Manufacturing activity in the euro area has remained sluggish since the spread of the new coronavirus. International trade tensions and a moribund auto industry hampered economic growth in the euro area. Unfortunately, manufacturing production contracted even more rapidly last month as demand continued to decline.
The HCOB Eurozone Manufacturing PMI compiled by S&P Global was 46.1 in March, down from 46.5 in February. The index fell below the 50 mark, indicating a contraction in factory production. The index marked the 12th straight month of decline in factory production in March.
However, manufacturing activity has rebounded in the United States, dispelling fears of an impending recession. The Institute for Supply Management's manufacturing PMI rose to 50.3% in March from 47.8% in February. In this way, business confidence in the manufacturing industry is on an improving trend.
While production recovered, the pipeline of new orders remained strong. Employment at manufacturing and sales outlets also improved significantly. So what's driving the increase in U.S. manufacturing activity? Don't forget: persistent inflation and shifting spending trends away from manufactured goods and toward services such as travel, dining out, and other recreational activities. The manufacturing industry suffered for quite some time.
However, a change in the Federal Reserve's monetary policy stance led to a full-fledged recovery in the manufacturing side of the economy. Fed Chairman Jerome Powell was not surprised by the recent spike in the PCE index, but the central bank has committed to lowering rates later this year. The Fed's dovish stance lowers borrowing costs and has the hidden benefit of boosting demand for manufacturers.
As such, industrial stocks in particular are poised to rise on the back of a key indicator: U.S. factory output is recovering. This will require investing in stocks such as: H&E Equipment Service Co., Ltd.. (heath – free report), AZZ Co., Ltd.. (AZZ – free report), Luxfur Holdings PLC (LXFR – free report) and Powell Industries, Inc.. (paul – free report).
These stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). The search was also narrowed down by his VGM score of A or B. Here, V stands for value, G stands for growth, and M stands for momentum, and the score is a weighted combination of these three metrics. Such scores allow you to eliminate the downside of stocks and pick winners. You can see the complete list of today's Zacks #1 Rank stocks here.
H&E equipment services is one of the largest full-service equipment service companies. HEES currently has a Zacks Rank #1 and a VGM Score of A. The Zacks Consensus Estimate for current-year earnings has moved 3.1% over the past 60 days. HEES' expected profit growth rate for this fiscal year is 5%.
AZZ is a global provider of metal coating services. AZZ currently carries a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for next year's earnings has moved 0.9% over the past 60 days. AZZ's expected profit growth rate for this fiscal year is 23.6%.
Luxfur We design, manufacture, and supply high-performance materials. LXFR currently has a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for current-year earnings has increased 111.4% over the past 60 days. LXFR's expected profit growth rate for this fiscal year is 21.3%.
Powell Industries This is a metal processing factory that supports petrochemical equipment. POWL currently carries a Zacks Rank #2 and a VGM Score of A. The Zacks Consensus Estimate for next year's earnings has moved 3.7% over the past 60 days. POWL's expected profit growth rate for this fiscal year is 83%.
Shares of H&E Equipment Services, AZZ, Luxfer, and Powell Industries have increased 21.2%, 33.7%, 14%, and 51.6%, respectively, since the beginning of the year.
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