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4 Top Industrial Stocks Set to Finish 2020 on a Stellar Note

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The U.S manufacturing sector has been showing signs of improvement for the past six months, spurred by the steady resumption of business and factory operations. Moreover, robust export demand for manufacturing products, government’s financial stimulus packages and rate cuts will aid the sector in the near term. The Zacks Industrial Products sector has appreciated 37.5% over the past six months, outperforming the S&P 500 Index’s gain of 23.2%.

Increasing Manufacturing Activities Hold Promise

Per the Institute for Supply Management, the U.S Manufacturing Purchasing Managers’ Index (PMI) logged 57.5% growth in November. This came in below October’s 59.3% — which was the highest so far in 2020. Notably, a reading above 50 denotes expansion in activity and the November PMI reading marks expansion in the sector for the sixth consecutive month. The index had remained below the 50 mark from March to May primarily due to the pandemic. It is to be noted that in April, the PMI index had plunged to 41.5% — the lowest reading since April 2009. Therefore, the sector’s ongoing recovery holds optimism for overall economic growth, as the manufacturing sector accounts for 11% of the U.S. economy.

Among the 18 manufacturing industries, 16 registered growth in November. The New Orders Index recorded 65.1% growth in November, down from October’s 67.9%. The Production Index came in at 60.8% compared with October’s 63%.

The IHS Markit Eurozone Manufacturing PMI came in at 53.8 in November after recording growth of 54.8 in October. Manufacturing output grew for the fifth successive month in November.

Meanwhile, the Official NBS Manufacturing PMI in China rose to 52.1 in November from 51.4 in October, marking the ninth consecutive month of expansion in factory activity as the economy continues to recover from the pandemic and ramped-up investments. Factory output, new orders and export sales also continue to improve.

Other Tailwinds

Per the Labor department, total U.S non-farm payroll added 245k jobs in November compared with the 610k job additions witnessed in October. The unemployment rate edged down to 6.7% in November, reflecting steady declines for the seventh consecutive month. The COVID-19 pandemic had impaired the job markets during April with more than 20 million job losses.

Thus, the drop in unemployment highlights the continued resumption of economic activity – which bodes well for the manufacturing sector. However, renewed lockdowns and uncertainties related to final impact of the pandemic might put a brake on the sector’s recovery. Therefore, in these uncertain times, manufacturing companies are focusing on supporting margins through cost-control actions and increased productivity.

4 Industrial Stocks to Grab for a Solid Finish to the Year

We have picked four Industrial Products stocks which are set to deliver improved results for the current year and are backed by a Zacks Rank #2 (Buy), and a VGM Score of A or B.  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, offer solid investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

These stocks have upbeat earnings growth projections for the current year and also been witnessing positive revisions, of late.

Avery Dennison Corporation AVY: This Pasadena, CA-based company produces pressure-sensitive materials, and a variety of tickets, tags, labels and other converted products. The company is benefiting from its rapidly-growing high-value product categories, such as specialty labels and Radio-frequency identification (RFID). Moreover, surging demand for food, beverage, home and personal care products categories amid the pandemic will fuel growth, as around 40% of the company’s revenues comes in from labelling of these non-durable consumer products.

The stock currently has a VGM Score of B. The Zacks Consensus Estimate for its ongoing-year earnings is pegged at $6.90, which indicates year-over-year growth of 4.6%. The estimate has moved up 13.1% over the past 60 days. The company has a trailing four-quarter earnings surprise of 12.7%, on average. Its shares have appreciated 37.4% in the past six months.

Sealed Air Corporation SEE: This Charlotte, NC-based company is a global leader in food safety and security and product protection. It is likely to benefit from the surge in demand for packaging for essential goods and e-commerce amid the coronavirus crisis. In addition, Sealed Air has been making steady progress on its reformation plan — Reinvent SEE Strategy — that is focused on driving bottom-line growth.

The company currently holds a VGM score A. Over the past 60 days, the Zacks Consensus Estimate for the ongoing year’s earnings moved 5.8% north to $3.09, suggesting a year-over-year increase of 9.6%. The company has a trailing four-quarter average earnings surprise of 23.07%. Shares of the company have rallied 51.9% over the past six months.

TriMas Corporation TRS: This Bloomfield Hills, MI-based company is a diversified global designer, manufacturer and distributor of engineered and applied products. The company is gaining from high demand for dispensing pumps and closure products as well as personal and home care products amid the coronavirus mayhem. Additionally, the company’s focus on expansion through acquisitions in packaging and aerospace markets will bolster its near-term performance.

The company carries a VGM score of B currently. The Zacks Consensus Estimate for 2020 earnings is pinned at $1.51, calling for a year-over-year increase of 4.1%. The estimate has moved up 2.7% in 60 days’ time. The company has a trailing four-quarter average earnings surprise of 8.4%. The stock has climbed 35.4% in the past six months.

Silgan Holdings Inc. SLGN: Based in Stamford, CT, Silgan is a leading supplier of rigid packaging for consumer goods products. Its products are used in diverse end markets. The company is witnessing solid volumes across all of its segments on the pandemic-induced surge in packaging demand for vital products. Silgan is also focused on strengthening the offerings in its served markets through strategic buyouts.

The company currently carries a VGM score of B. The Zacks Consensus Estimate for this year’s earnings is pegged at $2.98, suggesting a year-over-year jump of 37.9%. The consensus mark has been revised upward by 4.6% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 15.2%. Over the past six months, its shares have gained 12.4%.

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Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
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TriMas Corporation (TRS) : Free Stock Analysis Report
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