After encountering a difficult 2015 and a similarly tough first-half 2016, the scenario for the Machinery industry, which is broadly grouped under the Industrial Products sector (one of the 16 broad Zacks sectors) seems to be improving at last. After a 21% plunge in earnings in first-quarter 2016 and a 1% dip in the second quarter, our projected figures for the third quarter for the sector reveal a 3.7% growth in earnings. So far 21.7% of the companies in the sector reported their numbers exhibiting a 0.5% dip in earnings for the quarter. With bulk of the companies yet to report, the growth trajectory is likely to move upward eventually.
 
The industrial products sector is one of the nine sectors in our coverage that is anticipated to log positive growth in the quarter. Looking at the bigger picture of the yet-to-report 384 companies, total S&P 500 earnings are expected to edge up 0.1% while revenues will rise 1.5%. Even though the growth rate is meager at this moment, the positive growth is an improvement from the back-to-back declines for five quarters.

As per the Federal Reserve, industrial output edged up 0.1% in September after a 0.5% dip in August. The improvement was driven by a 0.2% rise in manufacturing output, which in turn was bolstered by the production of goods such as textiles and plastics. In the third quarter, industrial production rose at an annual rate of 1.8% - the first quarterly increase since third-quarter 2015. Manufacturing output moved up at an annual rate of 0.9% in the third quarter.

The industrial sector has been affected by a strong dollar and an oil price slump. Further, efforts to reduce an inventory overhang led to fewer orders being placed with factories. However, with the dollar's rally fading and oil prices stabilizing, the worst of the industrial downturn seems to be over.

It will be interesting to see how some of the machinery stocks fare when they release their numbers on Oct 25. Apart from beats and misses, focus will also be on their outlook.

Caterpillar, Inc. (CAT Quick QuoteCAT - Free Report) is slated to announce results before the opening bell on Oct 25. This release is always a much-awaited event as the world's largest manufacturer of construction and mining equipment is often considered an economic bellwether. Results for the past few quarters have reflected a weak mining industry, low oil prices, a stronger U.S. dollar and China's economic woes; so investors will be keen to see whether this quarter will be any different.

In the second quarter, Caterpillar’s top and bottom line both plunged year over year. However, Caterpillar surpassed the Zacks Consensus Estimate on both metrics. The stock beat estimates in three of the last four quarters with a positive average surprise of 5.20%.

CATERPILLAR INC Price and EPS Surprise

Pentair continues to aggressively manage its cost-structure and drive productivity to work through the near-term challenges. However, Pentair experienced fall in project orders in both industrial and energy businesses in first-half 2016 and anticipates these headwinds to prevail. Further, a strong U.S dollar and weak agricultural market will hurt results. (Read More: Pentair Q3 Earnings: Disappointment in the Cards?).

Designer and maker of robots for the consumer, defense and security, telemedicine and mobile video collaboration markets globally, iRobot Corporation (IRBT Quick QuoteIRBT - Free Report) is set to release third-quarter 2016 results after the market closes.

iRobot reported a year-over-year decrease in both earnings and sales in the second quarter, but managed to beat the respective Zacks Consensus Estimates. iRobot has outpaced the Zacks Consensus Estimate in all the trailing four quarters, with an average earnings beat of 178.41%.

IROBOT CORP Price and EPS Surprise