Analysts at big banks like The Goldman Sachs Group (NYSE: GS) often employ "top-down analysis," which starts with understanding the economy's fundamentals and selective industries. You can gauge what goes on by following the leading indicators, such as the ISM manufacturing PMI index, or simpler metrics, such as employment figures. The past month gave out significant data in this area to point you in the right direction.

You'll see why stocks like Westinghouse Air Brake Technologies Corporation (NYSE: WAB), GATX Corporation (NYSE: GATX) and even Trinity Industries Inc. (NYSE: TRN) will shine in this next quarter because of the same reasons that traders at the banks look for. 

Before you get in the weeds of things, keep in mind that executives in the industry stated that demand is "at a higher level than in the previous two years" when responding to the PMI survey.

Manufacturing makes a comeback

But more than one month of PMI data is needed to get traders excited and invest in the sector, so looking at the past three months can give you a better picture of the trend. For both the services and manufacturing PMIs, the transportation equipment and warehousing industry has pushed three months of consecutive expansion.

The following quarterly earnings announcements may favor stocks in this industry, riding on the tailwind of economic activity. The question is, will this trend stay in motion, or was it just a fluke?

According to the employment situation report for the past month, the transportation industry added as many as 45,200 jobs in a month, whereas the entire economy added 353,000, at 12.8%.

Goldman analysts expressed their expectations for a breakout in the manufacturing sector this year, which you can read over in their 2024 macro outlook report. As manufacturing activity makes a comeback, this sector — and stocks — have increasingly good odds in their favor.

Examine the outlook

To do this, you need to spread out the industry names and determine which ones are worth looking at. 

The two main components for achieving this are the expected earnings per share growth rates set by analysts and how much the markets are willing to pay for those future earnings today, also known as the forward price-to-earnings ratio.

The industry should grow at 10.9% for the next 12 months and trade at an average of 11.4x forward P/E. These are your two benchmarks from which you can spot the outliers.

Westinghouse stock trades at a 57% premium to the sector with its 18x forward P/E, and its analysts expect EPS growth of 12.6%, justifying this premium. Additionally, analysts at Bank of America Corporation (NYSE: BAC) have recently boosted their price targets to $150 a share for a 13% upside!

With GATX, the trend isn't so different. This stock calls for a 34.7% premium via its 15.4x forward P/E multiple, aligning all the fundamentals and attracting some institutional investors.

The State of New Jersey Common Pension Fund D upped its stake by 12.1% in the stock in February, squeezing Wells Fargo (NYSE: WFC) price targets set at $140 a share, 16% higher.

Last but not least, Trinity calls for a 5% premium valuation with a 12.0x forward P/E. Analysts think this stock could grow its EPS by a massive 60.2% in the next 12 months; maybe this is why a high target of $32 a share (for a 28% upside) is comfortably set on the stock today.