The U.S. manufacturing sector has struggled over the past three years but appears to be making a solid rebound. Although high prices and a shrinking labor market remain major concerns, demand has been on the rise lately, boosting manufacturing activity.
ISM Manufacturing PMI (purchasing managers’ index) expanded in March for the third straight month. The index for March came in at 52.7%, higher than January’s metric of 52.4% and above the Zacks Consensus Estimate of 52.3%.
In January, the ISM Manufacturing Index showed that the PMI reading jumped to 52.6% from 47.9% in December. This marked the strongest reading since 2022, with the sector growing for the first time in a year.
The Zacks-defined Manufacturing – General Industrial industry is currently in the top 34% of the Zacks Industry Rank. In the past year, the industry has provided 28% returns, while its year-to-date return is 10.9%. Since it is ranked in the top half of the Zacks Ranked Industries, we expect it to outperform the market over the next three to six months.
Given the positive sentiment, it would be ideal to invest in five stocks from the manufacturing industry with a favorable Zacks Rank. These are: DXP Enterprises Inc. DXPE, Graham Corp. GHM, Nordson Corp. NDSN, Gates Industrial Corp. plc GTES, and Flowserve Corp. FLS.
These stocks have provided double-digit returns year to date. Each of our picks currently carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
DXP Enterprises Inc.
Zacks Rank #1 DXP Enterprises is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico and Dubai. DXPE operates in three segments: Service Centers, Supply Chain Services, and Innovative Pumping Solutions.
DXPE provides innovative pumping solutions, supply-chain services and maintenance, repair, operating and production (MROP) services that emphasize and utilize its vast product knowledge and technical expertise in rotating equipment, bearings, power transmission, metal working, industrial supplies and safety products and services.
DXPE's breadth of MROP products and service solutions allows it to be flexible and customer-driven, creating competitive advantages for our customers. DXPE's business segments include Service Centers, Innovative Pumping Solutions and Supply Chain Services.
DXP Enterprises has an expected revenue and earnings growth rate of 10.1% and 14.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 17.2% in the last 60 days.
Graham Corp.
Zacks Rank #1 Graham designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters, and various types of heat exchangers. GHM markets to chemical, petrochemical, petroleum refining, and electric power generating industries, including cogeneration and geothermal plants.
Graham has an expected revenue and earnings growth rate of 17.4% and 45.4%, respectively, for the current year (ending March 2027). The Zacks Consensus Estimate for current-year earnings has improved 5.9% in the last 90 days.
Nordson Corp.
Zacks Rank #2 Nordson is benefiting from steady demand in medical components and engineered fluid solutions. NDSN’s Advanced Technology Solutions segment is being lifted by strength across semiconductor-related electronics dispense and x-ray system product lines.
NDSN’s Industrial Precision Solutions segment has returned to modest organic growth as demand for polymer processing and automotive applications has stabilized. Management raised its full-year sales and adjusted earnings guidance after a record last quarter, supported by higher backlog and broad order momentum. Shareholder returns also remain supportive.
Nordson has an expected revenue and earnings growth rate of 5.1% and 11.4%, respectively, for the current year (ending October 2026). The Zacks Consensus Estimate for the current year’s earnings has improved 0.5% over the last 30 days.
Gates Industrial Corp. plc
Zacks Rank #2 Gates Industrial is a manufacturer of engineered power transmission and fluid power solutions. GTES operates through two segments: Power Transmission and Fluid Power.
GTES offers a portfolio of products to diverse replacement channel customers and to original equipment manufacturers as specified components. GTES serves the agriculture, construction, manufacturing, energy and consumer applications industries. GTES operates primarily in the Americas, Europe, the Middle East & Africa, Greater China and East Asia & India.
Gates Industrial has an expected revenue and earnings growth rate of 3% and 5.3%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.6% over the last 30 days.
Flowserve Corp.
Zacks Rank #2 Flowserve is gaining from strength across its segments. The Flowserve Pump Division segment is particularly strong, driven by solid momentum in the aftermarket business. The increase in bookings across the energy and general industries’ end markets is aiding the Flow Control Division’s performance.
Strength across end markets, along with FLS’ Diversify, Decarbonize and Digitize (3D) strategy, is driving its booking levels. Benefits from acquired assets are driving FLS’ performance of late. Its measures to reward its shareholders are encouraging.
Flowserve has an expected revenue and earnings growth rate of 6.3% and 12.9%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 2.5% over the last 30 days.
Quantum Computing Stocks Set To Soar
Artificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.
Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power , you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.
Access the Report Free Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Flowserve Corporation (FLS): Free Stock Analysis Report
Nordson Corporation (NDSN): Free Stock Analysis Report
DXP Enterprises, Inc. (DXPE): Free Stock Analysis Report
Graham Corporation (GHM): Free Stock Analysis Report
Gates Industrial Corporation PLC (GTES): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).