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5 Industrial Stocks Poised to Gain Despite Coronavirus Jitters
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The rapid spread of the coronavirus globally has taken a toll on the U.S Manufacturing Sector. Per the Institute for Supply Management’s latest report, the U.S Purchasing Managers’ Index (PMI) declined to 50.1% in February 2020 from the January reading of 50.9%.
As trade tensions between the United States and China eased following the signing of a partial trade deal, PMI reading in January grew to more than 50, denoting an expansion in the manufacturing sector after continued contraction for five months. However, the coronavirus pandemic seems to have put brakes on the growth. The PMI has averaged 50.5% over the past 12 months, ranging from a low of 47.8% (December 2019) to a high of 54.6% (March 2019).
Of the 18 manufacturing industries, 14 reported growth in February. New Orders Index slumped to 49.8% in February from 52% in January. Waning demand owing to the impact of the coronavirus outbreak caused the New Order Index contraction, despite the expansion of export orders. Production Index came in at 50.3% in February, declining from 54.3% in January, highlighting two months of growth following five consecutive months of contraction. Employment Index was 46.9% in February, up from 46.6% in January. The growth is contracting for the seventh month in a row.
The World Health Organization (WHO) has officially declared the coronavirus outbreak as a pandemic. The virus has spread across more than 100 countries and per WHO’s situation report as of Mar 13, 2020, the global number of coronavirus cases is at 132,758. In China, the confirmed cases stand at 80,991. Meanwhile, 51,767 cases have been confirmed outside China, with three countries — Italy, the Republic of Korea and Iran — accounting for 64% of these.
The impact of the outbreak on customer spending, travel restrictions, factory closures in China, disruption in global supply chains, among others, are expected to weigh on the global economy. Per the Organisation for Economic Cooperation and Development (“OECD”), the coronavirus outbreak could cut global economic growth in half and push several countries into recession. The organization projects meager growth of 2.4% in the world economy this year — the lowest since 2009.
Furthermore, the outbreak dealt a severe blow to the global stock market. The uncertainty regarding the situation, primarily the scale and magnitude of its impact, remains a major concern. To combat the outbreak, the Federal Reserve has cut interest rates to near zero. Consequently, the Dow Jones Industrial Average was up 9.3% to close at 23,185.6 on Mar 13 and the S&P 500 increased 9.2% to close at 2,711.
The Industrial Products sector has underperformed the S&P 500 market over the past year due to the COVID-19 pandemic and waning demand. In the past year, the sector has lost 21.1% compared with the S&P 500’s decline of 5.2%.
All is Not Over Yet
Although the COVID-19 poses a threat to the U.S Manufacturing Sector until the situation stabilizes, considering supply-chain disruptions, shortage of labor and low demand for goods, it will pick up eventually on stimulus measures taken by the government. In the wake of low demand, the manufacturing companies will continue to sustain their margins through pricing actions and cost control, increased productivity, and elimination of waste.
Stocks That Are Poised to Grow
Despite the overall weakness in the sector, there are some Industrial Products stocks that hold promise. Our proprietary methodology comes in handy while zeroing in on these stocks. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here. Further, these companies have healthy earnings growth expectations for 2020.
Tennant Company (TNC - Free Report) : Based in Minneapolis, MN, this company has a long-term estimated earnings growth rate of 10%. It has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings has moved up 37% in the past 30 days, suggesting year-over-year growth of 40.7%. The company’s earnings beat estimates in the trailing four quarters by 26.6%, on average.
Brady Corporation (BRC - Free Report) : Milwaukee, WI-based Brady, a Zacks #2 Ranked stock, has a long-term estimated earnings growth of 7.50%. It has a VGM Score of B. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 8%. The estimates have moved up 1% over the past 30 days. The company has a trailing four-quarter positive earnings surprise of 10%, on average.
Myers Industries, Inc. (MYE - Free Report) : This Akron, OH-based company carries a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 has gone up 2% over the past 30 days, indicating year-over-year growth of 12.8%. The company has a trailing four-quarter average positive earnings surprise of 7.5%.
Regal Beloit Corporation (RBC - Free Report) : This Beloit, WI-based company currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings has moved up 1% in the past 30 days, indicating year-over-year growth of 6%. The company has a long-term estimated earnings growth of 10%.
Amcor Plc (AMCR - Free Report) : Based in Zürich, Switzerland, Amcor has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has gone up 5% over the past 60 days, suggesting year-over-year growth of 3.3%. The company has a trailing four-quarter positive earnings surprise of 7.9%, on average.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%. This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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5 Industrial Stocks Poised to Gain Despite Coronavirus Jitters
The rapid spread of the coronavirus globally has taken a toll on the U.S Manufacturing Sector. Per the Institute for Supply Management’s latest report, the U.S Purchasing Managers’ Index (PMI) declined to 50.1% in February 2020 from the January reading of 50.9%.
As trade tensions between the United States and China eased following the signing of a partial trade deal, PMI reading in January grew to more than 50, denoting an expansion in the manufacturing sector after continued contraction for five months. However, the coronavirus pandemic seems to have put brakes on the growth. The PMI has averaged 50.5% over the past 12 months, ranging from a low of 47.8% (December 2019) to a high of 54.6% (March 2019).
Of the 18 manufacturing industries, 14 reported growth in February. New Orders Index slumped to 49.8% in February from 52% in January. Waning demand owing to the impact of the coronavirus outbreak caused the New Order Index contraction, despite the expansion of export orders. Production Index came in at 50.3% in February, declining from 54.3% in January, highlighting two months of growth following five consecutive months of contraction. Employment Index was 46.9% in February, up from 46.6% in January. The growth is contracting for the seventh month in a row.
The World Health Organization (WHO) has officially declared the coronavirus outbreak as a pandemic. The virus has spread across more than 100 countries and per WHO’s situation report as of Mar 13, 2020, the global number of coronavirus cases is at 132,758. In China, the confirmed cases stand at 80,991. Meanwhile, 51,767 cases have been confirmed outside China, with three countries — Italy, the Republic of Korea and Iran — accounting for 64% of these.
The impact of the outbreak on customer spending, travel restrictions, factory closures in China, disruption in global supply chains, among others, are expected to weigh on the global economy. Per the Organisation for Economic Cooperation and Development (“OECD”), the coronavirus outbreak could cut global economic growth in half and push several countries into recession. The organization projects meager growth of 2.4% in the world economy this year — the lowest since 2009.
Furthermore, the outbreak dealt a severe blow to the global stock market. The uncertainty regarding the situation, primarily the scale and magnitude of its impact, remains a major concern. To combat the outbreak, the Federal Reserve has cut interest rates to near zero. Consequently, the Dow Jones Industrial Average was up 9.3% to close at 23,185.6 on Mar 13 and the S&P 500 increased 9.2% to close at 2,711.
The Industrial Products sector has underperformed the S&P 500 market over the past year due to the COVID-19 pandemic and waning demand. In the past year, the sector has lost 21.1% compared with the S&P 500’s decline of 5.2%.
All is Not Over Yet
Although the COVID-19 poses a threat to the U.S Manufacturing Sector until the situation stabilizes, considering supply-chain disruptions, shortage of labor and low demand for goods, it will pick up eventually on stimulus measures taken by the government. In the wake of low demand, the manufacturing companies will continue to sustain their margins through pricing actions and cost control, increased productivity, and elimination of waste.
Stocks That Are Poised to Grow
Despite the overall weakness in the sector, there are some Industrial Products stocks that hold promise. Our proprietary methodology comes in handy while zeroing in on these stocks. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer good investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here. Further, these companies have healthy earnings growth expectations for 2020.
Tennant Company (TNC - Free Report) : Based in Minneapolis, MN, this company has a long-term estimated earnings growth rate of 10%. It has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings has moved up 37% in the past 30 days, suggesting year-over-year growth of 40.7%. The company’s earnings beat estimates in the trailing four quarters by 26.6%, on average.
Brady Corporation (BRC - Free Report) : Milwaukee, WI-based Brady, a Zacks #2 Ranked stock, has a long-term estimated earnings growth of 7.50%. It has a VGM Score of B. The Zacks Consensus Estimate for 2020 earnings indicates year-over-year growth of 8%. The estimates have moved up 1% over the past 30 days. The company has a trailing four-quarter positive earnings surprise of 10%, on average.
Myers Industries, Inc. (MYE - Free Report) : This Akron, OH-based company carries a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 has gone up 2% over the past 30 days, indicating year-over-year growth of 12.8%. The company has a trailing four-quarter average positive earnings surprise of 7.5%.
Regal Beloit Corporation (RBC - Free Report) : This Beloit, WI-based company currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for 2020 earnings has moved up 1% in the past 30 days, indicating year-over-year growth of 6%. The company has a long-term estimated earnings growth of 10%.
Amcor Plc (AMCR - Free Report) : Based in Zürich, Switzerland, Amcor has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for fiscal 2020 earnings has gone up 5% over the past 60 days, suggesting year-over-year growth of 3.3%. The company has a trailing four-quarter positive earnings surprise of 7.9%, on average.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%. This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>