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4 Stocks to Buy as Industrial Production Continues to Rise

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·4-min read
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Production level at U.S. factories increased in May, although that pace somewhat slowed owing to the supply-chain crisis and rising prices of raw materials. However, a good sign is that production hasn’t declined and output hasn’t crumbled in the face of increasing price hike pressure.

This proves that the economy is still on solid ground and higher demand is helping to boost production at U.S. factories. Given this scenario, industrial stocks like Titan International, Inc. TWI, Hubbell Incorporated HUBB, Applied Industrial Technologies, Inc. AIT and Helios Technologies, Inc. HLIO are expected to benefit in the near term.

Industrial Production Rises

The Fed said on Jun 17 that industrial production grew 0.2% in May. Although this came in below analysts’ expectation of a rise of 0.4%, production at U.S. factories accelerated in each of the first five months of the year.

Manufacturing output declined marginally by 0.1% for the first time since January. However, it jumped 4.8% on a year-over-year basis, reflecting the pace of growth of the economy since it started reopening earlier last year.

Higher demand for consumer goods is helping boost production, although people have lately started spending more on services. The Fed said that the energy and utilities sectors played a key role in driving May’s industrial production. This saw a 1.9% jump in mining activity, including oil extraction. This indicates that the U.S. oil sector is gradually bouncing back after this year’s surge in oil prices.

Manufacturing Activity Facing Challenges

Manufacturing activity which has been growing despite pressures of higher prices finally slowed down. Although it shrank just 0.1%, there are challenges aplenty. Another reason behind this decline is that spending on services is fast increasing.

Consumers spent more money on goods and less money on services during the peak of the pandemic. This saw demand for commodities soaring, which aided the manufacturing sector's rapid growth.

However, people began spending on services once again as the economy recovered. This has somewhat been responsible for the slowdown in manufacturing output, which is impacting overall industrial production.

However, the sector has been putting up a great show. Pressures of the supply chain and rising input costs have been a concern for months now but the manufacturing sector has still managed to handle the challenges.

Higher crude oil prices, which have driven gasoline costs to all-time highs, are aiding output at mines. Also, higher demand for air-conditioning and cooling owing to unexpectedly warm weather helped utilities output. Utilities output increased 1% in May month over month.

Overall capacity utilization for the industrial sector increased to 79% in May.

Our Choices

Given this scenario, it would be ideal to invest in the four stocks we have picked below. All 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.

Titan International, Inc. is a leading global manufacturer of off-highway wheels, tires, assemblies, and undercarriage products. TWI globally produces a broad range of products to meet the specifications of original equipment manufacturers and aftermarket customers in the agricultural, earthmoving/construction, and consumer markets.

Titan International’s expected earnings growth for the current year is 84.7%. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the past 60 days. TWI sports a Zacks Rank #1.

Hubbell Incorporated is engaged in the design, manufacture and sale of electrical and electronic products to commercial, industrial, utility and telecommunications markets. HUBB’s products include plugs, receptacles, connectors, lighting fixtures, high-voltage test and measurement equipment, and voice and data signal processing components.

Hubbell Incorporated’s expected earnings growth for the current year is 15.9%. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the past 60 days. HUBB carries a Zacks Rank #2.

Applied Industrial Technologies, Inc. is a distributor of value-added industrial products — including engineered fluid power components, bearings, specialty flow control solutions, power transmission products and miscellaneous industrial supplies. AIT’s products are mainly sold to original equipment manufacturers and maintenance, repair, and operations customers in Australia, North America, Singapore and New Zealand.

Applied Industrial Technologies expected earnings growth for the current year is 31.7%. The Zacks Consensus Estimate for current-year earnings has improved 5.9% over the past 60 days. AIT has a Zacks Rank #1.

Helios Technologies, Inc. is an industrial technology company. HLIO develops and manufactures hydraulic and electronic control solutions. Helios Technologies’ operating subsidiaries include Sun Hydraulics, Enovation Controls and Faster Group.

Helios Technologies’ expected earnings growth for the current year is 7.3%. The Zacks Consensus Estimate for next-year earnings has improved 1.3% over the past 60 days. HLIO has a Zacks Rank #2.


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