5 Stocks to Buy as U.S. Manufacturing Expands for Nine Straight Months

The ISM Manufacturing PMI was 54.5% in September, marking a ninth consecutive month of expansion; new orders rose to 55.3% and backlogs increased 4.6 percentage points to 56.4%. The article highlights five industrial stocks with upward-revised earnings estimates, while noting that the Prices Index remained elevated at 77.9% amid tariffs, supply constraints and geopolitical cost pressures. The sector is projected to grow earnings 13.1% in Q3 2026 and 11.6% for 2026; EnerSys also secured a revised DOE grant of about $150 million for a planned 1 GWh defense-focused battery campus.

Analysis

The setup is more favorable for companies monetizing factory activity than for a blanket industrials trade. Lean customer inventories and rising orders can translate into replenishment, but elevated input prices create a key split: distributors such as GWW and MSM may defend margins through pricing and mix, while manufacturers face a timing risk if steel, copper and components reprice faster than customer contracts. Watch gross-margin commentary, not just revenue growth.

LECO offers comparatively direct exposure to welding automation and manufacturing investment; incremental automation demand could support mix even if overall factory growth moderates. PKOH has greater operating sensitivity to the cycle, but its strategic review and multiple end markets make execution and segment-level backlog more important than the PMI alone. ENS is not a clean near-term manufacturing-recovery proxy: its defense-cell project is a multiyear option, while data-center and defense demand are the nearer-term drivers. Do not capitalize the planned campus as current earnings.

Contrarian point: revisions and six-month outperformance already embed improving activity. A PMI above 50 is not proof of accelerating earnings, particularly with input-cost pressure and production growth easing. In the next 1–3 months, order conversion, pricing realization and margin updates matter more than the headline index. Over 6–18 months, sustained capex and automation investment could favor LECO; a renewed inventory rebuild would broaden the benefit. A reversal in orders or weaker pricing pass-through would expose the group to both estimate cuts and multiple compression.

Key Decisions for Investors

• Avoid adding broad industrial exposure solely on the PMI signal. Reassess after the next earnings updates, focusing on order conversion, backlog quality and gross/operating-margin trends.
• Prefer a staged long in LECO on market weakness as a selective automation/capex expression; reconsider if organic growth or automation demand weakens versus management’s outlook, or margin progress stalls.
• Treat PKOH as a higher-beta, execution-dependent position rather than a core sector proxy. Verify segment backlog, cash conversion and the Southwest Steel Processing review outcome before increasing exposure.
• Keep ENS’s planned lithium campus on a catalyst watchlist, not in near-term earnings assumptions. Track construction timing, grant conditions and customer commitments; nearer-term thesis requires continued data-center and defense demand.
• Falsification signal for the cyclical thesis: manufacturing new orders/backlogs fall toward contraction, or companies report input-cost inflation outpacing realized pricing and weakening margins. If that occurs, reduce cyclical exposure rather than assuming low inventories will guarantee a rebound.