U.S. Manufacturing Flying High Under Trump: 4 Top Picks

U.S. manufacturing sector is witnessing resurgence under the Trump administration, shrugging off its long phase of weak productivity and sluggish growth. In fact, U.S. manufacturers are increasing capital spending and hiring on the back of massive tax overhaul, deregulatory measures, strong domestic & global economy, weak dollar and robust business sentiment.

Under Trump’s presidency, manufacturing sector is observing strong business spending at factories for expensive durable items such as machinery and vehicles. This trend is likely to be fueled further owing to a massive infrastructure overhaul proposed by the government. At this stage, investment in manufacturing stocks with favorable Zacks Rank will be lucrative.

Strong Hiring in Manufacturing Sector

According to the Labor Department of Labor manufacturing added 22,000 jobs in March which increased 12-months job addition to 232,000. In the first three months of this year, the sector added 74,000 jobs on average per month, which is 36.6% of the average monthly job addition of the U.S. labor market.

The Department of Labor also revealed that the manufacturing sector added 293,000 jobs since November 2016, when Trump was elected as the President.

ISM Manufacturing Reading for March Remains Robust

The ISM index for national factory activity was recorded at 59.3 in March slightly below 60.8 in February, which marked the highest level in 14 years. However, a reading of more than 50 indicates that the sector is expanding.

Additionally, the New Orders Index came in at 60 or above for the 11th straight month and the customers’ Inventories Index at its lowest level since July 2011. The Backlog of Orders Index continued a 14-month expansion with its highest reading since May 2004. Of the 18 manufacturing industries, 17 reported growth in March. This clearly indicates that the U.S. heavy industrial sector is forging ahead with a strong momentum.

Massive Tax Overhaul, Proposed Increase in Infrastructure Spending

Newly introduced tax-reforms and deregulation policies are likely to act as a major catalyst.  The corporate tax rate was lowered from 35% to 21%. President Trump has also promised removing 75% of the regulations during his tenure. Trump’s business-friendly policies ought to help the private employers.

Moreover, the government has taken a decision to spend a whopping $1.5 trillion on several infrastructure projects like constructing new roads, bridges, highways, railways and waterways across the country over a period of 10 years. This decision is likely to create about 25 million new jobs over a decade. This project will generate significant demand for manufacturing sector.

Our Top Picks

Strong domestic and global economic conditions and favorable government policies will pave the way for long-term growth of the manufacturing sector. Considering these positives, investing in manufacturing stocks with high growth potential will be a lucrative. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We narrowed down our choice to four stocks each of which carries a Zacks Rank #1 (Strong Buy) and a good VGM score of either A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Graph below depicts price performance of our four picks in the last six months.

 

Zebra Technologies Corp. ZBRA builds tracking technology and solutions generating actionable information and insight, giving companies unprecedented visibility into their businesses converting physical things a digital voice. The stock has a VGM Score of A.

Zebra Technologies has expected earnings growth of 31.9% for current year. The Zacks Consensus Estimate for the current year has improved by 18% over the last 60 days.

Global Brass and Copper Holdings Inc. BRSS is a converter, fabricator, distributor and processor of copper and brass products primarily in North America. The stock has a VGM Score of B.

Global Brass and Copper has expected earnings growth of 17.3% for current year. The Zacks Consensus Estimate for the current year has improved by 16.8% over the last 60 days.

Stoneridge Inc. SRI is an independent designer and manufacturer of highly engineered electrical and electronic components, modules and systems for the automotive, medium and heavy-duty truck, and agricultural vehicle markets. The stock has a VGM Score of B.

Stoneridge has expected earnings growth of 25.5% for current year. The Zacks Consensus Estimate for the current year has improved by 18.7% over the last 60 days.

Century Aluminum Co. CENX is a primary aluminum producer, supplying aluminum to diverse downstream manufacturing customers in the aerospace, automotive and energy industries. The stock has a VGM Score of B.

Century Aluminum has expected earnings growth of 313.9% for current year. The Zacks Consensus Estimate for the current year has improved by 16.4% over the last 60 days.

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