The upcoming first-quarter season looks promising for the Zacks Industrial Products sector on the back of upbeat manufacturing data, strong housing and commercial construction markets and an improving U.S economy.
Per the Institute for Supply Management’s latest report, Purchasing Managers’ Index (PMI) for March rose to 55.3% from February’s reading of 54.2%. This indicates strong growth in manufacturing for the 31st consecutive month, led by continued expansion in new orders, production activity and employment. The PMI has averaged 54.4% over January-March 2019. Notably, a reading above 50% indicates expansion in manufacturing sector.
New Orders Index registered 57.4% in March, indicating growth in new orders for the 39th consecutive month. Over January-March period, the new orders index averaged 57%. Production Index was 55.8% in March, improving for 31 straight months. It clocked an average of 57% in January-March 2019. The employment index was pegged at 57.5% in March, maintaining growth for the 30th consecutive month. The average for employment index in January-March period was 55.1%.
Continued improvement in residential and non-residential construction as well as infrastructure demand is driving the sector. Mining companies are also resuming capital spending on the back of improvement in commodity prices. Further, the recently passed tax reform has been acting as a catalyst by expediting manufacturing investment in factories, new equipment and other capital goods. Moreover, the manufacturing companies continue to combat cost inflation through pricing actions, cost control, increasing productivity and eliminating waste.
Earnings for the Industrial Products Sector, one of the 16 broad Zacks sectors, rose 7.9% in the fourth quarter of 2018. Per the latest Earnings Trends report, the sector is expected to log a decline of 1.9% in earnings in the first quarter of 2019. However, the decline is not limited to this sector alone. In the March ending quarter, broad-based margin pressure across all major sectors is expected to result in declines across nine of the 16 Zacks Sectors. In fact, the Industrial Sector’s decline is expected to be the least among all the sectors.
The sector notched a year-to-date growth of 17.1%, outperforming S&P 500’s rally of 14.3%.
We have handpicked four industrial stocks which are expected to report a significant uptick in the to-be-reported quarter’s earnings and have a positive earnings surprise history. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan Holdings Inc. SLGN, a leading supplier of rigid packaging for consumer goods products, currently sports a Zacks Rank #1. The Zacks Consensus Estimate for first-quarter 2019 earnings per share reflects year-over-year growth of 2.38%. It has average positive earnings surprise of 5.23% over the past four quarters. The company is anticipated to report first-quarter 2019 earnings results on Apr 24.
Atkore International Group Inc. ATKR manufactures and distributes electrical raceway products. It carries a Zacks Rank #2. The Zacks Consensus Estimate for second-quarter fiscal 2019 earnings per share projects year-over-year growth of 22.2%. It has average positive earnings surprise of 20.57% over the past four quarters. The company is expected to report second-quarter 2019 earnings results on May 14.
Chart Industries, Inc. GTLS manufactures and sells engineered equipment and packaged solutions, and provides value-add services for the energy and industrial gas industries worldwide. The stock carries a Zacks Rank #2. The Zacks Consensus Estimate for first quarter fiscal 2019 earnings per share projects year-over-year growth of 82.6%. It has average positive earnings surprise of 23.60% over the past four quarters. The company is anticipated to report first-quarter 2019 earnings results on Apr 18.
Sun Hydraulics Corporation SNHY develops, manufactures, and sells solutions for the hydraulics and electronics markets. The stock carries a Zacks Rank #2. The Zacks Consensus Estimate for first-quarter fiscal 2019 earnings per share projects year-over-year growth of 39.1%. It has average positive earnings surprise of 2.27% over the past four quarters. The company is expected to report first-quarter 2019 earnings results on May 6.
Zacks' Top 10 Stocks for 2019
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