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Durable Goods Orders Bounce Back in February: 5 Top Picks
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On Mar 23, the U.S. Commerce Department published durable goods orders data for the month of February. The report showed strong business spending at US factories for expensive durable items such as machinery and vehicles.
Positive durable goods orders data came as a huge relief following the retail sales decline in February, which roused fears of an impending recession. Notably, the data was also an improvement from the contraction experienced in January.
Fundamentals of the economy remain solid. Recently, the Fed revised 2018 GDP projection to 2.7% from earlier estimate of 2.5%. Investor confidence remains high buoyed by a robust labor market, low inflationary expectations and anticipation of sustained earnings momentum. At this stage, it will make good sense to invest in those stocks from the industrials arena which possess strong fundamentals.
Robust Durable Goods Data
The Department of Commerce’s data showed that new orders for durable goods increased 3.1% in February after two straight monthly declines. The figure outpaced the consensus estimate of 1.7%. This strong showing can be attributed to a jump of 7.1% in transportation equipment orders. Orders for non-defense capital goods excluding aircraft grew 1.8%, reflecting biggest gain in five months.
Core capital goods shipments increased 1.4%. This was the largest increase experienced since December 2016. This metric is used for calculating equipment spending which is part of the government’s GDP measurement. A jump in industrial production supported by strong demand for machineries utilized mainly in factory production clearly indicates that the likelihood of a near-term recession is uncalled for.
Trump’s Tariffs and Trade War Remain Concerns
Earlier this month, Trump imposed a 25% tariff on steel imports and 10% tariff on aluminium import to shore up these struggling industries. Many industry researchers have stated that imposition of tariffs by the United States will prompt affected countries to retaliate by imposing tariffs on U.S. products, paving the way for a full blown global trade war.
Fear of trade war has shaken the U.S. stock markets in the last week. Over the last five days, Dow 30 was down 5.7%, S&P 500 declined 2.1% and Nasdaq Composite dropped 2.4%. Consequently, S&P Industrial Select Sector SPDR (XLI) also declined 5.01% in the last five days.
However, spending on capital goods surged in February supported by solid business confidence, improvement in international economic growth and a weakening dollar. A cheap dollar makes U.S. manufacturing sector competitive boosting the demand for home-made goods. Notably, manufacturing sector accounts for nearly 12% of the U.S. GDP. These are the factors which are likely to outweigh trade related concerns in the weeks ahead.
Our Top Picks
Rising Durable Goods Orders are normally associated with stronger economic activity. At present, the U.S. economy is firmly placed on growth trajectory barring minor corrections. Additionally, Trump administration’s decision to cut tax rate from 35% to 21% has been a shot in the arm for the United States.
Further, the government has taken a decision to spend a whopping $1.5 trillion on several infrastructure projects over a period of 10 years. This decision is likely to create about 25 million new jobs over a decade, which will spur higher consumer spending. This in turn will fuel long-term economic growth.
Considering these positives, investment on durable-goods producing stocks with high growth potential will be a wise decision. We narrowed down our choice to five stocks each of which carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows how our five picks outperformed the S&P 500 benchmark in the last three months.
Dover Corp. (DOV - Free Report) is a diversified global manufacturer. The company delivers innovative equipment and components, specialty systems and support services.
Dover has expected earnings growth of 45.4% for current year. The Zacks Consensus Estimate for the current year has improved by 27.1% over the last 60 days.
DXP Enterprises Inc. (DXPE - Free Report) is a leading products and service distributor that adds value and total cost savings solutions to industrial customers.
DXP Enterprises has expected earnings growth of 32.6% for current year. The Zacks Consensus Estimate for the current year has improved by 6.5% over the last 60 days.
Textainer Group Holdings Ltd. is the world’s largest lessor of intermodal containers with a total fleet of more than 1.3 million containers, representing over 2,000,000 TEU.
Textainer Group has expected earnings growth of 241.5% for current year. The Zacks Consensus Estimate for the current year has improved by 7.7% over the last 60 days.
Deere & Co. (DE - Free Report) manufactures agricultural, construction, and forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment.
Deere has expected earnings growth of 43% for current year. The Zacks Consensus Estimate for the current year has improved by 17.2% over the last 60 days.
Rexnord Corp. is an industrial company comprised of two platforms. These are Process & Motion Control and Water Management.
Rexnord has expected earnings growth of 2.3% for current year. The Zacks Consensus Estimate for the current year has improved by 7.1% over the last 60 days.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Image: Bigstock
Durable Goods Orders Bounce Back in February: 5 Top Picks
On Mar 23, the U.S. Commerce Department published durable goods orders data for the month of February. The report showed strong business spending at US factories for expensive durable items such as machinery and vehicles.
Positive durable goods orders data came as a huge relief following the retail sales decline in February, which roused fears of an impending recession. Notably, the data was also an improvement from the contraction experienced in January.
Fundamentals of the economy remain solid. Recently, the Fed revised 2018 GDP projection to 2.7% from earlier estimate of 2.5%. Investor confidence remains high buoyed by a robust labor market, low inflationary expectations and anticipation of sustained earnings momentum. At this stage, it will make good sense to invest in those stocks from the industrials arena which possess strong fundamentals.
Robust Durable Goods Data
The Department of Commerce’s data showed that new orders for durable goods increased 3.1% in February after two straight monthly declines. The figure outpaced the consensus estimate of 1.7%. This strong showing can be attributed to a jump of 7.1% in transportation equipment orders. Orders for non-defense capital goods excluding aircraft grew 1.8%, reflecting biggest gain in five months.
Core capital goods shipments increased 1.4%. This was the largest increase experienced since December 2016. This metric is used for calculating equipment spending which is part of the government’s GDP measurement. A jump in industrial production supported by strong demand for machineries utilized mainly in factory production clearly indicates that the likelihood of a near-term recession is uncalled for.
Trump’s Tariffs and Trade War Remain Concerns
Earlier this month, Trump imposed a 25% tariff on steel imports and 10% tariff on aluminium import to shore up these struggling industries. Many industry researchers have stated that imposition of tariffs by the United States will prompt affected countries to retaliate by imposing tariffs on U.S. products, paving the way for a full blown global trade war.
Fear of trade war has shaken the U.S. stock markets in the last week. Over the last five days, Dow 30 was down 5.7%, S&P 500 declined 2.1% and Nasdaq Composite dropped 2.4%. Consequently, S&P Industrial Select Sector SPDR (XLI) also declined 5.01% in the last five days.
However, spending on capital goods surged in February supported by solid business confidence, improvement in international economic growth and a weakening dollar. A cheap dollar makes U.S. manufacturing sector competitive boosting the demand for home-made goods. Notably, manufacturing sector accounts for nearly 12% of the U.S. GDP. These are the factors which are likely to outweigh trade related concerns in the weeks ahead.
Our Top Picks
Rising Durable Goods Orders are normally associated with stronger economic activity. At present, the U.S. economy is firmly placed on growth trajectory barring minor corrections. Additionally, Trump administration’s decision to cut tax rate from 35% to 21% has been a shot in the arm for the United States.
Further, the government has taken a decision to spend a whopping $1.5 trillion on several infrastructure projects over a period of 10 years. This decision is likely to create about 25 million new jobs over a decade, which will spur higher consumer spending. This in turn will fuel long-term economic growth.
Considering these positives, investment on durable-goods producing stocks with high growth potential will be a wise decision. We narrowed down our choice to five stocks each of which carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows how our five picks outperformed the S&P 500 benchmark in the last three months.
Dover Corp. (DOV - Free Report) is a diversified global manufacturer. The company delivers innovative equipment and components, specialty systems and support services.
Dover has expected earnings growth of 45.4% for current year. The Zacks Consensus Estimate for the current year has improved by 27.1% over the last 60 days.
DXP Enterprises Inc. (DXPE - Free Report) is a leading products and service distributor that adds value and total cost savings solutions to industrial customers.
DXP Enterprises has expected earnings growth of 32.6% for current year. The Zacks Consensus Estimate for the current year has improved by 6.5% over the last 60 days.
Textainer Group Holdings Ltd. is the world’s largest lessor of intermodal containers with a total fleet of more than 1.3 million containers, representing over 2,000,000 TEU.
Textainer Group has expected earnings growth of 241.5% for current year. The Zacks Consensus Estimate for the current year has improved by 7.7% over the last 60 days.
Deere & Co. (DE - Free Report) manufactures agricultural, construction, and forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment.
Deere has expected earnings growth of 43% for current year. The Zacks Consensus Estimate for the current year has improved by 17.2% over the last 60 days.
Rexnord Corp. is an industrial company comprised of two platforms. These are Process & Motion Control and Water Management.
Rexnord has expected earnings growth of 2.3% for current year. The Zacks Consensus Estimate for the current year has improved by 7.1% over the last 60 days.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>