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4 Solid Stocks to Buy as Industrial Production Rebounds
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The U.S. manufacturing sector, which has been hit the hardest, owing to price pressures and higher interest rates, is making a steady rebound. Manufacturing output at U.S. factories increased for the second month in a row, indicating that the Federal Reserve could start its easing cycle without pushing the economy into a recession.
The Federal Reserve reported on Jul 17 that overall industrial production as U.S. factories jumped 0.6% in June after rising 0.9% in May. Year over year, industrial production rose 1.6% in June. It increased 4.3% in the second quarter, which is another indication that demand is rebounding as inflation continues to cool.
Moreover, factory output increased 0.4% in June after an upwardly revised 1% in May. June’s rise was double the consensus estimate. Year over year, factory output jumped 1.1%. Most importantly, production at factories increased 3.4% in the second quarter after declining 1.3% in the first quarter.
Manufacturing, which accounts for 10.4% of the economy, has struggled over the past several months as the Federal Reserve’s aggressive monetary campaign to curb 40-year-high inflation started taking its toll on the sectors.
Higher interest rates saw orders drying up, leading to low factory output.
However, inflation has been declining once again after increasing in the first quarter. The labor market is finally showing signs of cooling. The Federal Reserve is also likely to start its interest rate cuts.
Federal Reserve Chairman Jerome Powell said last month that the central bank sees only one rate cut this year, which is sharply lower than the three projected in March.
However, even a single 25 basis point rate cut is positive news, given that several market participants had expected no rate cuts in 2024.
Moreover, the latest FOMC "dot plot" suggests a planned cumulative reduction of 1% interest rate by 2025, potentially taking the Fed funds rate down to 4.1% by the end of next year. Currently, markets are pricing a rate cut in September, with the possibility of another before the year-end if inflation continues to decline sharply.
Our Choices
Given this scenario, it would be ideal to invest in four stocks from the manufacturing sector — Alcoa Corporation (AA - Free Report) , Apogee Enterprises, Inc. (APOG - Free Report) , Brady Corporation (BRC - Free Report) and Cintas Corporation (CTAS - Free Report) — that 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.
Alcoa Corporation Alcoa is a global industry leader in bauxite, alumina and aluminum products.
Alcoa Corporation’s expected earnings growth for the current year is 196.9%. The Zacks Consensus Estimate for current-year earnings has improved 228.4% over the past 60 days. AA currently has a Zacks Rank #2.
Apogee Enterprises, Inc. is a leader in architectural products and services, providing architectural glass, aluminum framing systems and installation services for buildings, as well as value-added glass and acrylic for custom picture framing and displays.
Apogee Enterprises’ expected earnings growth for the current year is 1.9%. The Zacks Consensus Estimate for current-year earnings has improved 7% over the past 60 days. APOG presently sports a Zacks Rank #1.
Brady Corporation is a world leader in complete identification solutions that help companies improve productivity, performance, safety and security. BRC’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software.
Brady’s expected earnings growth for the current year is 13.5%. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the past 60 days. BRC presently carries a Zacks Rank #2.
Cintas Corporation provides specialized services to businesses of all types throughout North America. CTAS also operates in Europe, Asia and Latin America. Cintas Corporation designs, manufactures, implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for diversified businesses.
Cintas Corporation’s expected earnings growth for the current year is 15.2%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 60 days. CTAS presently carries a Zacks Rank #2.
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4 Solid Stocks to Buy as Industrial Production Rebounds
The U.S. manufacturing sector, which has been hit the hardest, owing to price pressures and higher interest rates, is making a steady rebound. Manufacturing output at U.S. factories increased for the second month in a row, indicating that the Federal Reserve could start its easing cycle without pushing the economy into a recession.
The Federal Reserve reported on Jul 17 that overall industrial production as U.S. factories jumped 0.6% in June after rising 0.9% in May. Year over year, industrial production rose 1.6% in June. It increased 4.3% in the second quarter, which is another indication that demand is rebounding as inflation continues to cool.
Moreover, factory output increased 0.4% in June after an upwardly revised 1% in May. June’s rise was double the consensus estimate. Year over year, factory output jumped 1.1%. Most importantly, production at factories increased 3.4% in the second quarter after declining 1.3% in the first quarter.
Manufacturing, which accounts for 10.4% of the economy, has struggled over the past several months as the Federal Reserve’s aggressive monetary campaign to curb 40-year-high inflation started taking its toll on the sectors.
Higher interest rates saw orders drying up, leading to low factory output.
However, inflation has been declining once again after increasing in the first quarter. The labor market is finally showing signs of cooling. The Federal Reserve is also likely to start its interest rate cuts.
Federal Reserve Chairman Jerome Powell said last month that the central bank sees only one rate cut this year, which is sharply lower than the three projected in March.
However, even a single 25 basis point rate cut is positive news, given that several market participants had expected no rate cuts in 2024.
Moreover, the latest FOMC "dot plot" suggests a planned cumulative reduction of 1% interest rate by 2025, potentially taking the Fed funds rate down to 4.1% by the end of next year. Currently, markets are pricing a rate cut in September, with the possibility of another before the year-end if inflation continues to decline sharply.
Our Choices
Given this scenario, it would be ideal to invest in four stocks from the manufacturing sector — Alcoa Corporation (AA - Free Report) , Apogee Enterprises, Inc. (APOG - Free Report) , Brady Corporation (BRC - Free Report) and Cintas Corporation (CTAS - Free Report) — that 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.
Alcoa Corporation Alcoa is a global industry leader in bauxite, alumina and aluminum products.
Alcoa Corporation’s expected earnings growth for the current year is 196.9%. The Zacks Consensus Estimate for current-year earnings has improved 228.4% over the past 60 days. AA currently has a Zacks Rank #2.
Apogee Enterprises, Inc. is a leader in architectural products and services, providing architectural glass, aluminum framing systems and installation services for buildings, as well as value-added glass and acrylic for custom picture framing and displays.
Apogee Enterprises’ expected earnings growth for the current year is 1.9%. The Zacks Consensus Estimate for current-year earnings has improved 7% over the past 60 days. APOG presently sports a Zacks Rank #1.
Brady Corporation is a world leader in complete identification solutions that help companies improve productivity, performance, safety and security. BRC’s products help customers increase safety, security, productivity and performance and include high-performance labels, signs, safety devices, printing systems and software.
Brady’s expected earnings growth for the current year is 13.5%. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the past 60 days. BRC presently carries a Zacks Rank #2.
Cintas Corporation provides specialized services to businesses of all types throughout North America. CTAS also operates in Europe, Asia and Latin America. Cintas Corporation designs, manufactures, implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for diversified businesses.
Cintas Corporation’s expected earnings growth for the current year is 15.2%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the past 60 days. CTAS presently carries a Zacks Rank #2.