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The Zacks Analyst Blog Highlights: DXP Enterprises, Milacron, Twin Disc, Deere and Colfax

Zacks Equity Research
After today's close, we will hear from Apple Inc. (AAPL). This morning, here are a few of the big names reporting.

For Immediate Release

Chicago, IL – January 23, 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: DXP Enterprises Inc. DXPE, Milacron Holdings Corp. MCRN, Twin Disc Inc. TWIN, Deere & Co. DE and Colfax Corp. CFX.

Here are highlights from Tuesday’s Analyst Blog:

December Manufacturing at 10-Month High: 5 Picks

U.S. manufacturing output surged significantly in December. Despite a volatile 2018, the sector is still expanding and generating impressive number of jobs. Manufacturers have increased capital spending and hiring driven by massive tax overhaul, deregulation, strong domestic economy and upbeat business sentiment.

U.S. manufacturing sector, which constitutes approximately 12% of the country’s GDP, has been witnessing resurgence under the Trump administration since 2017, shrugging off its lengthy spell of weak productivity and sluggish growth. At this stage, investment in manufacturing stocks with a favorable Zacks Rank and strong growth potential will be a prudent decision.

Robust Manufacturing Output in December

On Jan 18, Federal Reserve reported that manufacturing output soared 1.1% in December 2018, its highest gain in 10 months. Higher production of motor vehicles, construction supplies, business supplies and materials provided a boost to manufacturing sector. As a result of the surge in manufacturing output, U.S. industrial production rose 0.3% in December, outpacing the consensus estimate of 0.2%.

On Jan 3, the Institute for Supply Management (ISM) reported that the U.S. manufacturing expanded in December 2018 for the 116th consecutive month. Over the last 12 months, the average value of the manufacturing index has been pegged at 58.8, reflecting strong growth in the sector. Notably, any reading above 50 indicates overall growth of the manufacturing sector.

Importantly, Customers’ Inventories Index was pegged at 41.7 in December, reflecting 27th consecutive month of low (below 50 benchmark level) customer inventory. This will act as a major catalyst for the manufacturing sector in 2019.

Strong Hiring in Manufacturing Sector

According to the Department of Labor, the manufacturing sector generated 284,000 jobs in 2018, highest since 1997. This sector generated 207,000 jobs in 2017. Within the sector, durable goods industries, which produce industrial intermediaries, generated nearly 89% of job additions.

The National Association of Manufacturers reported that about 500,000 manufacturing jobs are currently available in the United States. A recent study by the Manufacturing Institute and Deloitte has projected that by the end of 2025, the U.S. manufacturing sector will witness shortages of around 2 million skilled workers.

Positive Developments on Trade War Front

On Jan 18, Bloomberg reported that China has offered to ramp up imports from the United State in the next six years. Total value of these imports will be $1 trillion which will bring down the United States’ massive trade deficit with China to zero in 2024. Notably, the United States had a trade deficit of $323 billion with China in 2018.

On Jan 16, The Wall Street Journal reported that the U.S. government is contemplating lifting some tariffs imposed on China. This will act as an incentive to the Asian economic giant to make deeper concessions to the United States. However, a Treasury Department spokesperson later denied the report.

Our Picks

At present, the U.S. economy is firmly placed on growth trajectory. Strong manufacturing goods orders are normally associated with stronger economic activity.  Considering these positives, investing in manufacturing stocks with strong growth potential will be a lucrative move. We narrowed down our choice to five stocks each of which carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy).

DXP Enterprises Inc. is a leading products and service distributor that adds value and total cost savings solutions to industrial customers in the United States, Canada, Mexico and Dubai. It sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. The company has expected earnings growth of 33.5% for current year. The Zacks Consensus Estimate for the current year has improved by 6.7% over the last 60 days.

Milacron Holdings Corp. manufactures, distributes and services engineered and customized systems within the plastic technology and processing industry. It flaunts a Zacks Rank #1. The company has expected earnings growth of 15.1% for current year. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 60 days.

Twin Disc Inc. designs, manufactures and sells heavy duty off-highway power transmission equipment. It carries a Zacks Rank #2. The company has expected earnings growth of 21% for current year. The Zacks Consensus Estimate for the current year has improved by 1.8% over the last 60 days.

Deere & Co. manufactures agricultural, construction, and forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment.  It carries a Zacks Rank #2. The company has expected earnings growth of 21.8% for current year. The Zacks Consensus Estimate for the current year has improved by 0.4% over the last 60 days.

Colfax Corp. is a global supplier of fluid handling products, including pumps, fluid handling systems and specialty valves.  It carries a Zacks Rank #2. The company has expected earnings growth of 17% for current year. The Zacks Consensus Estimate for the current year has improved by 3.1% 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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