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5 Solid Stocks to Buy on a Solid Jump in Factory Orders

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The struggle continues for the U.S. manufacturing sector, but the picture is finally looking brighter with the sector making a solid effort to stage a rebound. Cooling inflation is once again driving demand that has seen orders at U.S. factories picking up lately.

New orders for U.S.-made factory goods increased 2.6% in November, surpassing economists’ expectations of a rise of 2.1%, the Census Bureau said on Jan 5. The rebound came after a 3.4% decline in October.

Year over year, factory orders increased 0.7% in November, driven by a solid 80.1% jump in orders for civilian aircraft after it fell 43.9% in the month earlier. Orders for computers and electronic products, machinery, electrical equipment, appliances and components, and primary metals also increased in November.

Shipments of manufactured goods rose 0.5% in November. Also, orders for non-defense capital goods, excluding aircraft, jumped 0.8%.

The manufacturing sector accounts for 10.3% of the economy. Although inflation declined sharply over the past year, the sector’s rebound has been slow. The Federal Reserve increased interest rates by 525 basis points since March 2022 to curb inflation, which took its benchmark policy rate to the range of 5.25-5.50%.

This weighed heavily on the manufacturing sector as higher borrowing costs saw demand drying up.

Things, however, are finally looking brighter as demand is increasing and easing inflation has seen the Fed keeping interest rates unchanged in its last three policy meetings. This saw durable goods orders also increasing a solid 5.4% in November on a month-over-month basis.

The Federal Reserve is now planning to cut interest rates by 25 basis points at least thrice this year, which definitely bodes well for the manufacturing sector.

Our Choices

Given this scenario, it would be ideal to invest in five stocks such as EMCORE Corporation (EMKR - Free Report) , Ferrari N.V. (RACE - Free Report) , RADCOM Ltd. (RDCM - Free Report) , A. O. Smith Corporation (AOS - Free Report) and Graham Corporation (GHM - Free Report) , which we have detailed below. 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.

EMCORE Corporation offers a broad portfolio of compound semiconductor-based products for the broadband, fiber optic, satellite and terrestrial solar power markets. EMKR’s Fiber Optic segment offers optical components, subsystems and systems for high-speed data and telecommunications networks, cable television and fiber-to-the-premises.

EMCORE’s expected earnings growth for the current year is 90.9%. The Zacks Consensus Estimate for current-year earnings has improved 57.1% over the last 60 days. EMKR presently carries a Zacks Rank #2.

Ferrari N.V. is engaged in designing, manufacturing and selling sports cars. RACE’s products include sports car models consists of 458 Italia, 488 GTB, 458 Spider, 488 Spider, F12 Berlinetta, 458 Speciale and 458 Speciale A as well as two grand tourer (GT) cars: California T and FF.

Ferrari’s expected earnings growth for the current year is 31.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 60 days. RACE presently has a Zacks Rank #2.

RADCOM Ltd. designs, manufactures, markets and supports innovative, high-performance internetworking test and analysis equipment for data communications networks. RDCM’s products are used in the development and manufacturing of network equipment, the installation of networks, and the ongoing maintenance of operational networks.

RADCOM’s expected earnings growth for the current year is 200%. The Zacks Consensus Estimate for current-year earnings has improved 46.2% over the last 60 days. RDCM presently has a Zacks Rank #2.

A. O. Smith Corporation is one of the leading manufacturers of commercial and residential water heating equipment, and water treatment products of the world. AOS specializes in offering innovative and energy-efficient solutions and products, which are developed and sold on a global platform.

A. O. Smith’s expected earnings growth for the current year is 20.4%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the last 60 days. AOS currently carries a Zacks Rank #2.

Graham Corporation designs and builds vacuum and heat transfer equipment for process industries and energy markets worldwide. GHM’s products include steam jet ejector vacuum systems and liquid ring vacuum pumps, surface condensers, Heliflows, water heaters and various types of heat exchangers.

Graham Corporation’s expected earnings growth for the current year is 933.3%. The Zacks Consensus Estimate for current-year earnings has improved 106.7% over the past 60 days. GHM presently sports a Zacks Rank #1.

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