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US Manufacturing Remains a Bright Side in Early 2021: 5 Picks

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Tirthankar Chakraborty
·5 min read
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With coronavirus cases continuing to rise despite a breakthrough on the vaccine front, concerns about broader economic growth in the United States remain. Service side of the economy continues to grapple with the pandemic. But it’s U.S. manufacturing that has been providing strength to the economy, especially since the beginning of this year.

Demand for factory products was healthy last month as manufacturing continues to recoup from the pandemic. In fact, the Institute of Supply Management’s (ISM) manufacturing index came in at 58.7% last month, somewhat lower than December’s reading of 60.5%. Yet, January’s reading is above the 50% mark, indicating expansion. In fact, manufacturing activity picked up for the last eight consecutive months, the ISM further confirmed.

Additionally, new orders and production indexes may have dropped a bit lower in January compared to December but remained in growth mode. The employment index, in the meanwhile, increased last month, a tell-tale sign that the manufacturing sector is in the pink amid the rise in coronavirus cases and the latest hiccups in vaccine distribution that can easily derail the economic recovery.

By the way, as mentioned in a Wall Street Journal article, another manufacturing survey released by the IHS Markit showed that January’s final reading for the US Manufacturing Business Activity PMI Index was 59.2, up from 57.1 in December. Notably, this was also the highest reading since the survey started to collect data in 2007.

Interestingly, the IHS Markit survey categorically mentioned that new orders and production increased in January. Moreover, Chris Williamson, chief business economist at IHS Markit, as quoted in a Morningstar article, said that “U.S. manufacturing started 2021 on an encouragingly strong footing, with production and order books growing at the fastest rates for over six years.”

At the same time, Oren Klachkin, an economist at Oxford Economics, as mentioned in the Wall Street Journal article, said that “manufacturing sector prospects for 2021 are upbeat, with solid consumer goods demand, inventory restocking, gradual business reopenings, and additional federal pandemic relief all set to keep activity on a firm footing.”

5 Stocks to Play Recovery in Manufacturing Activity

As noted by the purchasing managers’ surveys, the manufacturing sector exhibited strength despite the pandemic in the month of January. Lest we forget, December’s headline industrial production data pointed out that manufacturing activity will continue to chug along in 2021 as well (read more: 5 Top-Ranked Industrial Stocks to Buy for Solid Upside in 2021).

On that promising note, we have highlighted five solid stocks from the manufacturing sector that are poised to make the most of the strength in the said sector and scale northward in the near future. These stocks currently flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corporation AGCO is a leading manufacturer and distributor of agricultural equipment and related replacement parts. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved up 4.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 21.6%.

Mueller Industries, Inc. MLI is a leading manufacturer of copper tube and fittings. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has risen more than 100% over the past 60 days. The company’s expected earnings growth rate for the current year is nearly 17%.

Myers Industries, Inc. MYE is an international manufacturer of polymer products for industrial, agricultural, automotive, commercial, and consumer markets. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has moved almost 14% up over the past 60 days. The company’s expected earnings growth rate for the current year is 16.5%.

Columbus McKinnon Corporation CMCO is a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 4.6% over the past 60 days. The company’s expected earnings growth rate for the next quarter is more than 100%.

Donaldson Company, Inc. DCI is engaged in manufacturing and selling of filtration systems and replacement parts. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 5.9% north over the past 60 days. The company’s expected earnings growth rate for the current year is 7%.

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AGCO Corporation (AGCO) : Free Stock Analysis Report
 
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