4 Industrial Stocks to Buy on a Jump in Durable Goods Orders

The manufacturing sector has been struggling due to higher borrowing costs. However, the sector is showing signs of recovery as inflation cooled in April, easing price pressures.

The Commerce Department reported that orders for U.S. manufactured capital goods, made to last more than three years, rebounded in April. Also, shipments of those goods increased. Durable goods orders increased $1.9 billion, or 0.7%, to $284.1 billion in April, beating analysts’ expectations of a decline of 0.8%.

Excluding transportation, orders for durable goods rose 0.4%. Non-defense capital goods orders excluding aircraft, increased 0.3% month over month in April.

Core capital goods orders increased a solid 1.2% year over year in April, while shipments grew 0.4% after declining 0.3% in March.

The manufacturing sector, which accounts for 10.4% of the economy, has seen business spending shrinking over the past year due to the Federal Reserve’s aggressive monetary tightening policy that saw it hike interest rates by 525 basis points.

Higher borrowing costs have been putting the brakes on business spending on equipment. Inflation declined sharply last year but resumed its climb in the first quarter. However, inflation finally showed signs of cooling again in April.

This has raised hopes that the Federal Reserve, which was delaying its planned interest rate cuts this year could soon implement it.

Lower borrowing costs bode well for the manufacturing sector as it will boost business spending on equipment.

Our Choices

Given this scenario, it would be ideal to invest in four industrial stocks such as Applied Industrial Technologies, Inc. AIT, Eaton Corporation plc ETN, Lakeland Industries, Inc. LAKE and AZZ Inc. AZZ. 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.

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 maintenance, repair, and operations customers in Australia, North America, Singapore and New Zealand.

Applied Industrial Technologies’ expected earnings growth for the current year is 9.9%. The Zacks Consensus Estimate for current-year earnings has improved 2.1% over the past 60 days. AIT currently carries a Zacks Rank #2.

Eaton Corporation plc is a diversified power management company and a global technology leader in electrical components and systems. ETN sells products in more than 175 countries and has 92,000 employees.

Eaton Corporation’s expected earnings growth for the current year is 15.8%. The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the past 60 days. ETN presently carries a Zacks Rank #2.

Lakeland Industries, Inc. has five divisions and three wholly-owned subsidiaries. One large division of LAKE manufactures disposable/limited-use garments. The four smaller divisions are Chemland, which manufactures suits for use by toxic waste clean-up teams; Fireland Fyrepel Products, a manufacturer of fire and heat protective apparel and protective systems for personnel; Highland, which manufactures specialty safety and industrial work gloves and Uniland, which manufactures industrial and medical woven cloth garments.

Lakeland Industries’ expected earnings growth for the current year is 63.6%. The Zacks Consensus Estimate for current-year earnings has improved 38.9% over the past 60 days. LAKE presently sports a Zacks Rank #1.

AZZ Inc. is a global provider of metal coating services, welding solutions, specialty electrical equipment and highly engineered services to the markets of power generation, transmission, distribution and industrial in protecting metal and electrical systems used to build and enhance the world’s infrastructure.

AZZ Inc.’s expected earnings growth for the current year is 7.1%. The Zacks Consensus Estimate for current-year earnings has improved 5% over the past 60 days. AZZ, at present, carries a Zacks Rank #2.

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