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U.S. Durable Goods Orders Jump in September: 5 Stocks to Buy

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Ritujay Ghosh
·5 min read
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Orders to U.S. factories for long-lasting manufacturing goods increased more than expected in September, reflecting a rebound in orders for transportation equipment, according to a report released by the Commerce Department on Oct 27. Also, orders for core durable goods, considered a key metric to track business investment plan, surged significantly.

This once again reflects robust spending in business and the economy trying to get back on its feet after having taken a massive hit owing to the coronavirus outbreak. Moreover, shipment of core manufactured goods increased to a large extent in September. The jump comes on the back of impressive data on retail sales and housing market.

Durable Goods Orders Jump in September

On Oct 27, the Commerce Department reported that new orders for manufactured durable goods in September increased $4.3 billion or 1.9% to $237.1 billion. This is the fifth consecutive month of increase followed by a smaller 0.4% increase in August. Excluding transportation, new orders jumped 0.8%.

Transportation equipment was up in four of the last five months, rising 4.1% to $76.8 billion. Also, shipments of manufactured durable goods increased an impressive $0.7 billion or 3% to $245 billion, after declining 0.3% in the previous month.

Orders for Core Capital Goods Increase

One of the highpoints of the report was that the core durable goods order (which excludes defense aircraft) increased 1% in September. Shipments of core capital goods increased less than $0.1 billion or 0.1% to $70.2 billion.

Unfilled orders declined $0.4 billion or 0.1% to $593.5 billion. Inventories advanced $0.7 billion or 0.4% to $193.8 billion. The pace of growth in orders for durable goods has somewhat slowed since the economy started reopening following the coronavirus pandemic. However, the good sign is that it is still on the rise.

The robust growth in September comes despite a surge in coronavirus cases and once again proves that the country’s pandemic-ravaged economy is trying to get back on its feet. Although signs of another $3 trillion stimulus have been fading over the past few days, it might work miracles if it at all gets passed and gives businesses another lifeline.

The fifth straight month of growth in orders for durable goods indicates that business spending is likely to continue although the pace may decline to some extent. Moreover, U.S. small business confidence last month rose to its highest level since February, which is yet another healthy sign.

Our Choices

Given this scenario, it will be prudent to invest in stocks with a favorable Zacks Rank that are poised to gain from the solid durable goods orders. We narrowed down our search to five such stocks. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CIRCOR International, Inc. CIR designs, manufactures and markets flow control solutions and other highly engineered products and sub-systems for markets including oil & gas, aerospace, power, process and industrial solutions. 

The company’s expected earnings growth rate for next year is 72.3%. Its shares have advanced 6.7% in the past one month. Circor International has a Zacks Rank #2.

Entegris, Inc. ENTG is a leading provider of materials management solutions to the microelectronics industry including, in particular, the semiconductor manufacturing and disk manufacturing markets.

The company’s expected earnings growth rate for the current year is 28%. The Zacks Consensus Estimate for current-year earnings has improved 3.9% over the past 60 days. The company carries a Zacks Rank #2.

Kulicke and Soffa Industries, Inc. KLIC is a leading provider of semiconductor packaging and electronic assembly solutions supporting the global automotive, consumer, communications, computing and industrial segments.

The company’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the past 60 days. The company sports a Zacks Rank #1.

EMCORE Corporation EMKR offers a broad portfolio of compound semiconductor-based products for the broadband, fiber optic, satellite and terrestrial solar power markets.

The company’s expected earnings growth rate for the current year is 68.9%. Its shares have advanced 12% in the past one month. The company carries a Zacks Rank #2.

Altra Industrial Motion Corp. AIMC is one of the leading manufacturers and distributors of a diversified range of motion control, electromechanical power transmission and automation products. 

The company’s expected earnings growth rate for next year is 19.3%. The Zacks Consensus Estimate for current-year earnings has improved 3.2% over the past 60 days. The company has a Zacks Rank #2.

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Entegris, Inc. (ENTG) : Free Stock Analysis Report
 
EMCORE Corporation (EMKR) : Free Stock Analysis Report
 
Altra Industrial Motion Corp. (AIMC) : Free Stock Analysis Report
 
CIRCOR International, Inc. (CIR) : Free Stock Analysis Report
 
Kulicke and Soffa Industries, Inc. (KLIC) : Free Stock Analysis Report
 
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