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Machinery Stocks Earnings Slated for Jul 26: CAT, JBT & More
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The performance of machinery stocks last year was nothing worth writing home about due to adverse currency movements, weakening economic conditions, particularly in China, and multi-year low commodity prices plaguing the industry. Even in the last quarter, this industry, which is broadly grouped under the Industrial Products sector (one of the 16 broad Zacks sectors), suffered an unceremonious 22.2% drop in earnings.
The second quarter does not paint an impressive picture either. Only 23.8% of the companies have reported so far, clocking a 3% improvement in earnings for the quarter. However, it’s still too early to rejoice. In fact, considering all the companies that are yet to report, the sector’s earnings are expected to record an 8% drop this quarter.
The second-quarter projections for the 374 yet-to-report companies show that total S&P 500 earnings will be down 3.4% due to 0.5% lower revenues. This means we are looking toward the fifth consecutive quarter of an earnings decline. In fact, 9 of the 16 Zacks sectors are expected to be in the negative territory, with the Energy sector accounting for the maximum drag. For a detailed account, please read our Earnings Trends report.
Meanwhile, weak industrial production numbers, which comprise the output of the manufacturing, mining and utility sectors, add to the woes. Per the latest Federal Reserve report, industrial production inched up 0.6% in June, after declining 0.3% in May. In the second quarter, industrial production suffered the third consecutive quarter of decline, reflecting an annual rate of decline of 1%. Industrial demand remained soft in the quarter due to the weak global oil & gas markets. Moreover, capacity utilization has been decreasing, indicating sluggish industrial capex spending.
While residential and commercial construction continue to be a source of strength, key markets for the machinery industry – oil and gas, agriculture, and mining – are pulling the industry down, with no possibility of an improvement any time soon. The U.S. rig count currently stands at 414, down 47.3% from a year ago. The rig count is likely to dwindle even further, in tandem with falling oil prices. Moreover, the U.S. Department of Agriculture estimates farm income to decline further this year. Persistent economic weakness in China has sucked the mining machinery industry into its vortex.
Keeping these headwinds in mind, it will be interesting to see how some of the machinery stocks fare in their upcoming releases next week. Apart from beats and misses, focus will also be on steps taken to overcome the headwinds as well as on their outlook.
Caterpillar, Inc.’s (CAT - Free Report) results, which are slated to be announced before the opening bell on Jul 26, is a much-awaited event as the world's largest manufacturer of construction and mining equipment is often considered an economic bellwether. As results during the past few quarters have reflected a weak mining industry, low oil prices, a stronger U.S. dollar and China's economic woes, investors must be looking forward to see whether this quarter will be any different.
Last quarter, Caterpillar’s earnings came in line with the Zacks Consensus Estimate. The stock beat estimates in three of the four trailing quarters, with a positive average surprise of 2.21%.
Even though the effect of weak mining and agriculture will be reflected in Caterpillar’s results, perked-up restructuring actions should lead to significant cost savings. Another ray of hope is in the pickup in construction-related activity, which might mitigate the headwinds. We expect Caterpillar to come up with a positive earnings surprise this season backed by the combination of its Zacks Rank #3 (Hold) and Earnings ESP of +2.08%. (Read more: Caterpillar Q2 Earnings: A Surprise in the Cards?)
Astec Industries, Inc. (ASTE - Free Report) , the manufacturer and marketer of road building equipment, will also report second-quarter fiscal 2016 results on Jul 26, before the opening bell.
In the prior quarter, Astec Industries posted a positive surprise of 5.48%. However, the stock missed earnings thrice in the trailing four quarters, with an average negative surprise of 33.69%.
Astec is poised to benefit from acquisitions and the launch of new products. Extension of the long-term highway bill, further opportunity from pellet plants and strong infrastructure sales activity will also augment growth. However, Energy Group sales are expected to remain under pressure as lower oil prices have had a negative impact on oil production and exploration. Astec has a Zacks Rank #4, which along with a 0.00% ESP, makes an earnings beat unlikely this season.
John Bean Technologies Corporation (JBT - Free Report) , which primarily deals with providing solutions to the food processing and air transportation industries, will report second-quarter results on Jul 26.
Last quarter, John Bean Technologies delivered a positive earnings surprise of 13.33%. The company has outpaced the Zacks Consensus Estimate in all of the last four quarters, with an average positive surprise of 12.16%.
John Bean Technologies has been benefiting from favorable market trends, with rising global demand for food equipment. The company has also been witnessing incremental consumer spending on both mobile and fixed equipment.
John Bean Technologies’ Zacks Rank #3 and Earnings ESP of -1.72% makes surprise prediction difficult for this quarter.
Tennant Company (TNC - Free Report) will report its second-quarter fiscal 2016 results on Jul 26, before the market opens.
In the last reported quarter, Tennant Company posted a positive earnings surprise of 11.54%. Notably, the company has delivered an average positive earnings surprise of 10.62% over the last four quarters.
Tennant will benefit from the strong product and technology pipeline, continued gains in emerging markets, return to growth in Europe, focus on strategic accounts and an enhanced go-to-market strategy designed to significantly expand Tennant's worldwide market coverage and customer base. However, unfavorable foreign currency and global economic volatility will remain headwinds.
We believe Tennant is likely to beat earnings given its Zacks Rank #3 and Earnings ESP of +4.23%.
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Machinery Stocks Earnings Slated for Jul 26: CAT, JBT & More
The performance of machinery stocks last year was nothing worth writing home about due to adverse currency movements, weakening economic conditions, particularly in China, and multi-year low commodity prices plaguing the industry. Even in the last quarter, this industry, which is broadly grouped under the Industrial Products sector (one of the 16 broad Zacks sectors), suffered an unceremonious 22.2% drop in earnings.
The second quarter does not paint an impressive picture either. Only 23.8% of the companies have reported so far, clocking a 3% improvement in earnings for the quarter. However, it’s still too early to rejoice. In fact, considering all the companies that are yet to report, the sector’s earnings are expected to record an 8% drop this quarter.
The second-quarter projections for the 374 yet-to-report companies show that total S&P 500 earnings will be down 3.4% due to 0.5% lower revenues. This means we are looking toward the fifth consecutive quarter of an earnings decline. In fact, 9 of the 16 Zacks sectors are expected to be in the negative territory, with the Energy sector accounting for the maximum drag. For a detailed account, please read our Earnings Trends report.
Meanwhile, weak industrial production numbers, which comprise the output of the manufacturing, mining and utility sectors, add to the woes. Per the latest Federal Reserve report, industrial production inched up 0.6% in June, after declining 0.3% in May. In the second quarter, industrial production suffered the third consecutive quarter of decline, reflecting an annual rate of decline of 1%. Industrial demand remained soft in the quarter due to the weak global oil & gas markets. Moreover, capacity utilization has been decreasing, indicating sluggish industrial capex spending.
While residential and commercial construction continue to be a source of strength, key markets for the machinery industry – oil and gas, agriculture, and mining – are pulling the industry down, with no possibility of an improvement any time soon. The U.S. rig count currently stands at 414, down 47.3% from a year ago. The rig count is likely to dwindle even further, in tandem with falling oil prices. Moreover, the U.S. Department of Agriculture estimates farm income to decline further this year. Persistent economic weakness in China has sucked the mining machinery industry into its vortex.
Keeping these headwinds in mind, it will be interesting to see how some of the machinery stocks fare in their upcoming releases next week. Apart from beats and misses, focus will also be on steps taken to overcome the headwinds as well as on their outlook.
Caterpillar, Inc.’s (CAT - Free Report) results, which are slated to be announced before the opening bell on Jul 26, is a much-awaited event as the world's largest manufacturer of construction and mining equipment is often considered an economic bellwether. As results during the past few quarters have reflected a weak mining industry, low oil prices, a stronger U.S. dollar and China's economic woes, investors must be looking forward to see whether this quarter will be any different.
Last quarter, Caterpillar’s earnings came in line with the Zacks Consensus Estimate. The stock beat estimates in three of the four trailing quarters, with a positive average surprise of 2.21%.
CATERPILLAR INC Price and EPS Surprise
CATERPILLAR INC Price and EPS Surprise | CATERPILLAR INC Quote
Even though the effect of weak mining and agriculture will be reflected in Caterpillar’s results, perked-up restructuring actions should lead to significant cost savings. Another ray of hope is in the pickup in construction-related activity, which might mitigate the headwinds. We expect Caterpillar to come up with a positive earnings surprise this season backed by the combination of its Zacks Rank #3 (Hold) and Earnings ESP of +2.08%. (Read more: Caterpillar Q2 Earnings: A Surprise in the Cards?)
Astec Industries, Inc. (ASTE - Free Report) , the manufacturer and marketer of road building equipment, will also report second-quarter fiscal 2016 results on Jul 26, before the opening bell.
In the prior quarter, Astec Industries posted a positive surprise of 5.48%. However, the stock missed earnings thrice in the trailing four quarters, with an average negative surprise of 33.69%.
ASTEC INDS INC Price and EPS Surprise
ASTEC INDS INC Price and EPS Surprise | ASTEC INDS INC Quote
Astec is poised to benefit from acquisitions and the launch of new products. Extension of the long-term highway bill, further opportunity from pellet plants and strong infrastructure sales activity will also augment growth. However, Energy Group sales are expected to remain under pressure as lower oil prices have had a negative impact on oil production and exploration. Astec has a Zacks Rank #4, which along with a 0.00% ESP, makes an earnings beat unlikely this season.
John Bean Technologies Corporation (JBT - Free Report) , which primarily deals with providing solutions to the food processing and air transportation industries, will report second-quarter results on Jul 26.
Last quarter, John Bean Technologies delivered a positive earnings surprise of 13.33%. The company has outpaced the Zacks Consensus Estimate in all of the last four quarters, with an average positive surprise of 12.16%.
JOHN BEAN TECH Price and EPS Surprise
JOHN BEAN TECH Price and EPS Surprise | JOHN BEAN TECH Quote
John Bean Technologies has been benefiting from favorable market trends, with rising global demand for food equipment. The company has also been witnessing incremental consumer spending on both mobile and fixed equipment.
John Bean Technologies’ Zacks Rank #3 and Earnings ESP of -1.72% makes surprise prediction difficult for this quarter.
Tennant Company (TNC - Free Report) will report its second-quarter fiscal 2016 results on Jul 26, before the market opens.
In the last reported quarter, Tennant Company posted a positive earnings surprise of 11.54%. Notably, the company has delivered an average positive earnings surprise of 10.62% over the last four quarters.
TENNANT CO Price and EPS Surprise
TENNANT CO Price and EPS Surprise | TENNANT CO Quote
Tennant will benefit from the strong product and technology pipeline, continued gains in emerging markets, return to growth in Europe, focus on strategic accounts and an enhanced go-to-market strategy designed to significantly expand Tennant's worldwide market coverage and customer base. However, unfavorable foreign currency and global economic volatility will remain headwinds.
We believe Tennant is likely to beat earnings given its Zacks Rank #3 and Earnings ESP of +4.23%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>