5 Manufacturing Stocks to Buy Despite Weak January Data

The U.S. manufacturing sector contracted for the 15th consecutive month in January, following 28 months of growth. The Institute of Supply Management (ISM) reported that the reading for U.S. manufacturing PMI (purchasing managers’ index) came in at 49.1 in January, compared with 47.1 the previous month. The consensus estimate was 47.6.

Notably, any reading below 50 indicates a contraction in manufacturing activities. However, January’s PMI improved to a good extent. The New Orders Index moved into expansion territory at 52.5, 5.5% higher than 47 recorded in December. The Production Index reading of 50.4 reflects a 0.5% increase from December’s figure of 49.9.

While supply-chain disruptions persist, especially related to the availability of electronic components, the situation has improved, as evident from the ISM report’s Supplier Deliveries Index. The metric for January was 49.1, which was 2.1% higher than December’s metric of 47. Any reading of above 50 indicates slower deliveries, which is typical as the economy improves and customer demand increases.

Our Top Picks

We have narrowed our search to five manufacturing stocks with strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 60 days. Moreover, these companies are regular dividend payers. Finally, each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The chart below shows the price performance of our five picks in the past three months.

Image Source: Zacks Investment Research

Eaton Corp. plc’s ETN ongoing research and development are allowing it to develop new products for providing efficient power management solutions. ETN will benefit from improving end-market conditions, increasing demand from the new AI data center and contributions from its organic assets.

ETN is expanding via acquisitions and its rising backlog shows demand for its products. ETN’s strategy to manufacture in the zone of sale has helped it cut costs. Our model projects total revenues to improve in the 2024 to 2025 time period.

Eaton has an expected revenue and earnings growth rate of 6.7% and 10.4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last seven days. ETN has a current dividend yield of 1.27%.

IDEX Corp. IEX has benefited from the strength of the Fire & Safety/Diversified Products (FSD) unit. Strong momentum in the fire and rescue businesses is a key catalyst behind the FSD segment’s growth. Acquired assets are boosting IEX’s top line. IEX expects buyout synergies to boost sales by 2% in the fourth quarter and 4% in 2023.

IDEX has an expected revenue and earnings growth rate of 3.3% and 1.8%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days. IEX has a current dividend yield of 1.16%.

Parker-Hannifin Corp. PH is benefiting from higher demand from distributors and end users across the oil and gas, material handling, cars and light trucks, and farm and agriculture markets in the North American region within the Diversified Industrial segment.

Higher volume across all businesses, especially the commercial and military aftermarket businesses bolstered PH’s Aerospace Systems unit. Synergies from the Meggitt buyout are also aiding PH. Benefits from the Win strategy are driving PH’s margins.

Parker-Hannifin has an expected revenue and earnings growth rate of 4.4% and 9.8%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last seven days. PH has a current dividend yield of 1.16%.

Crane Co. CR manufactures and sells engineered industrial products in the Americas, Europe, the Middle East, Asia, and Australia. CR has three segments: Aerospace & Electronics, Process Flow Technologies, and Engineered Materials.

Crane has an expected revenue and earnings growth rate of 7.9% and 10%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the last seven days. CR has a current dividend yield of 0.57%.

Hubbell Inc. HUBB 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 has an expected revenue and earnings growth rate of 6.9% and 7.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last seven days. HUBB has a current dividend yield of 1.38%.

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