5 Industrial Stocks Geared Up For Gains In 2019
Zacks Investment Research | Mar 19, 2019 09:44PM ET
The imposition of tariffs on steel imports into the United States last year dealt a massive blow to the manufacturing sector overall. Given that steel is a primary raw material, every manufacturing company bore the brunt of rising steel prices owing to the tariffs. Despite this setback, the manufacturing sector held its ground and witnessed strong production output and strength in new orders last year. It seems well poised to sustain the momentum this year as well, supported by improvement in its end markets like residential and non-residential construction; mining driven by ongoing recovery in the commodities, oil and gas industry; and overall economic growth. Further, manufacturers have increased capital spending and hiring driven by massive tax overhaul, deregulatory measures and strong domestic economy.
Manufacturing Sector Firing on All Cylinders
Per the Institute for Supply Management’s (“ISM”) latest report, Purchasing Managers’ Index (“PMI”) for February rose 54.2% after a 56.6% reading in January. In fact, the sector has maintained the growth rate for 30 consecutive months. Of the 18 manufacturing industries, 16 reported growth in February.
The PMI has averaged 58% over the last 12 months ranging from a low of 54.2% to a high of 60.8%. Notably, a reading above 50% indicates expansion in manufacturing economy. The PMI reading of 59.3% for February corresponds to an increase of 3.3% in real gross domestic product ("GDP") on an annualized basis.
New Orders Index registered 55.5% in February, indicating growth in new orders for the 38th consecutive month. Production Index registered growth of 54.8% in February, indicating improvement in production for the 30th consecutive month. Employment continues to expand, supporting production growth. The employment index was pegged at 52.3% in February, maintaining growth for the 29th consecutive month.
Additionally, industrial production — a measure of the level of output of manufacturing, mining and utilities sectors — rose 0.1% in February. Manufacturing output fell 0.4% while output of utilities rose 3.7%. Mining output rose 0.3% — its 13th consecutive monthly increase aided by gains in oil and gas extraction, coal mining, and support activities for mining.
Sector Performance & Projections
All the machinery industries are broadly clubbed under the Zacks Zacks Investment Research
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