Caterpillar At All Time High, Spotlight On Industrial Stocks

 

Industrial Stocks Well Poised for Growth

 

Commodities have rebounded, boosting demand for heavy mining equipment which bodes well for companies like Caterpillar. Further, construction activity has shown considerable improvement in North America as well as Asia Pacific, including China.

 

The company’s stellar run and growth prospects have brought back the spotlight on industrial stocks. Caterpillar’s performance instills optimism as it has long been considered as a bellwether of the global manufacturing industry and the world economy owing to the size and scope of operations. The company falls under the industrial products sector. This sector has been outperforming the S&P 500 market in recent times. In the past year, the sector has gained around 27.0%, above the S&P 500’s growth of 18.2%.

 

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We believe that implementation of Trump administration’s growth policies, especially the proposed $1 trillion spending on infrastructure improvement, will be a boon for industrial stocks. Further, manufacturing is likely to get a boost this year from $1.5 trillion tax cut approved by the Republican-controlled U.S. Congress. The overhaul of the tax code resulted in the slashing of the corporate income tax rate to 21% from 35%.

 

Notably, the Industrial Products sector put up 19.6% growth in earnings in the third quarter of 2017 and 22.1% growth in earnings is projected for the fourth quarter of 2017. The sector is expected to deliver double-digit growth in all the quarters of 2018. Per our projections, the sector will log growth of 14% in the first quarter of 2018, followed by 13.4%, 10% and 13.1% in the second, third and fourth quarters, respectively. (Read more: Q4 Earnings Season Gets Underway)

 

Consequently, we suggest you to stay invested in the sector to reap the benefits of healthy prospects ahead. Apart from Caterpillar, which is good investment currently given its Zacks Rank #2 and factors mentioned above, we suggest few other stocks in the sector.

 

To zero in on stocks that are winning currently and have the potential to gain further, we have opted for one of the relatively new investment techniques, by betting on stocks near a 52-week high. The 52-week investment strategy relies on the new investment mantra, “buy high and sell higher.”

 

Other Stocks That Fit the Bill

Given their positive earnings revisions, we believe these four industrial stocks, all of which are near their 52-week highs, will continue moving north for now. The stocks carry a Zacks Rank #1 (Strong Buy) or 2, and have a VGM Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here. Notably, our research shows that stocks with an impressive VGM Score of A or B when combined with a Zacks Rank 1 or 2, offer the best upside potential.

 

Deere & Company DE manufactures and distributes agriculture and turf, along with construction and forestry equipment worldwide. The company has a Zacks Rank #1 and VGM Score of A. The long-term expected earnings growth rate for Deere is 8.20%. It has outpaced the Zacks Consensus Estimate in the trailing four quarters, generating a positive average earnings surprise of 19.5%.

 

The estimate for fiscal 2017 climbed 15% in the past 60 days and moved north 22% for fiscal 2018. The stock has gained 53% in the past year. The stock closed at $161.11, trading near its 52-week high of $161.68.

 

Kennametal Inc. KMT is a manufacturer, marketer and distributor of high-speed metal cutting tools, tooling systems and wear-resistant parts. The stock has a Zacks Rank #2 and VGM Score of B. The company has a long-term earnings growth rate of 8.33%. The earnings estimates for the company have gone up 14% for fiscal 2018 and 9% for fiscal 2019, in the past 90 days.

 

The company also has an impressive earnings surprise history, beating the Zacks Consensus Estimate in the trailing four quarters, with an average positive earnings surprise of 20.56%. Its shares have surged 59% in the past year. The stock closed at $50.29 yesterday, near its 52-week high of $51.07.

 

Atlas Copco AB ATLKY is a world leading provider of industrial productivity solutions. It has a Zacks Rank #2 and a VGM Score of B. The company has a long-term earnings growth rate of 12.50%. It has a positive average earnings surprise of 9.89% in the trailing four quarters. The Zacks Consensus Estimate for earnings has gone up 2% for 2017 and 3% for 2018, in the past 60 days. The stock has gained 45% over the past year to close at $45.79 yesterday, close to its 52-week high of $45.85.

 

Donaldson Company, Inc. DCI manufactures and sells filtration systems and replacement parts worldwide. It has a Zacks Rank #2 and VGM Score of B. The company has a long-term earnings growth rate of 11.08%. The company has a positive average earnings surprise of 5.23% in the trailing four quarters. The earnings estimate for fiscal 2018 has moved up 6% while that of fiscal 2018 has advanced 7% in the past 60 days. Its shares have surged 45% in the past year. The stock closed at $49.81 yesterday, near its 52-week high of $50.10.

 

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Kennametal Inc. (KMT) : Free Stock Analysis Report

 

Caterpillar, Inc. (CAT) : Free Stock Analysis Report

 

Deere & Company (DE) : Free Stock Analysis Report

 

Atlas Copco AB (ATLKY) : Free Stock Analysis Report

 

Donaldson Company, Inc. (DCI) : Free Stock Analysis Report

 

To read this article on Zacks.com click here.

 

Zacks Investment Research

Source : https://finance.yahoo.com/news/caterpillar-time-high-spotlight-industrial-221110466.html

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