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Manufacturing Activity Continues to Expand: 5 Stocks to Buy

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The manufacturing sector has been on a high ever since the economy reopened. Manufacturing activity has increased every month since then.

People had shifted their spending toward services but have again started investing in goods, helping the manufacturing sector.

Manufacturing Activity Increases

The Institute for Supply Management (ISM) reported on Oct 1 that U.S. manufacturing activity expanded to a reading of 61.1 in September from a reading of 59.9 in August. Manufacturing activity has now increased for the 16th consecutive month.

The jump comes despite factories experiencing delays in getting delivery of raw materials. Also, factories had to pay more for inputs. One of the major reasons for the increase was a rise in the survey’s measure of supplier deliveries. The reading jumped to 73.4 in September from August’s reading of 69.5.

The New Orders Index showed a reading of 66.7%, unchanged from August. The Employment Index also bounced back to growth with a reading at 50.2%, 1.2 percentage points higher than the August reading of 49%.

However, the Production Index fell to 59.4% from August’s reading of 60%. Also, the New Export Orders Index fell 3.2% to 53.4% from 56.6% in August.

Manufacturing Activity Poised to Grow

Last year, manufacturing activity had come to a standstill when the economy had to be shut down almost entirely whenthe pandemic struck. However, the ISM PMI has remained above 50 since June 2020, when the economy started reopening. Anything above 50% indicates expansion in manufacturing activities.

Spending on goods had somewhat slowed down but is again picking up, which is a good sign for the sector. Moreover, with the vaccination drive in full swing, people are a lot more confident and businesses and factories are also fast going back to their optimum level of production.

According to the Commerce Department, spending on goods rose 1.2% in August, driven by the purchase of recreational items. Moreover, the Commerce Department said on Oct 1 that U.S. consumer spending rose 0.8% in August after a revised 0.1% decline in July.

Our Choices

Given this scenario, it is ideal to invest in these five stocks. All these stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.

DXP Enterprises, Inc. DXPE provides innovative pumping solutions, supply chain services and maintenance, repair, operating and production services that emphasize and utilize DXP's vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies, and safety products and services. 

The company’s expected earnings growth rate for the current year is 77.6%. The Zacks Consensus Estimate for current-year earnings has improved 70.9% over the past 60 days. The company has a Zacks Rank #1.

Applied Industrial Technologies, Inc. AIT is a distributor of value-added industrial products — including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. Last year, it acquired Advanced Control Solutions, known for providing automation products and engineered solutions on machine vision equipment and software. Earlier this year, the company acquired Gibson Engineering Company, Inc.

The company’s expected earnings growth rate for the current year is 12%. The Zacks Consensus Estimate for current-year earnings has improved 6.2% over the past 60 days. The company has a Zacks Rank #2.

Helios Technologies, Inc HLIO develops and manufactures hydraulic and electronic control solutions. The company's operating subsidiaries includes Sun Hydraulics, Enovation Controls and Faster Group. Its operating business segment consists of Hydraulics and Electronics.

The company’s expected earnings growth rate for the current year is 70.5%. The Zacks Consensus Estimate for current-year earnings has improved 12.7% over the past 60 days. The company carries a Zacks Rank #1.

Kadant Inc. KAI is a leading supplier of a range of products and systems for the global papermaking and paper-recycling industries, including de-inking systems, stock-preparation equipment, water-management systems, and papermaking accessories. 

The company’s expected earnings growth rate for the current year is 48.2%. The Zacks Consensus Estimate for current-year earnings has improved 6.6% over the past 60 days. The company sports a Zacks Rank #1.

Nordson Corporation NDSN is one of the leading manufacturers as well as distributors of products and systems designed to dispense, apply and control adhesives, coatings, polymers, sealants, biomaterials and other fluids.

The company’s expected earnings growth rate for the current year is 45.3%. The Zacks Consensus Estimate for current-year earnings has improved 5.3% over the past 60 days. The company sports a Zacks Rank #1.


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