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Manufacturing Sector Steadying for a 2024 Recovery: 5 Winners
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Manufacturing activity slowed over the past year in the United States as the nation grappled with inflation and the Federal Reserve maintained an aggressive interest rate hike policy to fight against it. However, the sector put up a great fight against the odds as demand remained high.
Now, easing inflation and high expectations of rate cuts in 2024 are likely to bolster conditions for higher manufacturing activity and output. One of the immediate signs of this was a slow but steady jump in manufacturing activity.
Production at U.S. factories rose 0.2% month over month in November, the Federal Reserve said last week. Also, manufacturing output increased 0.3% in November from a month earlier. This comes after a 0.8% decline in production at U.S. factories in October.
Also, capacity utilization inched up 0.1% point to 78.8% in November.
Last month’s jump was driven by the output of motor vehicles as strikes at major factories ended. The manufacturing sector’s mixed fortune continues amid growing interest rates that somewhat softened demand.
However, the broader economy has been expanding despite a slowdown in the manufacturing sector, which accounts for 10.2% of the economy. The U.S. GDP grew at an annual rate of 5.2% in the third quarter, which proves the underlying strength of the economy.
The Federal Reserve kept its benchmark policy rates unchanged in its December FOMC meeting in the range of 5.25-5.50% after hiking interest rates by 525 points. Investors have been optimistic lately as the Fed finally gave a clearer picture of its plans with interest rates.
Federal Reserve Chairman Jerome Powell said that he believes that interest rates may have reached the peak or near it. He added that the central bank will closely monitor inflation data so as not to keep rates higher for a longer period.
Also, a majority of the Federal Reserve believes that three rate cuts of 25 basis points each could be possible in 2024. Lower interest rates definitely bode well for the manufacturing sector.
A. O. Smith Corporation is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS specializes in offering innovative and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith’s expected earnings growth for next year is 6.1%. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the last 60 days. AOS presently carries a Zacks Rank #2.
Emerson Electric Co. is a diversified global engineering and technology company with a presence in Europe, the Americas, and Asia, the Middle East & Africa. EMR offers a wide range of products and services to customers in consumer, commercial and industrial markets.
Emerson Electric’s expected earnings growth for next year is 7.6%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the last 60 days. EMR currently sports a Zacks Rank #1.
Graham Corporation designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters and various types of heat exchangers.
Graham Corporation’s expected earnings growth for next year is 3.2%. The Zacks Consensus Estimate for current-year earnings has improved 106.7% over the past 60 days. GHM presently sports a Zacks Rank #1.
Flowserve Corporation is a leading manufacturer and aftermarket service provider of comprehensive flow control systems, globally. FLS develops and manufactures precision-engineered flow control equipment, such as pumps, valves and seals, for critical service applications that require high reliability. Flowserve uses its manufacturing platform to offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting.
Flowserve Corporation’s expected earnings growth for next year is 24.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. FLS presently has a Zacks Rank #2.
Alamo Group Inc. is a leader in the design, manufacture, distribution and service of high quality-equipment for infrastructure maintenance, agriculture and other applications. ALG’s include truck and tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements and related after-market parts and services.
Alamo Group’s expected earnings growth for next year is 13.6%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 60 days. ALG presently carries a Zacks Rank #2.
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Manufacturing Sector Steadying for a 2024 Recovery: 5 Winners
Manufacturing activity slowed over the past year in the United States as the nation grappled with inflation and the Federal Reserve maintained an aggressive interest rate hike policy to fight against it. However, the sector put up a great fight against the odds as demand remained high.
Now, easing inflation and high expectations of rate cuts in 2024 are likely to bolster conditions for higher manufacturing activity and output. One of the immediate signs of this was a slow but steady jump in manufacturing activity.
Production at U.S. factories rose 0.2% month over month in November, the Federal Reserve said last week. Also, manufacturing output increased 0.3% in November from a month earlier. This comes after a 0.8% decline in production at U.S. factories in October.
Also, capacity utilization inched up 0.1% point to 78.8% in November.
Last month’s jump was driven by the output of motor vehicles as strikes at major factories ended. The manufacturing sector’s mixed fortune continues amid growing interest rates that somewhat softened demand.
However, the broader economy has been expanding despite a slowdown in the manufacturing sector, which accounts for 10.2% of the economy. The U.S. GDP grew at an annual rate of 5.2% in the third quarter, which proves the underlying strength of the economy.
The Federal Reserve kept its benchmark policy rates unchanged in its December FOMC meeting in the range of 5.25-5.50% after hiking interest rates by 525 points. Investors have been optimistic lately as the Fed finally gave a clearer picture of its plans with interest rates.
Federal Reserve Chairman Jerome Powell said that he believes that interest rates may have reached the peak or near it. He added that the central bank will closely monitor inflation data so as not to keep rates higher for a longer period.
Also, a majority of the Federal Reserve believes that three rate cuts of 25 basis points each could be possible in 2024. Lower interest rates definitely bode well for the manufacturing sector.
Our Choices
Given this scenario, it would be ideal to invest in five stocks such as A. O. Smith Corporation (AOS - Free Report) , Emerson Electric Co. (EMR - Free Report) , Graham Corporation (GHM - Free Report) , Flowserve Corporation (FLS - Free Report) and Alamo Group Inc. (ALG - Free Report) ,which we have detailed below. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
A. O. Smith Corporation is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS specializes in offering innovative and energy-efficient solutions and products, which are developed and sold on a global platform.
A. O. Smith’s expected earnings growth for next year is 6.1%. The Zacks Consensus Estimate for current-year earnings has improved 4.4% over the last 60 days. AOS presently carries a Zacks Rank #2.
Emerson Electric Co. is a diversified global engineering and technology company with a presence in Europe, the Americas, and Asia, the Middle East & Africa. EMR offers a wide range of products and services to customers in consumer, commercial and industrial markets.
Emerson Electric’s expected earnings growth for next year is 7.6%. The Zacks Consensus Estimate for current-year earnings has improved 6.4% over the last 60 days. EMR currently sports a Zacks Rank #1.
Graham Corporation designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters and various types of heat exchangers.
Graham Corporation’s expected earnings growth for next year is 3.2%. The Zacks Consensus Estimate for current-year earnings has improved 106.7% over the past 60 days. GHM presently sports a Zacks Rank #1.
Flowserve Corporation is a leading manufacturer and aftermarket service provider of comprehensive flow control systems, globally. FLS develops and manufactures precision-engineered flow control equipment, such as pumps, valves and seals, for critical service applications that require high reliability. Flowserve uses its manufacturing platform to offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting.
Flowserve Corporation’s expected earnings growth for next year is 24.1%. The Zacks Consensus Estimate for current-year earnings has improved 2.5% over the past 60 days. FLS presently has a Zacks Rank #2.
Alamo Group Inc. is a leader in the design, manufacture, distribution and service of high quality-equipment for infrastructure maintenance, agriculture and other applications. ALG’s include truck and tractor-mounted mowing and other vegetation maintenance equipment, street sweepers, snow removal equipment, excavators, vacuum trucks, other industrial equipment, agricultural implements and related after-market parts and services.
Alamo Group’s expected earnings growth for next year is 13.6%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 60 days. ALG presently carries a Zacks Rank #2.