufacturing Purchasing Managers Index (PMI) of China fell sharply to 35.7 in February from the previous month’s figure of 50. Production and demand have been hit hard, as indicated by a monthly decline of 23.5 percentage points in production index and fall of 22.1 percentage points in new orders index. Export orders have also suffered immensely, suggesting trade partners to take a cautious stance at the moment.
Virus Outbreak Concerning the U.S. Market
Speaking of the U.S. market, the virus concern can now be seen in projections of some big players. Yesterday, General Electric Company (GE - Free Report) communicated that its first-quarter 2020 performance will likely reflect the adverse impacts of the virus outbreak. The conglomerate quantified the adverse impacts of the virus to be $300-$500 million on its Industrial free cash flow and $200-$300 million on its operating profit. It is worth mentioning here that General Electric sources roughly 9% of its Industrial revenues from operations in China.
Another industrial player, Stanley Black & Decker, Inc. (SWK - Free Report) , feels that the virus-outbreak will hurt its revenue-generation capabilities for March and April. The virus outbreak has taken a toll on the U.S. stock market as well. Since mid-January, the S&P 500 has declined 4.8%, and the NYSE and Nasdaq have dipped 7.4% and 2.6%, respectively. Also, the DOW Industrial index is in the red territory, down 6.7% since mid-January. Recently, an emergency interest rate cut of 0.5 percentage points has been announced by the Federal Reserve to avoid virus-related slowdown.
However, some companies are likely to gain or stay immune to the impacts of the outbreak. For instance, shares of 3M Company (MMM - Free Report) have rallied 3.2% since the beginning of March. The industrial company has businesses that specialize in making products for personal safety and respirators.
Stocks to Bet On
Below we discuss a few industrial companies that are likely to sail through the tough times smoothly. The selected picks can be considered good options to bet, especially given their present discounted prices.
Emerson Electric Co. (EMR - Free Report) : Based in St. Louis, MO, it is a diversified global manufacturing and technology company. It expects the coronavirus outbreak to hit its second-quarter fiscal 2020 (ending March 2020) revenues by $100-$150 million. Additionally, the company believes that half of the adverse impacts might be recovered later in fiscal 2020 (ending September 2020). The stock price has decreased 12.6% since the beginning of calendar 2020.
The price dip can be considered a good buying opportunity as the company seems poised to gain from healthy prospects in hybrid and process markets. Also, strength in long cycle businesses will likely be beneficial. The company presently carries a Zacks Rank #2 (Buy).
Also, its earnings estimates have been revised upward by 1.1% for fiscal 2020 and 2% for fiscal 2021 (ending September 2021) in the past 60 days.
Tennant Company (TNC - Free Report) : The Minneapolis, MN-based company engages in manufacturing equipment for coatings for protecting, repairing and upgrading surfaces; detergent-free and other sustainable cleaning technologies; and maintaining surfaces in industrial, commercial and outdoor environments. The company expects the virus outbreak to impact its performance in the first half of 2020. Year to date, its stock price has decreased 0.7%.
Solid product offerings, acquired assets, focus on innovation and healthy orders are likely to benefit the company in the quarters ahead. Presently, it sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Also, its earnings estimates have been raised by 37.4% for 2020 and 27.1% for 2021 in the past 30 days.
Johnson Controls International plc (JCI - Free Report) : Based in Ireland, it is a diversified technology company and a multi-industrial leader. The company is wary about the adverse impacts of coronavirus on its performance. Notably, the business in China accounts for 6% of the company’s revenues. The stock price has decreased 3.4% year to date.
The company stands to gain from its acquisitive nature, solid product offerings, healthy balance sheet and increasing cash generation. It presently carries a Zacks Rank #2.
Also, its earnings estimates have been raised by 0.4% for fiscal 2020 (ending September 2020) and 0.7% for fiscal 2021 (ending September 2021) in the past 60 days.
Amcor plc (AMCR - Free Report) : Based in Switzerland, the company is a player in the plastic packaging industry, serving customers in healthcare, food, consumer products and other industries. The company has a packaging business in China and operates 12 plants in the region. Revenues generated from China operations account for 4% of its total revenues. Year to date, the stock price has decreased 8.8%.
The company presently carries a Zacks Rank #2. Also, its earnings estimates have been raised by 5% for fiscal 2020 (ending June 2020) and 3% for fiscal 2021 (ending June 2021) in the past 60 days.
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