Parker Hannifin (PH - Analyst Report) is set to report first quarter 2014 results before the opening bell on Oct 18. Last quarter, Parker posted an 8.72% negative earnings surprise. Given, the continued weakness in international markets and the uncertain economic environment, we are skeptical about its chances of an earnings beat in this quarter. Let’s see how things are shaping up for this announcement.
Factors this Past Quarter
Parker was primarily affected by major cancellations and rescheduling of orders in the past quarter. Earnings during the quarter were also impacted by lower volumes and greater-than-expected inventory, acquisition, integration and related expenses. Further, the company witnessed declining revenues in North America Industrial sales. The recessionary condition in Europe, negative currency translations and flat organic sales in some segments were headwinds for the company.
Our proven model does not conclusively show that Parker is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: That is because the Most Accurate estimate stands at $1.46 while the Zacks Consensus Estimate is at $1.47. That is a difference of -0.68%.
Zacks Rank #3 (Hold).Parker’s Zacks Rank #3 (Hold) lowers the predictive power of ESP because the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Spansion Inc. (CODE - Snapshot Report),with Earnings ESP of +6.67% and a Zacks Rank #1 (Strong Buy).
Clayton Williams Energy, Inc. (CWEI - Snapshot Report)), with Earnings ESP of +43.75% and a Zacks Rank #2 (Buy).
Carrizo Oil & Gas Inc. (CRZO - Snapshot Report), with Earnings ESP of +1.35% and a Zacks Rank #2 (Buy).