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5 Top Industrial Stocks to Buy With Strong Potential Upside

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Manufactures of late are facing unparalleled supply shortages amid inflationary pressure. Yet, manufacturing activity in the United States improved immensely last month. After all, IHS Markit’s final U.S. Manufacturing Business Activity PMI reading for the month of July was 63.4, the highest in nearly 14 years, citing a MarketWatch article. The reading also surpassed analysts’ estimate of 63.1.

Notably, June’s reading was at 62.1, indicating that the manufacturing side of the U.S. economy has been expanding, especially after the difficulties faced last year due to the coronavirus outbreak.

It’s also worth pointing out that the improvement in the health crisis and trillions of dollars of financial aid provided by the government bolstered an individual’s well-being and boosted manufacturing activities as well. U.S. manufacturing now, in fact, has seen a surge in demand for goods, which is hard to match up to by manufacturers. However, strengthening demand for goods is certainly a plus.

Orders for U.S.-manufactured goods increased 1.5% in June, more than economists’ expectations of an increase of 1%, per the Commerce Department, citing another MarketWatch article. In reality, factory orders in the United States have been increasing for quite some months now, a tell-tale sign that the manufacturing sector has certainly recouped from the pandemic. Demand for industrial goods, at present, has soared well above pre-pandemic levels.

Coming back to manufacturing activity for the month of July, some skeptics may say that the Institute for Supply Management’s (ISM) data has somewhat shown that factory activity last month cooled down. After all, ISM’s index of U.S. manufacturing activity dropped to 59.5 last month from June’s reading of 60.6, and is now at the lowest level since January, quoting a Reuters article. But still, it’s worth mentioning that the reading is well above 50, indicating that manufacturing activity is expanding.

This is because the central region of the United States witnessed an expansion in factory activity in the month of July, per the Federal Reserve Bank of Kansas City. The central region includes Colorado, Nebraska, Kansas and Wyoming. Citing a MarketWatch article, the Tenth District Manufacturing Survey's composite index jumped to a reading of 30 last month from 27 in the previous month. The reading was way higher than analysts’ estimate of 25.

Citing another MarketWatch article, factory activity in the mid-Atlantic region of the United States also strengthened in July. The Federal Reserve Bank of Richmond noted that regions such as North Carolina, South Carolina, Virginia and Maryland have seen a pick-up in manufacturing activity last month. To put things into perspective, the Fifth District Survey of Manufacturing Activity’s composite index stood at 27 in July versus 26 in June and way higher than analysts’ projection of 21.5.

Thus, with American industries along with the rest of the U.S. economy bouncing back from the coronavirus-led drubbing it took last year, it’s prudent to invest in sound industrial stocks. Hence, we have highlighted five such industrial stocks that possess a Zacks Rank #1 (Strong Buy) or 2 (Buy).

Mueller Industries, Inc. MLI manufactures and sells copper, brass, aluminum, and plastic products. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 52.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 154.1%.

Terex Corporation TEX is a global manufacturer of aerial work platforms, materials processing machinery and cranes. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 18.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 2,207.69%.

Valmont Industries, Inc. VMI is primarily engaged in the production of fabricated metal products, metal and concrete pole and tower structures and mechanized irrigation systems in the United States and abroad. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 9.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 32%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company DE 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. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 1.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 106.9%.

A. O. Smith Corporation AOS is one of the leading manufacturers of commercial and residential water heating equipment. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved up 2.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 26.9%.


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