Five US Manufacturing Stocks That Could Outperform In 2014

According to the recent quarterly economic forecast by Manufacturers Alliance for Productivity and Innovation (MAPI), U.S. manufacturing production is likely to outpace the overall U.S. economic growth in 2014 on the back of rise in consumer spending combined with increase in business investment. MAPI predicts that U.S. manufacturing will increase 3.2% in 2014 and 4.0% in 2015, outperforming GDP growth, which MAPI estimates will be 2.8% in 2014 and 3.2% in 2015. Manufacturing production grew 2.3% during 2013.

MAPI forecasts that high-tech production (computers and electronic products) will grow 6.8% in 2014 after growing 4.4% during 2013, while non-high-tech or traditional manufacturing will grow 2.9% in 2014 following the 2% growth during 2013. Further, MAPI forecasts that total exports are anticipated to grow 5.1% in 2014, while imports will experience growth of 3.3% in 2014. Moreover, overall unemployment is predicted to average 6.4% in 2014 and drop to 5.8% in 2015.

The following five stocks have registered strong growth in sales and EPS during the trailing 12 months. These stocks are also currently trading at relatively low forward Price-to-Earning (P/E) and Price to Book (P/B) multiples in comparison to industry average and provide a Return on Equity (ROE) of more than 13%. All estimates have been sourced from Bloomberg.

Alliant Techsystems Inc. (NYSE: ATK): The developer and supplier of advanced weapon and space systems including military ammunition has seen its share price nearly double during the past year. The company recently raised its fiscal 2014 sales and EPS guidance and increased its quarterly cash dividend by 23% to 32 cents a share. ATK’s Return on Equity is currently 20%. Its sales are estimated to grow by 9% in 2014 with a 17.9% expected increase in EPS.

Shiloh Industries, Inc. (NASDAQ: SHLO): The company provides lightweighting and noise, vibration and harshness (NVH) solutions to automotive, commercial vehicle and other industrial markets. Shiloh reported a 26% improvement in its first quarter 2014 sales revenue along with a 93% surge in EPS. The company’s Return on Equity is currently 18.1%. Its sales are estimated to grow by 13.5% in 2014 with a 27% expected increase in EPS. 

AZZ Incorporated (NYSE: AZZ): The company manufactures specialty electrical equipment and components for the global power generation, power transmission, and distribution markets and also provides hot dip galvanizing services to the steel fabrication industry across the United States. Its third-quarter revenue rose 32.1% while its EPS increased by 20%. AZZ’s Return on Equity is currently 17.8%. Its sales are estimated to grow by 33.8%in 2014 with a 4.4% expected increase in EPS.

TriMas Corporation (NASDAQ: TRS): TriMas manufactures trailer products, recreational accessories, packaging systems, energy products and industrial specialty products for the commercial, manufacturing, and consumer markets. The company recorded a 9.6% increase in sales during 2013 along with a 12% rise in EPS. TriMas’ Return on Equity is currently 17.7%. Its sales are estimated to grow by 5.8% in 2014 with a 7.2% expected increase in EPS.

Sonoco (NYSE: SON): The company manufactures industrial and consumer packaging solutions that include flexible packaging, high density film products, and folding cartons. In 2013, Sonoco achieved a 1.3% increase in its net sales as well as a nearly 5% rise in base earnings. SON’s Return on Equity is currently 13.7%. Its sales are estimated to grow by 2.7% in 2014 with an 8.5% expected increase in EPS.

These five companies stand out from the pack in that they have the highest on Return on Equity (ROE) of their group, which gives a snapshot of much profit a company is generating for each dollar that shareholders have invested in the business. Warren Buffett, for example, places a great importance on Return on Equity since it allows a company to grow its business without having to borrow excessively or without the owners of the business having to invest more capital.