The U.S. manufacturing sector has been making a steady rebound despite inflationary pressures. Robust demand for manufactured goods has been giving the sector a boost after months of struggle.
This has primarily been a year of comeback for the manufacturing sector. After a solid first quarter, the sector showed signs of further growth in the second quarter.
Given the positive sentiment, it would be ideal to invest in four stocks from the manufacturing sector — MSC Industrial Direct Co., Inc. MSM, Applied Industrial Technologies, Inc. AIT, Hubbell Incorporated HUBB and Trimble Inc. TRMB — that we have detailed below.
Industrial Production Grows
U.S. industrial production grew 0.1% in June after rising at a similar pace in the previous month, the Federal Reserve reported on Friday. Year over year, industrial production increased 1.1% in June. Moreover, industrial production grew 4% in the second quarter.
Manufacturing output remained unchanged in June after increasing 0.1% in the previous month. Year over year, manufacturing output jumped 1.1% in June. In the second quarter, manufacturing output jumped a solid 4.7%, the fastest pace in five years.
The jump in the second quarter follows a 1.4% jump in the first quarter.
The solid performance by the sector comes as companies continue to spend heavily on AI, driving manufacturing activity. Production of computers and peripherals jumped a solid 9.2% in June from the year-ago levels and 7.2% in the second quarter.
Production of motor vehicles and parts rose 0.7% sequentially in June. Output of semiconductors and related electronic components climbed 0.5% month over month and 10.2% from the year-ago levels.
Mining production edged up 0.4% in June after increasing 1.1% in the prior month.
Big tech companies have been investing aggressively in AI, which has been boosting demand. This has been driving the domestic manufacturing output. The Federal Reserve has been contemplating raising interest rates after inflation jumped, following the U.S.-Iran war that broke out in late February.
However, inflation eased substantially in June after hostilities between the two warring nations came to a halt. The consumer price index (CPI) fell 0.4% sequentially in June, after increasing 0.5% in May. Year over year, CPI fell to 3.5% in June. The decline follows a reading of 4.2% in May. The monthly decline in CPI was the biggest since April 2020.
The Federal Reserve could not adopt a wait-and-watch policy and hold back its plans for rate cuts if inflation continues to ease in the near term. This could help the manufacturing sector and the broader economy.
4 Industrial Products Stocks With Upside
MSC Industrial Direct
MSC Industrial Direct Co., Inc. is one of the premier distributors of Metalworking and maintenance, repair and operations (“MRO”) supplies to industrial customers throughout the United States. MSM distributes approximately 590,000 industrial products from approximately 3,000 suppliers to approximately 350,000 customers.
MSC Industrial Direct’s expected earnings growth for the current year is 18.9%. The Zacks Consensus Estimate for next year's earnings has improved 2.5% over the past 60 days. Currently, HLIO has a Zacks Rank #1.
Applied Industrial Technologies
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 MRO customers in Australia, North America, Singapore and New Zealand.
Applied Industrial Technologies’ expected earnings growth for the current year is 5.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. AIT currently has a Zacks Rank #2.
Hubbell Incorporated
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 9.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days. HUBB currently carries a Zacks Rank #2.
Trimble
Trimble Inc. is a leading technology solutions provider that addresses the needs of building, civil and infrastructure construction, geospatial, survey and mapping, natural resources, utilities, transportation, and government end-markets. Asset owners, general and specialty contractors, engineers and designers, surveyors, energy and utility companies, trucking companies and drivers, as well as state, federal, and municipal governments are TRMB’s primary customers.
Trimble’s expected earnings growth for the current year is 12.6%. The Zacks Consensus Estimate for next year’s earnings has improved 0.3% over the past 60 days. TRMB has a Zacks Rank #2 at present.
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Trimble Inc. (TRMB): Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report
MSC Industrial Direct Company, Inc. (MSM): Free Stock Analysis Report
Hubbell Inc (HUBB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).