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US Manufacturing Sector Continues to Expand: 5 Top Gainers

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As quoted in a Businessworld article, “the manufacturing sector that accounts for 11.3% of U.S. economic activity,” has witnessed a rebound in the past few months. In fact, the sector has grown at a faster pace for the fifth consecutive month in October, boosted by a shift in spending from services toward goods. As the coronavirus pandemic has locked Americans indoors, the recent remote working trend has pushed them to set up home offices and remote classrooms along with avoiding public transportation to contain the spread of the infection.

ISM Manufacturing Index Nears 2-Year High

Per the Institute for Supply Management’s (ISM) report on Nov 2, its Purchasing Managers' Index (PMI) for manufacturing added 3.4 points in October rising to 59.3%, the highest PMI reading since September 2018. The October figure also beat the consensus estimate of 55.9%.

PMI’s new order index for October has increased at a faster pace, rising to 67.9%, up 7.7 points from September. The sub-index has hit its highest point since January 2004 and maintained growth for the fifth straight month.

Other sub-indexes like the production index grew 2 points to 63%, inventories rose 4.8 points to 51.9% and prices grew 2.7 points to 65.5%. Additionally, employment in the manufacturing space has witnessed an uptick, with 3.6-point growth in employment to 53.2% in October. In fact, job addition in the reported month breaks the 14-month streak of contraction in employmentin the manufacturing sector.

Per the report, textile mills and printing were the only two industries to report contraction of the 18 manufacturing industries surveyed by ISM. Among the ones reporting growth in October are apparel and leather, fabricated metal products, non-metallic mineral products, food and related products, plastics and rubber, machinery, furniture, paper, wood, chemical products, primary metals, computers and electronics, transportation equipment, electrical equipment, and miscellaneous manufacturers. And in the survey, managers have expressed optimism in sustained growth.

Factory Order Jumps

In a separate report on Nov 3, the U.S. Census Bureau announced that new orders for manufactured goods jumped 1.1% in September, or increased $5.2 billion to $475.0 billion. The reported figure beats the consensus estimate of 0.9% and surpasses August’s revised 0.6% increase. New orders for manufactured durable goods increased 1.9%, while manufactured non-durable goods orders edged up 0.3%.

This fifth consecutive month jump in new orders was boosted by higher demand for primary metals, computers and electronic products along with motor vehicles and fabricated metal products. Additionally, shipments rose for the fifth consecutive month and edged up 0.3% or $1.6 billion to $482.8 billion in September.

Our 5 Top Picks

Given the momentum in the manufacturing sector, we have highlighted five Zacks Rank #1 (Strong Buy) stocks from the space that can return well on investment. You can see the complete list of today’s Zacks #1 Rank stocks here.

Altra Industrial Motion Corp. AIMC designs, produces and markets a range of electromechanical power transmission motion control products. The company’s expected earnings growth rate for the current quarter is 4.6% against the Zacks Manufacturing - General Industrial industry’s projected earnings decline of 33.1%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 27.2% upward over the past 60 days.

Regal Beloit Corporation RBC designs, manufactures, and sells electric motors, electrical motion controls, and power generation and transmission products. The company’s expected earnings growth rate for the current year is 1.5% against the Zacks Manufacturing - Electronics industry’s projected earnings decline of 4.5%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 19.5% upward over the past 60 days.

Kaman Corporation KAMN operates in the aerospace, medical, and industrial markets. The company’s expected earnings growth rate for the current year is 12.9% against the Zacks Manufacturing - General Industrial industry’s projected earnings decline of 16.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 0.6% upward over the past 60 days.

Franklin Electric Co., Inc. FELE designs, manufactures, and distributes water and fuel pumping systems. The company’s expected earnings growth rate for the current year is 2.4% against the Zacks Manufacturing - Electronics industry’s estimated earnings decline of 4.5%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 15.2% upward over the past 60 days.

Standex International Corporation SXI manufactures and sells various products and services for commercial and industrial markets. The company’s expected earnings growth rate for the current year is 5.4% against the Zacks Manufacturing - General Industrial industry’s projected earnings decline of 16.6%. The Zacks Consensus Estimate for the company’s current-year earnings has been revised 4.8% upward over the past 90 days.

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Regal Beloit Corporation (RBC) : Free Stock Analysis Report
 
Franklin Electric Co., Inc. (FELE) : Free Stock Analysis Report
 
Kaman Corporation (KAMN) : Free Stock Analysis Report
 
Standex International Corporation (SXI) : Free Stock Analysis Report
 
Altra Industrial Motion Corp. (AIMC) : Free Stock Analysis Report
 
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