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4 Stocks to Buy as Industrial Production Continues to Rise

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The U.S. economy is fast getting back on its feet with more people going back to work, as factories and businesses operate at the optimum level. This has seen industrial production grow almost every month. Also, industrial production finally got a push in March from higher output from the automotive sector, which has lately been struggling due to semiconductor shortage.

Also, manufacturing activity rose in March despite multiple challenges such as rising costs of raw materials and a supply chain crisis. Given this scenario, industrial stocks like Nordson Corporation NDSN, H&E Equipment Services, Inc. HEES, Deere & Company DE and Titan International, Inc. TWI are expected to benefit in the near term.

Industrial Output Increases

The Fed said on Apr 15 that U.S. industrial production increased 0.9% in March against expectations of a rise of 0.4%. This is now the third consecutive month when industrial production has increased. Industrial production had increased 0.9% in February. Moreover, on a year-over-year basis, industrial production jumped 5.5% in March.

Industrial production includes output at factories, mines and utilities. Capacity utilization increased to 78.3% in March against expectations of a rise of 77.8%. One of the major reasons behind the jump was the higher production of automobiles.

Automobile production had slowed last year owing to semiconductor shortage and supply chain crisis but has been picking up this year. March was one of the best months for automobile makers, which eventually drove industrial output. Motor vehicle production jumped 7.8% in March, contributing to an increase of 3.9% in overall industrial production.

Overall industrial production rose 8.1% in the first quarter on a year-over-year basis.

Manufacturing Activity Aiding Economy

The manufacturing sector has been on solid ground for quite some time now. The peak of the pandemic saw people spending more on goods and less on services. This helped the manufacturing sector grow at an impressive pace on greater demand for goods.

People once again started spending on services as the economy began reopening but that hasn’t impacted manufacturing output as demand for goods remains high. On the other hand, manufacturing, which accounts for 11.9% of the U.S. economy, has been struggling to cope with an extremely tight labor market, while supply bottlenecks remain a cause of concern due to COVID-induced lockdowns in China and the Russia-Ukraine war.

Even then, the manufacturing sector has managed to survive. Manufacturing output rose 0.9% in March. On an annualized rate, manufacturing output jumped 5.1% in the first quarter. Overall production grew 8.1% in March, the highest since the end of 2020.

The index for mining increased 1.7%, while that for utilities rose 0.4% in March.

As people get back to work, the U.S. employment level is again on the rise. More employment means more income and spending power. Thus, it is likely that as people get the confidence to spend more, demand for U.S.-made factory goods will only increase in the near term.

Our Choices

Given this scenario, it would be ideal to invest in the four stocks we have picked below. All these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

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 Corporation has operations in over 35 countries.

Nordson Corporation’s expected earnings growth for the current year is 16.9%. The Zacks Consensus Estimate for next-year earnings has improved 12.4% over the past 60 days.  NDSN Electron has a Zacks Rank #2.

H&E Equipment Services, Inc. is one of the largest integrated equipment services companies in the United States. HEES provides full-service facilities throughout the Intermountain, Southwest, Gulf Coast & Southeast regions of the United States. H&E Equipment Services is focused on heavy construction & industrial equipment and rents, sells and provides parts and service support for four core categories of specialized equipment that are hi-lift or aerial platform equipment, cranes, earthmoving equipment & industrial lift trucks.

H&E Equipment Services’ expected earnings growth for the current year is 34.9%. The Zacks Consensus Estimate for next-year earnings has improved 9.6% over the past 60 days. HEES Electron sports a Zacks Rank #1.

Deere & Company is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. DE is the 68th-largest company in the S&P 500 Index, with market capitalization of more than $134 billion. Deere & Company has an advantage in most farm machinery categories as its machines come with advanced features and are better constructed than its competitors.

Deere & Company’s expected earnings growth for the current year is 19.9%. The Zacks Consensus Estimate for next-year earnings has improved 0.3% over the past 60 days.  DE carries a Zacks Rank #2.

Titan International, Inc. is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. TWI globally produces a broad range of products to meet the specifications of original equipment manufacturers and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets.

Titan International’s expected earnings growth for the current year is 36.5%. The Zacks Consensus Estimate for next-year earnings has improved 19.6% over the past 60 days.  TWI carries a Zacks Rank #1.


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Deere & Company (DE) : Free Stock Analysis Report
 
Nordson Corporation (NDSN) : Free Stock Analysis Report
 
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H&E Equipment Services, Inc. (HEES) : Free Stock Analysis Report
 
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