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The Zacks Analyst Blog Highlights: AZZ, CIRCOR International, Intevac, Cisco Systems and Stratasys

Zacks Equity Research

For Immediate Release

Chicago, IL – July 29, 2019 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: AZZ Inc. AZZ, CIRCOR International Inc. CIR, Intevac Inc. IVAC, Cisco Systems Inc. CSCO and Stratasys Ltd. SSYS.

Here are highlights from Friday’s Analyst Blog:

U.S. Durable Goods Orders Hit Highest in 10 Months: 5 Picks

Orders to U.S. factories for long-lasting manufactured goods surged in June reversing the sharp decline in the previous two months. Moreover, core durable goods order –- a key metric to track business investment plan –- jumped significantly.

The shipment of core durable goods also increased to a large extent in June. These two metrics provide a major relief to the market’s concern that investment contracted in the manufacturing sector primarily owing to the lingering trade dispute with China and fears of global economic slowdown.

Durable Goods Orders Rebound in June

On Jul 24, the Department of Commerce reported that new orders for manufactured durable goods increased $4.9 billion or 2% to $246 billion in June from May. The consensus estimate was of an increase of 0.7%. This marks the first monthly increase in three months and the highest monthly rise in durable goods orders since August 2018. Notably, durable goods orders in May and April declined 2.3% (revised) and 2.8%, respectively.

The significant increase in June’s orders is primarily due to a 75% jump in aircraft orders, which fell 50% in May and nearly 40% in April. In addition, orders for cars and auto parts witnessed a gain of 3.1%, marking the biggest monthly rise since July 2018. Furthermore, machines, computers, networking gear and primary metals witnessed strong orders.

Core Durable Goods Orders Jump in June

More important information from the report is that the core durable goods order (which excludes defense aircraft) jumped 1.9% in June compared with a rise of a mere 0.4% in May. This also reflects the highest monthly gain of core factory orders since February 2018.

However, year over year, core capital goods orders increased just 1% compared with a gain of 8% in June 2018. Shipments of core capital goods increased $3.5 billion or 1.4% to $258.2 billion.

Implication of Strong Core Durable Goods Data

Industry researchers are highly concerned about future capital spending by the U.S. manufacturing sector due to the prolonged tariff battle between the United States and China and an impending global economic slowdown. Notably, the manufacturing sector constituted nearly 12% of U.S. GDP.

However, core durable goods data for June indicate that business spending is likely to continue although the pace may decline to some extent. Additionally, shipment of core capital goods is a leading metric to calculate equipment spending in the U.S. government’s GDP measurement. Both core durable goods orders and shipment of core durable goods increased for two consecutive months.   

Lingering trade conflict between the United States and China took a toll on the manufacturing sector. A large section of U.S. manufacturing companies is dependent on low-cost inputs from China which act as intermediary products for the heavy industrial sector. However, imposing of tariff on several of these intermediary products by the Trump administration raised input cost for those U.S. companies.

Consequently, business confidence dented and investors postponed investment plans. Notably, the first quarter of 2019 witnessed contraction of business spending on equipment for the first time in three months. Therefore, stabilization of business investment in May and June will act as a relief to the manufacturing sector.

Our Top Picks   

Against this backdrop, 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 carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.

AZZ Inc. provides galvanizing and metal coating services, welding solutions, specialty electrical equipment and highly engineered services to the power generation, transmission, distribution, refining and industrial markets. The stock sports a Zacks Rank #1. The company has expected earnings growth rate of 32.1% for the current year. The Zacks Consensus Estimate for the current year has improved 2.8% over the last 60 days.

CIRCOR International Inc. designs, manufactures, and markets engineered products and sub-systems worldwide. It operates through three segments: Energy, Aerospace and Defense, and Industrial. The stock sports a Zacks Rank #1. The company has expected earnings growth rate of 7.6% for the current year. The Zacks Consensus Estimate for the current year has improved 35% over the last 60 days.

Intevac Inc. provides vacuum deposition equipment for various thin-film applications, and digital night-vision technologies and products to the defense industry in the United States, Asia, Europe, and internationally. The stock carries a Zacks Rank #2. The company has an expected earnings growth rate of 115.8% for the current year. The Zacks Consensus Estimate for the current year has improved 0.5% over the last 60 days.

Cisco Systems Inc. designs, manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry worldwide. The stock carries a Zacks Rank #2. The company has an expected earnings growth rate of 18.5% for the current year. The Zacks Consensus Estimate for the current year has improved 0.7% over the last 60 days.

Stratasys Ltd. provides 3D printing and additive manufacturing solutions for individuals, businesses, and enterprises. Its 3D printing systems utilize the company’s proprietary fused deposition modeling and inkjet-based PolyJet technologies. The stock carries a Zacks Rank #2. The company has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for the current year has improved 1.6% over the last 60 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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