Manufacturing and construction activity boomed last month, and the summer often means even more spending. So let’s take a look at three construction and manufacturing sector stocks that are strong buys at the moment.
The Institute of Supply Management’s manufacturing index popped to 58.7 in May up from 57.3 in April, which topped economists’ expectations of 58.4. Last month marked the 21st straight month of manufacturing expansion.
U.S. construction spending also surged 1.8% to a record high in April, the biggest increase since January 2016, according to the Commerce Department. These gains were due in part to the 4.5% jump in residential construction, the biggest percentage gain since November 1993.
With all that said, let’s take a look at three stocks from the manufacturing and construction sector that investors should think about buying right now.
1. Caterpillar Inc. CAT
Right off the bat, Caterpillar stock looks pretty darn cheap at the moment. Coming into Friday, CAT was trading at 13.6X forward 12-month Zacks Consensus EPS estimates, which marks a discount compared to the S&P 500’s 17.3X. Meanwhile, investors should note that Caterpillar stock has traded as high as 32.6X over the last two years, with a two-year median of 22.6X—with CAT currently trading just above it two-year low of 13X.
Meanwhile, our latest Zacks Consensus Estimates are calling for Caterpillar’s quarterly revenues to surge by 21.5% to touch $13.77 billion. At the other end of the income statement, CAT’s adjusted earnings are projected to skyrocket nearly 78% to hit $2.65 per share, while its full-year EPS figure is expected to expand by roughly 56%. Investors should also note that CAT has received 11 upward earnings estimate revisions for its full-year, all within the last 60 days, against zero downgrades. Caterpillar stock is currently a Zacks Rank #1 (Strong Buy) and sits well below its 52-week high.
2. United Rentals URI
United Rentals, which, as its name suggests, rents an array of industrial and construction equipment, has seen its stock price climb roughly 54% over the last year. URI is also currently a Zacks Rank #1 (Strong Buy) and sports an “A” grade for Value in our Style Scores system. United Rentals stock is currently trading at 10X forward 12-month Zacks Consensus EPS estimates, which comes in far below its industry’s average of 16.7X.
Looking ahead, United Rentals revenues are projected to climb by 12.8% this quarter to hit $1.8 billion, while its full-year revenues are expected to surge nearly 14% to reach $7.56 billion. Meanwhile, the company’s bottom line expansion projections look more impressive. United Rental’s quarterly earnings are expected to hit $3.53 per share and its full-year EPS figure is projected to touch $15.49, which would represent year over year gains of roughly 49% and 46%, respectively.
3. Terex Corporation TEX
Shares of Terex have been trending in the wrong direction lately, but its earnings revisions are headed in the right direction. The lifting and material processing products company has earned 10 full-year upward earnings estimate revisions within the last 60 days, against zero downward revisions. Terex’s adjusted full-year earnings are projected to soar by 114.81% to touch $2.90 per share. The company’s current quarter EPS figure is projected to climb by 76% to touch $0.90 per share. On the top of the income statement, Terex’s quarterly revenues are expected to pop over 18% to $1.40 billion, while its full-year revenues are projected to climb 16% to touch $5.06 billion.
TEX is also currently a Zacks Rank #1 (Strong Buy) that rocks an “A” grade for Momentum in our Style Scores system. Lastly, TEX’s valuation picture looks solid right now. Going into Friday, TEX was trading at 12.3X forward 12-month Zacks Consensus EPS estimates, representing a discount compared to its industry’s 16.4X average. Furthermore, TEX has traded as high as 29.7X over the last year and currently rests right above its 52-week low of 12.2X.
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