Industrials topped the Zacks sector heatmap, ending the one and half month lead of the Auto, Tires and Trucks sector. The upward movement, from the sixth position to the top, can be attributed to the fact that the majority of the industries within this sector performed well in the past few months and look poised for growth in the coming quarters.
Year to date, the sector has gained 5.18%. It is expected to improve further as the year progresses. Currently, the Office Supplies industry is among the top 1% of the total 265 Zacks categorized industries, while Machinery-Electrical Utilities and Thermal Products are among the top 2%. Tools & Related Products is among the top 4% while Wire and Cable Products industry is ranked in the top 5%.
We believe that a lot of domestic and international drivers, including growth policies of U.S. President Donald Trump, policies of the Federal Reserve, energy price volatility, forex woes and economic unrest in some foreign nations are influencing market sentiments in the U.S. Trump administration’s plan to invest significantly in the country’s infrastructure, if implemented, will boost growth of the industrial sector.
Also, other economic indicators are pointing toward a healthy business environment in the industrial sector. Industrial production grew 0.1% year over year in January and 0.4% in February driven by improvements in manufacturing and mining outputs, partially offset by a decline in utilities outputs. Also, new export orders for U.S.-manufactured machinery have risen 2.9% in the first two months of 2017.
We believe that government policies encouraging better trade relations, increase in infrastructural investments, job creation and high consumer-end demand will support growth of the industrial sector. As per the Earnings Outlook report dated Apr 6, first quarter 2017 earnings and revenues for the sector are projected to grow 5.8% and 7.3%, respectively.
Best Stocks within the Industrial Space
Here we have picked five stocks from the industrial sector based on their favorable ranking, growth projections and impressive returns.
Casella Waste Systems, Inc. (CWST – Free Report) : This Zacks Rank #1 (Strong Buy) stock has yielded roughly 11.6% return year to date. Last quarter, the company posted a positive earnings surprise of 400% and has a four-quarter average positive earnings surprise of 165.21%.
The company’s prospects look bright as evident from a 23.7% increase in earnings estimates for 2017 over the last 60 days. The current estimate represents year-over-year growth of 147.37%.
Broadwind Energy, Inc. (BWEN – Free Report) : Year to date, shares of this Zacks Rank #2 (Buy) industrial company have gained 94.56%. Also, its earnings estimates for 2017 have been revised upward in the last 60 days, representing a year-over-year growth of 188.89%. The company has a VGM Score of A.
Norsk Hydro ASA (NHYDY – Free Report) : The stock currently carries a Zacks Rank #2 and has a VGM Score of A. Sentiments are in favor of the company, as reflected in the positive estimate revisions for 2017 in the last 60 days. Also, the projected earnings growth rate for the year is 131.82%.
In the next 3-5 years, the company’s earnings are predicted to grow 28.4%, way higher than the industry growth rate of 13.8%. Also, the stock seems undervalued compared with the industry with respective P/E multiples of 11.47x and 43.20x.
Atkore International Group Inc. (ATKR – Free Report) : This Zacks Rank #2 stock has yielded roughly 7.86% return year to date. Last quarter, the company’s earnings of 26 cents beat the Zacks Consensus Estimate by 8.3%. The company’s VGM score is A.
Earnings estimates for fiscal 2017 were revised upward in the last 60 days. Also, the 2017 estimate represents year-over-year growth of 71.28%, higher than the industry’s projected growth rate of 33.3%.
SPX Flow, Inc. (FLOW – Free Report) : Year to date, shares of this Zacks Rank #2 industrial company have gained 10.36%. Also, its earnings estimates for 2017 have been revised upward in the last 60 days. The current estimate indicates year-over-year growth of 37.24%. The company’s VGM score is A.
In the next 3-5 years, the company’s earnings are predicted to grow 19%, way higher than the industry’s growth rate of 15.3%.
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