3 Stocks To Bank On November's Strong Manufacturing Output

Industrial production in the country took the road north in November, marking the largest monthly rise in two years. Manufacturing output increased last month after production in September and October were held down by a strike in the auto industry. In addition, an almost finalized phase one trade agreement between the United States and China promises to push industrial production ahead.

Manufacturing Output Rebounds in November

According to a Federal Reserve report dated Dec 17, industrial production rebounded 1.1% in November from October. A major reason for this was the end of a strike at General Motors Company (NYSE:GM).

The almost six-week long strike by about 46,000 General Motors workers ended after the United Auto Workers union formulated a new four-year labor contract with the U.S. automaker in late October.

The conclusion of this strike led to a bounce back in the output of motor vehicles and parts last month, which in turn, pushed November’s manufacturing output. Therefore, excluding the production of motor vehicles and parts, overall industrial production last month increased 0.5%.

With overall industrial output increasing, capacity utilization, which is a measure of how completely companies are using their resources, also reached 77.3% in November after rising 0.7 percentage point from the month before.

“Nearly Complete” Trade Deal to Push Stocks

The manufacturing sector, which represents about 11% of the American economy, has been beaten down so far by the 17-month long U.S.-China trade war. Needless to say, the sector is at the forefront of gains now that a phase one trade deal between the two countries is almost through.

On Dec 13, the United States and China announced a phase one agreement that eases some U.S. tariffs (enacted in September) in exchange for more purchase of American farm goods by the Asian country. The United States said that China had agreed to raise imports of goods in 2020 and 2021 by a total of $200 billion more than the total in 2017, which comprises about $40 billion of American farm goods.

The deal also canceled a set of U.S. tariffs on Chinese goods that were scheduled to be effective from Dec 15. The deal also comprises China’s action to protect American intellectual property and assurances of not manipulating its currency.

The two countries are expected to finalize the phase one deal in the first week of January.

Manufacturing Stocks Could Keep Up Gains

We have chosen three stocks from the manufacturing sector that have solid potential for growth. We have used the Zacks Stock Screener to narrow down on stocks with prospects, sporting a Zacks Rank #1 (Strong Buy) or 2 (Buy) along with a Growth Scoreof B.

Crawford United Corporation (OTC:CRAWA) engages in aerospace components, commercial air handling and industrial hose businesses. The Zacks Consensus Estimate for the company’s current-year earnings has risen 2.9% over the past 60 days. Crawford carries a Zacks Rank #1. Shares of the company have risen 90.5%, outperforming the Zacks Manufacturing – General Industrial industry’s rise of 34.2% on a year-to-date basis. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant Company (NYSE:TNC) is a designer, manufacturer and marketer of floor cleaning equipment. The Zacks Consensus Estimate for the company’s current-year earnings has risen 5.2% over the past 60 days. Tennant Company carries a Zacks Rank #1. Shares of the company have gained 50.2%, thus outperforming the Zacks Manufacturing – General Industrial industry’s gain of 34.2% on a year-to-date basis.

DXP Enterprises, Inc. (NASDAQ:DXPE) is a distributor of maintenance, repair and operating products, equipment and services to energy and industrial customers. The Zacks Consensus Estimate for the company’s current-year earnings has risen 3.3% over the past 60 days. DXP Enterprises carries a Zacks Rank #2. Shares of the company have gained 49.4%, thus surpassing the Zacks Manufacturing – General Industrial industry’s gain of 34.2% on a year-to-date basis.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

Start Your Access to the New Zacks Top 10 Stocks >>