Despite registering increase for the fourth month in a row, the U.S industrial production growth slowed down in August. The industrial output was much lower compared with the pre-pandemic level. Per the latest report published by the Federal Reserve on Sep 15, industrial production improved 0.4% month-over-month in August, following strong growth of 6.1% and 3.5% in June and July, respectively. However, the metric came below the consensus estimate of 1% growth.

Notably, the manufacturing sector remained well in its recovery phase, with output rising 1% in August 2020. However, the gains across most of its categories have slowed down over the past couple of months. Outputs in mining sector recorded a decline of 2.5% in August in contrast to growth of 1.4% in July. Also, the utilities output declined 0.4% against growth of 3.8% recorded in the previous month.

With the gradual reopening of major global economies, certain industries from the industrial sector is expected to continue benefitting from recovery in manufacturing activities, gradual improvement in domestic and international orders for industrial products apart from the growing e-commerce business.

Our Top Picks

Amid such a scenario, we suggest considering four industrial stocks from different industries under the ambit of the Zacks Industrial Products sector that have the potential for strong growth. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy) and are well positioned to capitalize on the opportunities in the sector.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere Company DE: The Moline, IL-based company is currently the world’s largest producer of agricultural equipment. Year to date, shares of the Zacks Rank #1 company have rallied 24.5% compared with the Zacks Manufacturing – Farm Equipment industry’s rise of 21.7%. The Zacks Consensus Estimate for fiscal 2020 (ending October 2020) earnings has been revised 19.3% upward over the past 60 days, while the same for fiscal 2021 (ending October 2021) has been raised 17.3%.

Deere is well poised for long-term growth, backed by steady investments in new products with advanced technologies. Also, the company’s efforts to expand in precision agriculture will drive growth. In addition, growing U.S. farm income bodes well for agricultural equipment demand.

Astec Industries, Inc. ASTE: Based in Chattanooga, TN, Astec Industries is a major manufacturer and marketer of road building equipment. Also, it is engaged in manufacturing equipment and components unrelated to road construction, including equipment for the mining, quarrying, construction and demolition industries; industrial heat transfer equipment; and commercial and industrial burners. Year to date, the Zacks Rank #1 stock has rallied 24.1% compared with the Zacks Manufacturing – Construction and Mining industry’s growth of 2.3%. In the past 60 days, the Zacks Consensus Estimate for its 2020 earnings has moved 50.4% upward, while the same for 2021 has increased 48%.

It stands to benefit from focus on growing part sales volume and international business, as well as launching new products. Also, its restructuring actions and diligent cost-reduction initiatives bode well.

ABB Ltd ABB: Based in Zurich, Switzerland, ABB is a leading technology company. The Zacks Rank #2 stock has rallied 8.6% compared with the Zacks Manufacturing – Electronics industry’s rise of 1% year to date. In the past 60 days, the Zacks Consensus Estimate for its 2020 earnings has been revised 11.1% upward, while the same for 2021 has moved up 3.8%.

The company is poised to benefit from strength in its end markets, including distribution utilities, semiconductors, logistics, e-mobility, rail, data centers and mining & mineral. Also, its organic growth investments and diligent cost-cutting initiatives are likely to prove beneficial over time.

Cintas Corporation CTAS Based in Cincinnati, OH, Cintas provides entrance mats, restroom supplies, promotional products and first aid and safety products for diversified businesses. Year to date, shares of the Zacks Rank #2 company have rallied 22% compared with the Zacks Uniform and Related industry’s rise of 18.8%. The Zacks Consensus Estimate for its fiscal 2021 (ending May 2021) earnings has been revised 16.5% upward over the past 60 days, while the same for fiscal 2022 (ending May 2022) has been hiked 5.4%.

In the quarters ahead, the company is likely to benefit from solid product offerings, investment in technology, buyouts and impressive cash position.

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