4 Industrial Stocks Near 52-Week High With More Room To Run
Zacks Investment Research | Jun 19, 2019 10:01PM ET
Industrial production rose 0.4% in May reversing the decline of 0.4% in April. Manufacturing output rebounded with growth of 0.2% after having decreased about 0.4% per month, on average, in the first four months of the year.
These figures allayed concerns triggered by the Institute for Supply Management’s latest report that the pace of growth in the U.S manufacturing sector has been hindered by escalating trade war concerns between the United States and China. Per the Institute for Supply Management, Purchasing Managers’ Index (PMI) for May came down to 52.1% from 52.8% registered in April. Despite the dip in May, the PMI averaged 57.7% over the last 12 months. Further, it has remained above 50% (which indicates expansion) for 33 straight quarters. The New Orders Index registered 52.7% in May, marking growth for 41 straight months. Production Index was 51.3% in the month, improving for 33 straight months.
Factors Likely to Aid Growth
Continuous advancements in technologies applied in agriculture and mining industries sustain demand strong for farming and mining machinery. Despite weakness in the agricultural sector, replacement demand will continue to drive order activity for agricultural equipment due to the pressing need to replace older fleet and capitalize on the new technology available. Further, the recently announced $16 billion aid program for American farmers impacted by the trade war is likely to bolster agricultural equipment sales. Long-term demand for agricultural equipment will be buoyed by increased global demand for food. Growth in demand for packaged foods and beverages, especially in emerging countries, are significantly increasing the utilization of highly sophisticated food processing and packaging equipment.
Improvement in residential and non-residential construction as well as infrastructure demand will fuel the sector’s performance. Mining companies are also resuming their capital spending on the back of improvement in commodity prices. Further, the tax reform has been acting as a catalyst.
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