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Machinery Stocks Earnings Preview for Oct 21: PH, LECO, AIMC

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The beginning of the Q3 earnings season has been buoyant, with growth in earnings and revenues tracking better compared with the performances over the last few quarters. A robust continuation of this trend would translate into positive earnings growth in aggregate for the quarter, following five back-to-back quarters of earnings declines for the S&P 500 index.

However, with macroeconomic conditions still soft, earnings growth is projected to be negative for eight of the 16 Zacks sectors. On the whole, our latest data highlights that earnings for the S&P 500 companies are now on track to decline 1% from the year-ago period, on 1.5% higher revenues. These numbers, however, hint toward some tell-tale signs of improvement in the overall earnings picture. (For more details, read our latest Earnings Trends article)

As of Oct 19, we had results from 81 S&P 500 members (accounting for 19.9% of the index’s total market capitalization), of which about 80.2% have posted earnings beats and 63% trumped top-line estimates. This indicates that both earnings and revenues have improved notably relative to the recent quarters.  

According to the Zacks Industry classification, the machinery industry is broadly grouped under Industrial Products, one of the 16 Zacks sectors. The industrial products sector is one of those expected to chart positive earnings growth this quarter. According to our latest numbers, its earnings are on track to grow 3.4% in the quarter, on 0.3% lower sales compared with the last year.

Let’s have a look at how some machinery players within the sector, like Parker-Hannifin Corporation (PH - Free Report) , Lincoln Electric Holdings Inc. (LECO - Free Report) and Altra Industrial Motion Corp. , are poised ahead of their scheduled announcements tomorrow.

Parker-Hannifin: This company is a leading worldwide full-line manufacturer of motion control products, including fluid power systems, electro-mechanical controls and related components. It operates in two segments, Diversified Industrial and Aerospace Systems.

Parker-Hannifin has a robust earnings surprise history, with consecutive earnings beats over the four trailing quarters, for an average positive earnings surprise of 11.1%. In the last reported quarter, the company outpaced earnings estimates by 7.3%. (Read about the company’s growth drivers for the quarter here: Parker-Hannifin Q1 Earnings: Will It Beat Again?)

PARKER HANNIFIN Price and EPS Surprise

Our proven model shows that Parker-Hannifin is likely to beat earnings this quarter. This is because the company has an Earnings ESP of 0.64%. The Most Accurate Estimate for the current quarter is currently pegged at $1.58 per share for the company, higher than the broader Zacks Consensus Estimate of $1.57 per share. This is a very meaningful and leading indicator of a likely earnings surprise.

The company also carries a Zacks Rank #3 (Hold). The combination of Parker-Hannifin’s Zacks Rank #3 and positive ESP makes us confident of an earnings beat in the upcoming report. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Note that stocks with a Zacks Rank #1, or 2 (Buy) or 3 have a significantly higher chance of beating estimates.

Lincoln Electric: This company is a full-line manufacturer of welding and cutting products and integral horsepower industrial electric motors. It caters to both domestic and international markets.

Lincoln Electric’s earnings history is a mixed bag. It beat the Zacks Consensus Estimate in one of the trailing four quarters, while missing in another, for a modest average positive surprise of 1.6%. In the last reported quarter, the company earnings were in line with expectations.

LINCOLN ELECTRC Price and EPS Surprise

 

Our proven model does not conclusively show that Lincoln Electric is likely to beat on earnings in the to-be-reported quarter. This is because the company carries a Zacks Rank #3 and has as an Earnings ESP of -2.41%. Despite a favorable rank, the company’s negative Earnings ESP makes surprise prediction inconclusive. The Zacks Consensus Estimate for the quarter is pegged at 83 cents.

Altra Industrial: This company designs, produces and markets electromechanical power transmission products.

The company has had a remarkable earnings history over the trailing four quarters and has generated an average positive surprise of 9.2%, beating estimates all through. In the last reported quarter, the trumped estimates by 7.7%.

ALTRA INDUS MOT Price and EPS Surprise

 

Our proven model does not conclusively show that Altra Industrial is likely to beat on earnings in the to-be-reported quarter. This is because the company carries a Zacks Rank #2 and has an Earnings ESP of 0.00%. Though the company carries a favorable Zacks Rank #2, its 0.00% ESP makes surprise prediction difficult. The Zacks Consensus Estimate for the quarter is pegged at 35 cents.

Keep an eye on our full earnings articles to see how these players finally fared in quarter.

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