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Manufacturing Activity Hits 37-Year High: 5 Stocks to Buy

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The U.S. manufacturing sector is been putting up a great show and continued to expand in March despite the pandemic showing no signs of easing. The space has been performing with renewed vigor ever since the economy started reopening after the COVID-19 induced lockdown.

That said, March particularly has been great for the sector, with manufacturing activity hitting its highest level in more than 37 years, according to the Institute for Supply Management (ISM). One of the major reasons behind the rise is that people are spending more on goods compared to services since the COVID-19 outbreak.

Manufacturing Activity Hits a High

The ISM said on Apr 1 that its index of national factory activity soared to 64.7% in March from 60.8% in the prior month, reflecting an increase of 3.9%. This is also the index’s highest reading since December 1983. Anything above 50% indicates expansion in manufacturing activities.

Also, this is the 10th consecutive month of expansion after the decline in April and May 2020 when the economy had to be closed down due to the pandemic.  Other indexes within the PMI like the New Orders Index jumped to 68%, increasing 3.2% from February’s reading of 64.8%.

The Production Index came in at 68.1% versus the February reading of 63.2%, reflecting an increase of 4.9%. Also, The Employment Index was 59.6% compared to 54.4% in February, increasing 5.2% month over month.

Manufacturing Activity Poised to Grow

Manufacturing activity has been gathering steam ever since the economy started to reopen. The sector started this year on a high, despite COVID-19 cases soaring in winter. One of the major reasons behind this upbeat sentiment is the new round of stimulus and vaccine rollout. The vaccination drive is in full swing and at the same time, new cases and deaths have been on the decline over the past couple of months.

Currently, three COVID-19 vaccines are being administered in the United States and President Joe Biden has said that by Apr 19, more than 90% of the Americans will be eligible for vaccines, while the rest will become eligible by May 1.

As more people start getting vaccinated, they will feel confident and further help the manufacturing sector. Moreover, the fresh round of coronavirus relief package is expected to give a further boost to the economy, thus helping the manufacturing sector. 

Last week, Biden also unveiled an ambitious $2 trillion infrastructure spending plan like roads and bridges over 10 years. The economy grew 4.3% in the last quarter and predictions are that it could grow over 7% this year, the fastest since 1984.

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.

Astec Industries, Inc. ASTE is a leading manufacturer and marketer of road building equipment. The company sells equipment used in each phase of road building, from quarrying and crushing the aggregate to applying the asphalt.

The company’s expected earnings growth rate for the current year is 14.3%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. The company has a Zacks Rank #1.

Deere & Company DE is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand.

The company’s expected earnings growth rate for the current year is 82.5%. The Zacks Consensus Estimate for current-year earnings has improved 20.5% over the past 60 days. The company has a Zacks Rank #2.

ABB Ltd ABB is a leading technology company. Its products and services can be used in automated manufacturing, providing digital solutions, electrification of industry and transport, and enhancing productivity. 

The company’s expected earnings growth rate for the current year is 26.5%. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the past 60 days. The company has a Zacks Rank #2.

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. 

The company’s expected earnings growth rate for the current year is 34.4%. The Zacks Consensus Estimate for current-year earnings has improved 8.9% over the past 60 days. The company has a Zacks Rank #2.

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Astec Industries, Inc. (ASTE) : Free Stock Analysis Report
 
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
 
ABB Ltd (ABB) : Free Stock Analysis Report
 
Chart Industries, Inc. (GTLS) : Free Stock Analysis Report
 
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