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Industrial Production Rises in November: 5 Utilities Picks

U.S. industrial production climbed 0.6% in November, the strongest gain in three months. The increase came on the back of robust output in utilities and mines. One of the major reasons behind the strong gains made by utilities was the extreme cold weather that swept across the country.

That said, year to date, utilities has been the best performing sector in the S&P 500 sector amid growing tensions of slowing global economy and trade was fears that have been rattling markets for a while now. However, November’s rise in industrial production once again proves the strength in the U.S. economy. Given this scenario, it makes good sense to add utilities stocks in your portfolio.

Industrial Production Soars in November

U.S. industrial production rose 0.6% in November exceeding the estimated level of 0.4%. This is also the strongest gain in three months. The rise in industrial production came on the back of surging output at mines and utilities. Per the Federal Reserve, utility output rose 3.3% because of the unusually cold weather that swept across the country.

The latest figures imply that unusually cold weather resulted in higher demand for natural gas and electricity. Mining output climbed 1.7% on the back of robust production at coal mines and oil and gas drillers.

Moreover, capacity utilization rose 0.4% in November to 78.5%. However, manufacturing output was weak for the second straight month in November. Within manufacturing, durable goods output climbed 0.2%.  

Utility Sector Among Best Performers

Trade war fears coupled with growing worries of slowing global economic growth has been plaguing markets for a while now. So much so, that even tech stocks which have been responsible for the market’s long rally too have been at the helm of the carnage. However, the utilities sector has been consistently performing well amid this market turmoil. The Utilities Select Sector SPDR (XLU) has gained 7.9% on a year-to-date basis.

Also, the utilities sector happens to be the only gainer in the S&P 500 index in the last three months, when markets have taken the maximum beating. The Utilities Select Sector SPDR (XLU) has gained 4.64% in the last three months. Understandably, investors find it safer investing in utilities stocks during times of market turmoil as they are relatively stable and reliable because of the necessity of the products they offer.

Our Choices

Trade war fears and concerns over slowing global economy have been taking a toll on stocks. However, the utilities sector has been performing well amid this tension. However, November’s rise in industrial production once again proves the strength in the U.S. economy.

Moreover, utilities are a safe bet during times of market turmoil, as they are relatively stable because of the necessity of the products they offer. This is why picking utilities stocks still looks like a smart option. However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Otter Tail Corporation’s OTTR primary business is the production, transmission, distribution and sale of electric energy. 

Otter Tail sports a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 10.2% for the current year. The Zacks Consensus Estimate for the current year has improved 2.5% over the past 60 days.

Middlesex Water Company MSEX treats, stores and distributes water for residential, commercial, industrial and fire prevention purposes.

The company has expected earnings growth of 42% for the current year. The Zacks Consensus Estimate for the current year has improved 6.5% over the past 60 days. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Consolidated Water Co. Ltd. CWCO intends to develop and operate seawater conversion plants and water distribution systems in areas of the world where naturally-occurring supplies of potable water are scarce or nonexistent.

Consolidated Water Cohas a Zacks Rank #2 (Buy). The company has expected earnings growth of 51% for the current year. The Zacks Consensus Estimate for the current year has improved 29.8% over the past 60 days.

Ameren Corporation AEE powers the quality of life for electric customers and natural gas customers through its Ameren Missouri and Ameren Illinois rate-regulated utility subsidiaries. 

Ameren carries a Zacks Rank #2. The company has expected earnings growth of 19.1% for the current year. The Zacks Consensus Estimate for the current year has improved 3.1% over the past 60 days.

ONE Gas, Inc. OGS is a natural gas local distribution company. It operates primarily in Oklahoma, Kansas and Texas through Oklahoma Natural Gas, Kansas Gas Service and Texas Gas Service.

ONE Gas has a Zacks Rank #2. The company has expected earnings growth of 11.2% for the current year. The Zacks Consensus Estimate for the current year has improved 0.9% over the past 60 days.

In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?

These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>


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Ameren Corporation (AEE) : Free Stock Analysis Report
 
Otter Tail Corporation (OTTR) : Free Stock Analysis Report
 
ONE Gas, Inc. (OGS) : Free Stock Analysis Report
 
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
 
Middlesex Water Company (MSEX) : Free Stock Analysis Report
 
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