U.S. manufacturing activity expanded in October, marking the sixth successive month of expansion after the lows of April, indicating a stable recovery from the coronavirus-led lockdown in March. Per the data released by the Institute of Supply Management (“ISM”), the purchasing manager’s index (“PMI”) for October was 59.3% compared to 55.4% in September. Notably, any reading of above 50 is reflective of an expansion in manufacturing activity. This is also the highest reading recorded since September 2018, when manufacturing activity had expanded by 59.3% as well.
Among the other indexes within the PMI, the New Orders Index saw growth of 67.9% during the month compared to 60.2% in September, marking the fifth successive month of gains. Moreover, this was also the highest expansion in new orders since January 2004 when the index had registered growth of 70.6%. Meanwhile, the Production Index saw growth of 63% in October against 61% in September, reflecting the fourth successive month in which the reading came in above 60%.
New orders for manufactured goods also increased for the fifth month in a row in September. The Commerce Department reported that factory orders registered growth of 1.1% in September, following an increase of 0.6% in August, as quoted in a Reuters article. The article also mentioned that industries like primary metals, fabricated metal products, computers and electronic products, and motor vehicles, drove the uptick in new orders during the month.
A resumption in economic activities over the last few months can be attributed as the primary reason for this acceleration in manufacturing and rise in new orders for manufactured goods. This has been further aided by the Fed maintaining an “accommodative stance of monetary policy,” which it recently reiterated in the latest FOMC Policy Statement.
The interest rates have been held by the Fed at a rate of 0% to 0.25%. This has significantly reduced borrowing costs for manufacturers, allowing them to expand their production at low credit costs even amid the pandemic. Along with that, the government had also provided a fiscal stimulus package toward the early part of the year, allowing businesses to mitigate the impact of the pandemic to an extent.
4 Top Stocks to Buy
The U.S. manufacturing sector continued its strong recovery with manufacturing activity expanding steadily. New orders for manufactured goods also maintained its growth trajectory in September, further asserting the turnaround, making this the ideal time to invest in industrial stocks which can take advantage of this positive trend. Hence, we have picked four such stocks that carry a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Crown Holdings, Inc. CCK manufactures and sells packaging products for consumer goods, like steel and aluminum cans, and industrial products in the United States. The Zacks Consensus Estimate for its current-year earnings increased 10% over the past 60 days. The company’s expected earnings growth rate for the current year is 11.7%.
Worthington Industries, Inc. WOR is a metals manufacturer and operates under two segments, namely, steel processing and pressure cylinders, in the United States. The Zacks Consensus Estimate for its current-year earnings increased 43.6% over the past 60 days. The company’s expected earnings growth rate for the current year is 19.2%.
Altra Industrial Motion Corp. AIMC operates under two segments, namely power transmission technologies, and automation and specialty, producing, designing and manufacturing electromechanical power transmission motion control products in the United States. The Zacks Consensus Estimate for its current-year earnings increased 27.1% over the past 60 days. The company’s expected earnings growth rate for next year is 17.4%.
EnPro Industries, Inc. NPO operates under the segments of sealing products and engineered products, and manufacturing and marketing engineered industrial products in the United States. The Zacks Consensus Estimate for its current-year earnings increased 52.7% over the past 60 days. The company’s expected earnings growth rate for next year is 22.4%.
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