4 Industrials Stocks To Beat Earnings Blues

Last year wasn’t particularly kind for industrial stocks. Buffeted by multiple headwinds, the sector struggled before faring better toward the end of the year. Now, a new survey indicates that the sector may already be slipping into a recessionary phase even as clouds gather over broader markets. Naysayers are already predicting that gloomy days are ahead for the economy as a whole.

However, there is significant evidence that the economy will continue to chug along at a steady pace. Additionally, specific subsectors of the broader industrials sector are performing well and are expected to continue gaining going forward. This is why it makes good sense to pick select industrial stocks, especially those poised to beat estimates in their upcoming earnings releases. 

Dismal Indicators

Most of the traditional economic indicators for industrials have been showing signs of sectoral weakness. The ISM manufacturing index declined from November’s 48.6% to 48.2% in December, the lowest reading since the last month of 2008’s recession. Construction spending declined 0.4% in November. Additionally, industrial production declined for the third straight month in December.

Now, fresh figures from the Corbin Perception Industrial Sentiment Survey show that 70% of the respondents are negatively disposed toward the prospects of the industrials sector. China’s economic slowdown, a rising dollar and weakening commodities are some of the concerns being raised. This is a survey of 39 analysts and investors who together handle nearly $2.3 trillion worth of assets across the world.

Is There an Upside?

But it isn’t that the sector is bereft of any positives. Aerospace, auto and construction are some of the industries which have registered strong performances last year. Only recently, the International Air Transport Association (IATA) raised its forecast for profitability of airlines.

Additionally, non-farm payroll data released in January showed strong gains for construction in December. Among recently released indicators, existing home sales numbers have been encouraging. Most importantly, Markit Flash PMI for January came in at 52.7, which indicates expansion. Also, this figure is higher than December’s final reading of 51.2.

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