5 Top Ranked Machinery Stocks That More Than Doubled The S&P

The scenario for machinery stocks has improved this year with indicators pointing toward healthy operating conditions in the industry. Through November, total industrial production -- one of the leading economic indicators for the industrial stocks -- has increased 3.4% above its year-ago level. The figure is also at 106.4% of its 2012 average in November.

In November, manufacturing production rose 0.2% — its third consecutive monthly gain. The index for mining increased 2% driven by a gain of 3% in oil and gas extraction. The index for mining is up 9.4% from year-earlier level. Capacity utilization for manufacturing advanced to 76.4% in November, its highest reading since May 2008. The operating rate for mines increased 1.5 percentage points to 84.5%.

Per the U.S. Census Bureau report, new orders for U.S. manufactured machinery increased 4.9% in the first 10 months of 2017. According to the Institute for Supply Management (“ISM”), its index of national factory activity slipped to a reading of 58.2 in November from 58.7 in October. Though the index has slipped in October, it continues to signal strengthening manufacturing conditions.

Notably, a reading above 50 indicates improved factory activity. The average PMI for 2017 is currently pegged at 57.4. The November PMI indicates growth for the 102nd consecutive month in the overall economy as well as the 15th straight month of growth in the manufacturing sector. Notably, the manufacturing sector accounts for about 12% of the U.S. economy.

The U.S. GDP expanded at 3.3% in the third quarter of 2017 — the fastest pace of growth in three years. Notably, it is the first time since 2014 that the U.S. economy has witnessed growth of 3% or more for two straight quarters. Per a report by the Commerce Department, consumer spending (about 70% of the economy), advanced 2.3% in the third quarter of 2017.

In November, the United States created 228,000 jobs while the unemployment rate was at 4.1%. Manufacturing added 31,000 jobs in the month, led by machinery which created 8,000 jobs. Since its recent low in November 2016, employment in the manufacturing industry has increased by 189,000.

Strong Construction Sector Remains a Pillar

The construction sector has demonstrated stability through 2017 and witnessed sustainable growth amid various challenges. It goes without saying that President Donald Trump was the biggest factor. Investors were expecting faster growth based on Trump’s assurance of significant tax cuts, higher infrastructure spending and lesser regulations.

So far, it has been a good year for the housing market and the trend is anticipated to continue in 2018, owing to improving economy, modest wage growth, low unemployment levels, positive consumer confidence, a tight supply situation and escalating rent costs. Despite the repeated hikes of the Federal Reserve’s interest rates, optimism surrounding the housing market remains largely unaffected.

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Further, there has been a recovery in the mining sector driven by improvement in commodity prices. Miners are resuming their capital investments which are translating to better order flows for mining machinery companies.

All these positive factors have helped the Zacks machinery-construction/mining Original post

Written By: Zacks Investment Research