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3 Industrial Stocks Set for a Strong Q1 Amid Coronavirus Crisis
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The coronavirus pandemic has taken a massive toll on the U.S Manufacturing sector, which was already reeling under waning global demand and trade-related concerns. Per the Institute for Supply Management’s (ISM) latest report, the U.S Purchasing Managers’ Index (PMI) declined to 49.1% in March, after climbing 50.9% in January, followed by 50.1% in February. Notably, after a continued contraction for five months till December 2019, the PMI reading in January and February had climbed to more than 50. However, this recovery was short-lived as the unfavorable impact of the pandemic as well as the global energy-market volatility resulted in further contraction in the sector. The coronavirus pandemic has affected manufacturing activities leading to supply-chain disruptions, factory closures and lower customer demand.
Of the 18 manufacturing industries, 10 reported growth in March. The New Orders Index shrunk to 42.2% in March from 49.8% in February due to the slump in demand. Production Index came in at 47.7% in March, declining from February’s 50.3%. Employment Index was 43.8% in March, down from 46.9% in February — denoting lowest reading since May 2009. There has been a contraction in the Employment Index in the sector for the eight months in a row.
Moreover, per the Federal Reserve, industrial production declined 5.4% in March due to several factory closures on suspension of operations as well as supply-chain disruptions. Manufacturing output fell 6.3% — the steepest drop since February 1946 — with the largest decline in motor vehicles and parts industries. Capacity utilization for the industrial sector was down 4.3 percentage points to 72.7% in the month and came in 7.1 percentage points lower than its long-run average for 1972-2019.
Per the World Health Organization’s situation report as of Apr 19, 2020, the global number of confirmed coronavirus cases stands at around 2.2 million, with a death toll of 152, 551. The United States is currently the worst affected with 821,860 cases.
Industry Price Performance
Over the past year, the Industrial Products sector has lost 22.1% compared with the S&P 500’s decline of 1.7%.
Sector Projections
Per the latest Earnings Trends report, earnings for the Industrial Products sector are expected to decline 21.2% in first-quarter 2020. In fact, 11 of the 16 Zacks sectors are expected to register earnings declines. Among these, Autos, Aerospace, Energy and Transportation are expected to fare the worst.
In the second quarter, the Industrial Products sector is expected to suffer year-over-year declines of 35.4% in earnings, followed by a drop of 20.7% in the third quarter, and 4.7% in the fourth. Overall for 2020, the sector’s earnings are expected to be down 20.2%. However, the next year holds promise as the sector’s earnings are expected to be up 13.9%.
Meanwhile, the U.S Manufacturing Sector will bear the brunt of the coronavirus pandemic, considering the worldwide factory closures, supply-chain disruptions, labor shortage, weak demand for goods, logistics costs, and volatility in the oil and gas market. In this scenario, the manufacturing companies should focus on sustaining their margins through pricing actions and cost control as well as increased productivity.
Major players in the sector like Caterpillar Inc. (CAT - Free Report) , Deere & Company (DE - Free Report) are expected to report year-over-year declines in their upcoming quarterly releases. Citing the coronavirus-induced uncertainties, these companies have withdrawn their guidance as well.
Stocks That Are Poised to Grow
Despite the overall weakness in the sector, there are some Industrial Products stocks that are poised to beat first-quarter earnings. These companies have a positive Earnings ESP, which combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. These companies also have positive earnings estimates for the current quarter.
Silgan Holdings Inc. (SLGN - Free Report) currently carries a Zacks Rank #2 and has an Earnings ESP of +0.68%. It has a projected earnings growth rate of 6.5% for the first quarter.
Lawson Products, Inc. , a Zacks #3 Ranked stock, has an Earnings ESP of +3.85%. It has an expected earnings growth rate of 8.3% for the first quarter.
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Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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3 Industrial Stocks Set for a Strong Q1 Amid Coronavirus Crisis
The coronavirus pandemic has taken a massive toll on the U.S Manufacturing sector, which was already reeling under waning global demand and trade-related concerns. Per the Institute for Supply Management’s (ISM) latest report, the U.S Purchasing Managers’ Index (PMI) declined to 49.1% in March, after climbing 50.9% in January, followed by 50.1% in February. Notably, after a continued contraction for five months till December 2019, the PMI reading in January and February had climbed to more than 50. However, this recovery was short-lived as the unfavorable impact of the pandemic as well as the global energy-market volatility resulted in further contraction in the sector. The coronavirus pandemic has affected manufacturing activities leading to supply-chain disruptions, factory closures and lower customer demand.
Of the 18 manufacturing industries, 10 reported growth in March. The New Orders Index shrunk to 42.2% in March from 49.8% in February due to the slump in demand. Production Index came in at 47.7% in March, declining from February’s 50.3%. Employment Index was 43.8% in March, down from 46.9% in February — denoting lowest reading since May 2009. There has been a contraction in the Employment Index in the sector for the eight months in a row.
Moreover, per the Federal Reserve, industrial production declined 5.4% in March due to several factory closures on suspension of operations as well as supply-chain disruptions. Manufacturing output fell 6.3% — the steepest drop since February 1946 — with the largest decline in motor vehicles and parts industries. Capacity utilization for the industrial sector was down 4.3 percentage points to 72.7% in the month and came in 7.1 percentage points lower than its long-run average for 1972-2019.
Per the World Health Organization’s situation report as of Apr 19, 2020, the global number of confirmed coronavirus cases stands at around 2.2 million, with a death toll of 152, 551. The United States is currently the worst affected with 821,860 cases.
Industry Price Performance
Over the past year, the Industrial Products sector has lost 22.1% compared with the S&P 500’s decline of 1.7%.
Sector Projections
Per the latest Earnings Trends report, earnings for the Industrial Products sector are expected to decline 21.2% in first-quarter 2020. In fact, 11 of the 16 Zacks sectors are expected to register earnings declines. Among these, Autos, Aerospace, Energy and Transportation are expected to fare the worst.
In the second quarter, the Industrial Products sector is expected to suffer year-over-year declines of 35.4% in earnings, followed by a drop of 20.7% in the third quarter, and 4.7% in the fourth. Overall for 2020, the sector’s earnings are expected to be down 20.2%. However, the next year holds promise as the sector’s earnings are expected to be up 13.9%.
Meanwhile, the U.S Manufacturing Sector will bear the brunt of the coronavirus pandemic, considering the worldwide factory closures, supply-chain disruptions, labor shortage, weak demand for goods, logistics costs, and volatility in the oil and gas market. In this scenario, the manufacturing companies should focus on sustaining their margins through pricing actions and cost control as well as increased productivity.
Major players in the sector like Caterpillar Inc. (CAT - Free Report) , Deere & Company (DE - Free Report) are expected to report year-over-year declines in their upcoming quarterly releases. Citing the coronavirus-induced uncertainties, these companies have withdrawn their guidance as well.
Stocks That Are Poised to Grow
Despite the overall weakness in the sector, there are some Industrial Products stocks that are poised to beat first-quarter earnings. These companies have a positive Earnings ESP, which combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. These companies also have positive earnings estimates for the current quarter.
TPI Composites, Inc. (TPIC - Free Report) has an Earnings ESP of +74.5% and carries a Zacks Rank of 2, currently. It has an estimated earnings growth rate of 20% for the first quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan Holdings Inc. (SLGN - Free Report) currently carries a Zacks Rank #2 and has an Earnings ESP of +0.68%. It has a projected earnings growth rate of 6.5% for the first quarter.
Lawson Products, Inc. , a Zacks #3 Ranked stock, has an Earnings ESP of +3.85%. It has an expected earnings growth rate of 8.3% for the first quarter.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>