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4 Stocks to Buy as Durable Goods Orders Continue to Rise

·5 min read

Rising prices have been a growing concern for people but higher demand for goods is helping manufacturers. Orders at U.S. factories continued to grow in May amid rising costs of raw materials and supply-chain crisis. This also proves that despite inflationary pressures, the U.S. economy is still on solid ground and that orders are being driven up by increasing demand for goods.

Increased demand is a sign that consumers are willing to spend more in spite of the pressure from rising prices. Given this scenario, stocks like DXP Enterprises, Inc. DXPE, Manitex International, Inc. MNTX, IDEX Corporation IEX and Nordson Corporation NDSN are expected to gain in the near term.

Durable Goods Orders Grow

The Commerce Department said on Jun 27 that orders for long-lasting durable goods (intended to last at least three years) manufactured in U.S. factories increased 0.7% or $1.9 billion month over month in May to $$267.2 billion. Economists had not expected the data to change.

Expectations were almost nil as higher costs have been pushing prices. However, that doesn’t seem to have impacted the production level at U.S. factories, as higher demand despite rising prices has been driving production.

May’s jump follows a 0.4% gain in April. Excluding defense, orders for durable goods rose 0.6%. Orders for transportation equipment, which play an important role in driving overall durable goods increased 0.8% in May after growing 0.7% in April.

New orders for capital goods other than defense increased 0.5% in May after increasing, 0.3% in April. On a year-over-year basis, new orders for capital goods other than defense jumped 10.2%.

U.S. Economy Still on Solid Ground

May’s jump once again proves that manufacturers’ confidence is still high although rising prices are denting consumer sentiment. May’s jump was driven by a solid 1.1% rise in machinery orders. Orders for motor vehicles rose 0.5% in May, after increasing 0.3% in April. Demand for primary metals, computers and electronic goods was also high in May.

Shipments of durable goods increased by 1.3% in May after rising 0.3% in April. Orders for unfilled durable goods climbed 0.3%, while inventories rose 0.6%.

More importantly, shipments of core capital goods were also high in May, rising 0.8%. Core capital goods shipments are a key component and are used to calculate equipment investment in the GDP measurement. The report also mentioned that spending on equipment is once again projected to grow in this ongoing quarter.

Moreover, core capital goods orders are expected to stay strong in the coming months as inventories continue to be at historically low levels, supporting the manufacturing sector, which accounts for 11.9% of the economy.

Our Choices

Given this scenario, it will be prudent to invest in stocks with a favorable Zacks Rank that are poised to gain from the solid durable goods orders. We narrowed down our search to four such stocks. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises, Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico and Dubai. DXPE provides innovative pumping solutions, supply-chain services and maintenance, repair, operating and production services. DXP Enterprises' business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services.

DXP Enterprises' expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. DXPE has a Zacks Rank #1.

Manitex International, Inc. is a leading provider of engineered lifting solutions including boom trucks, cranes, rough terrain forklifts, and special mission-oriented vehicles. MNTX, through its subsidiaries, manufactures and markets a comprehensive line of boom trucks and sign cranes. Manitex International’s boom trucks and crane products are primarily used in industrial projects, energy exploration and infrastructure development, including roads, bridges, and commercial construction.

Manitex International’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. MNTX sports a Zacks Rank #1.

IDEX Corporation is an applied solutions company that specializes in a diverse range of applications such as fluid and metering technologies; health and science technologies; and fire, safety and other products built to customer specifications. Serving high-growth niche markets, IEX operates under three business segments, namely Fluid & Metering Technologies, Health & Science Technologies, and Fire & Safety/Diversified Products. IDEX Corporation sells its products to OEMs, as well as to direct end-use customers across the globe.

IDEX Corporation’s expected earnings growth rate for the current year is 22.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the past 60 days. IEX has a Zacks Rank #2.

Nordson Corporation is one of the leading manufacturers as well as distributors of products and systems designed to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials, and other fluids. NDSN’s product line includes single-use components, stand-alone units for low-volume operations and microprocessor-based automated systems for high-speed, high-volume production lines. Nordson Corporationhas operations in more than 35 countries.

Nordson Corporation’s expected earnings growth rate for the current year is 20.4%. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the past 60 days. NDSN has a Zacks Rank #2.


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