Manufacturers at present are facing supply constraints. Due to such supply-side bottlenecks, manufacturers are expected to pay higher prices for inputs, a tell-tale sign that inflation is going to remain for some time. By the way, any optimism surrounding any redressal of the supply-side issues got totally crushed by the spread of the more contagious Delta variant of coronavirus that resulted in a scarcity of raw materials, especially from Southeast Asia. Additionally, congestion at China’s ports is leading to a general scarcity of supply.
To worsen matters, economists are widely expecting the third-quarter GDP numbers to be discouraging, and that’s not good news for manufacturers. However, despite such odds, manufacturers have been able to expand successfully in recent times. Citing a MarketWatch article, the manufacturing PMI of the Institute of Supply Management came in at 61.1% in September, up from 59.9% in August. The reading was not only the highest since May, but it also exceeded analysts’ expectations of 59.5%. Notably, any reading above the 50% mark indicates expansion.
The new orders index, in the meanwhile, was 66.7% last month. The employment index managed to remain above the growth mark. Similarly, even though the production index dipped a bit in September, it indicated expansion. New orders for manufactured goods, in reality, improved as demand continued to remain strong. Citing another MarketWatch article, demand for manufactured goods had already shown signs of improvement in August. The Commerce Department noted that U.S. factory orders increased 1.2% in August, while July’s data was revised to 0.7% instead of 0.4% gain, as earlier reported.
Orders for manufactured goods have now increased for four consecutive months in the United States. The Commerce Department further noted that durable goods orders rose 1.8% in August, and non-durable-goods orders improved 0.6% in the month. Orders for nondefense capital, barring aircraft as well as shipments of factory goods, increased. Thus, such an improvement in new orders for U.S. factory goods should help the manufacturing sector stay afloat in the fourth quarter of this year, if not beyond. Let us also admit that a significant improvement in the health crisis along with financial aids provided by the government will eventually boost an individual’s well-being and improve manufacturing activities in the near term.
Thus, given the strong demand for manufactured goods in the United States along with factory activities improvement despite the pandemic, it’s prudent for investors to place their bets on industrial stocks this quarter for better returns. Hence, we have highlighted four such industrial stocks that possess a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Deere & Company DE is the world’s largest producer of agricultural equipment. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 5.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 117.5%.
DXP Enterprises, Inc. DXPE distributes maintenance, repair, and operating (MRO) products, equipment, and services to energy and industrial customers, primarily in the United States. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 70.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 77.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Columbus McKinnon Corporation CMCO is a broad-line designer, manufacturer and supplier of sophisticated material handling products. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 14.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 158.6%.
IDEX Corporation IEX is an applied solutions company specializing in various applications, such as fluid and metering technologies. IDEX sells products to original equipment manufacturers (OEMs) and direct end-users across the globe. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 0.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 22.4%.
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