4 Solid Stocks to Buy on Rebounding Industrial Production

Production at U.S. factories has started showing signs of rebounding although it remains less than the year-ago levels. Industrial production rose an impressive 0.5% in February after declining 1.1% in January, and surpassed analysts' expectations of a rise of 0.3%, the Federal Reserve said on Mar 15.

Production at U.S. factories had increased 0.1% in December after a difficult 2023 that saw manufacturing output shrinking. Manufacturing output in February also rebounded, increasing 0.8% after declining 1.1% in January.

Although production at factories fell 0.7% year over year, the month-over-month gain indicates a steady recovery.

Capacity utilization for the industrial sector remained unchanged at 78.3% in February. However, capacity utilization for manufacturing jumped 0.6% in February.

The manufacturing sector, which accounts for 10.3% of the economy, suffered throughout 2023 as demand shrank amid growing price pressures. The Federal Reserve adopted a strict monetary tightening policy, increasing interest rates by 525 basis points, to curb multi-decade high inflation.

The Federal Reserve's stance saw inflation declining sharply over the past year. This saw demand rebounding once again, driving production at U.S. factories.

Investors are now expecting multiple rate cuts this year, which is likely to start at the end of the first half. Lower interest rates will ease borrowing costs, which is likely to further boost the manufacturing sector.

Our Choices

Given this scenario, it would be ideal to invest in four stocks — Emerson Electric Co. EMR, Eaton Corporation PLC ETN, Applied Industrial Technologies, Inc. AIT and Luxfer Holdings PLC LXFR— that we have detailed below. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns.

Emerson Electric Co. is a diversified global engineering and technology company, with presence in Europe, the Americas, and Asia, Middle East & Africa. EMR offers a wide range of products and services to customers in consumer, commercial and industrial markets.

Emerson Electric's expected earnings growth for next year is 21.9%. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the last 60 days. EMR currently has 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 12.4%. The Zacks Consensus Estimate for current-year earnings has improved 2.4% over the past 60 days. ETN presently carries a Zacks Rank #2.

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 7.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 60 days. AIT currently has a Zacks Rank #2.

Luxfer Holdings PLC is a materials technology company specializing in the design, manufacture and supply of high-performance materials, components and gas cylinders. LXFR has two divisions, Elektron and Gas Cylinders.

Luxfer Holdings PLC's expected earnings growth for the current year is 21.3%. The Zacks Consensus Estimate for current-year earnings has improved 111.4% over the past 60 days. LXFR currently has a Zacks Rank #2.

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