4 Stocks to Buy on Steady Rebound in Manufacturing Activity

The U.S. manufacturing sector is trying to rebound after suffering for over a year. New orders for U.S.-manufactured goods made a solid rebound in May, with the manufacturing sector showing signs of recovery in June as inflationary pressures eased.

Although tariff woes remain, the manufacturing sector is poised for a steady recovery on hopes of the Federal Reserve resuming its rate cuts in the coming weeks, which is likely to boost demand.

Given the positive sentiment, it would be ideal to invest in four stocks from the manufacturing sector — Allegion plc ALLE, AptarGroup, Inc. ATR, Broadwind, Inc. BWEN and DXP Enterprises, Inc. DXPE — 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.

Manufacturing Activity Rebounds

The Commerce Department said last week that new orders for U.S.-manufactured goods jumped 8.2% in May from a downwardly revised 3.9% decline a month earlier. Year over year, orders for factory goods jumped 3.2%.

The jump was driven by robust orders for commercial planes, which surged 230.8%. Orders for computer and electronic goods jumped 1.5%, while motor vehicles and parts rose 0.8%. Also, orders for capital goods, excluding aircraft, which is a gauge of the overall business spending, increased 1.7% in May. Shipments of core capital goods rose 0.4%, while non-defense capital goods orders climbed 49.5% in May.

The report came days after the Institute of Supply Management’s (ISM) survey showed that its manufacturing PMI rose to 49 in June from 48.5 in May. It was the fourth straight month that the PMI was below the threshold of 50, which denotes a contraction in the sector. Manufacturing activity accounts for 10.2% of the economy.

However, the rebound in June from the six-month low recorded in May is an indication that the sector is trying to make a rebound. President Donald Trump’s tariffs on imported goods have been weighing on companies. However, the White House has been negotiating with several countries and has already announced trade deals with quite a few of its biggest trading partners. Also, optimism surrounding a rate cut as early as July has been boosting consumer sentiment.

Lower borrowing costs are likely to help the manufacturing sector and the broader market.

4 Industrial Products Stocks With Upside

Allegion plc

Allegion plc is a leading global provider of security products and solutions for business and domestic purposes. ALLE offers an extensive portfolio of mechanical and electronic security products, including doors and door systems, electronic security products, biometric and mobile access control systems, locks, locksets, exit devices, portable locks, and workforce productivity systems and other accessories.

Allegion’s expected earnings growth for the current year is 3.9%. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 60 days. ALLE currently has a Zacks Rank #2.

AptarGroup, Inc.

AptarGroup, Inc. is a global supplier of a broad range of innovative dispensing, sealing, and active packaging solutions for the beauty, personal care, home care, prescription drug, consumer health care, injectables, food and beverage markets. ATR’s main products include dispensing pumps, closures, aerosol valves, and elastomeric primary packaging components.

AptarGroup’s expected earnings growth for the current year is 4.1%. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 60 days. ATR presently has a Zacks Rank #2.

Broadwind

Broadwind, Inc. is a precision manufacturer of structures, equipment & components for clean tech and other specialized applications. BWEN’s most significant presence is within the U.S. wind energy industry, although it has diversified into other industrial markets in order to improve capacity utilization and reduce exposure to uncertainty related to favorable governmental policies currently supporting the U.S. wind energy industry.

Broadwind’s expected earnings growth for the current year is 60%. The Zacks Consensus Estimate for current-year earnings has improved 14.3% over the past 60 days. BWEN currently carries a Zacks Rank #2.

DXP Enterprises

DXP Enterprises, Inc. is a leading product and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico and Dubai. DXPE provides innovative pumping solutions, supply-chain services and maintenance, repair, operating and production services. DXP Enterprises' business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services.

DXP Enterprises' expected earnings growth rate for the current year is 17.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. DXPE has a Zacks Rank #2.

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This article originally published on Zacks Investment Research (zacks.com).

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