Durable Goods Orders Rebound in June: 5 Stocks to Buy
According to data released by the Commerce Department on Thursday, U.S. durable goods orders rose 1% in June, after declining for two consecutive months. The rise can be attributed to an increase in orders for transportation equipment led by a rise in orders for civilian aircraft and auto.
The rise in orders of commercial aircraft and auto goods bears testimony to the underlying strength in the U.S. economy. Moreover, trade war fears too seem to have somewhat eased after President Donald Trump on Jul 25 announced that the United States and the EU would be working together to avoid a potential trade war. Against this backdrop, it makes good sense to invest in stocks that are poised to gain from the solid durable goods orders data.
Higher Durable Goods Order to Boost Confidence
Orders for durable goods rose 1% in June, after back-to-back fall. The rise was mainly backed by strong demand for civilian aircraft, which surged 4.3% in June, after declining 11.6% in May. Apart from commercial aircraft, the rise in durable goods orders was driven by a 4.4% increase in orders for autos.
Moreover, excluding the volatile transportation category, orders increased 0.4%, registering the fifth straight monthly gain. The overall demand for transportation increased 2.2% in June, making it clear that civilian airlines and autos are driving durable goods orders.
Manufacturing Sector Expands, Trade War Fears Ease
The ISM Manufacturing Index came in at 60.2% in June, increasing 1.5% from the May reading of 58.7%. Understandably, demand for U.S.-manufactured goods is growing given that 17 of the 18 manufacturing industries registered growth in June. Moreover, June’s PMI figure also marks overall economic growth for the 110th consecutive month.
Meanwhile, factory orders grew 0.4% owing to robust demand in military ware and machinery. On the other hand, trade war fears seem to be somewhat easing. President Donald Trump on Jul 25 announced that the United States and the EU would be collaborating on lowering tariffs in order to avoid further hostility in trade.
On Jul 26, Trump in a press conference with European Commission President, Jean-Claude Juncker, said, "We agreed today, first of all, to work together towards zero tariffs, zero non-tariff barriers and zero subsidies for the non-auto industrial goods." This definitely helped reinstate investors’ confidence, which saw industrials stocks rallying on Thursday.
Our Choices
The latest data, which reflects robust orders for durable goods, is a clear indication that economic activity in the manufacturing sector is expanding. Moreover, the robust in orders for civilian aircraft and autos is an indication of strong demand for U.S.-made goods. Strong factory orders aided by steady demand for transportation equipment such as civil aircraft and autos hint a bullish economic outlook.
Moreover, Trump’s announcement of collaborating with the EU and working out a possible trade solution gave a boost to investors’ confidence. Naturally, investing in stocks that are likely to gain from strong durable goods order looks like a good option at this point. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
DMC Global Inc. BOOM is a technology company, operating in industrial infrastructure, and oilfield products and services.
The company has an expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 5.7% over the last 60 days. The stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chart Industries, Inc. GTLS is a leading independent global manufacturer of highly engineered equipment servicing end market applications in Energy, Industry, Life Sciences and Respiratory Healthcare with a unique business portfolio.
Chart Industries has a Zacks Rank #1. The company has an expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.9% over the last 60 days.
Actuant Corporation ATU is a diversified industrial company serving customers from operations in more than 30 countries.
Actuant Corporation sports a Zacks Rank #1. The company has an expected earnings growth of 27.7% for the current year. The Zacks Consensus Estimate for the current year has improved by 2.9% over the last 60 days.
Greif, Inc. GEF is engaged in providing industrial packaging products and services. The company produces steel, plastic, fibre, flexible and corrugated containers, packaging accessories and containerboard, and provides blending, filling and packaging services.
Greif has a Zacks Rank #2 (Buy). The company has an expected earnings growth of 20.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.2% over the last 60 days.
A. O. Smith AOS is one of the world's leading manufacturers and marketers of residential and commercial water heating equipment, offering a comprehensive line featuring the best- known brands in the industry.
A. O. Smith has a Zacks Rank #2. The company has an expected earnings growth of 19.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 days.
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