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Machinery Stocks' Earnings Lineup for Jan 26: CAT, DOV, SWK
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The machinery industry, which is broadly grouped under the Industrial Products sector (one of the 16 broad Zacks sectors), had logged a growth of 9.1% in third-quarter 2016. For the fourth quarter, a mere 4.5% of the S&P 500 members in the industrial products sector have reported their numbers so far putting up a 9.6% growth in earnings driven by a 6.4% rise in revenues. However, its too early to rejoice at the numbers as per our projections, the sector’s earnings is likely dip 1.3% in the fourth quarter despite a 4.3% increase in revenues.
Looking at the broader picture, of the 63 S&P 500 members that have reported across all sectors, that constitute 19.2% of the index’s total market capitalization, earnings has gone up 4.7% for the fourth quarter. Considering all the companies that are yet to report, the S&P 500 is expected to register a 4.8% growth in the quarter, maintaining the growth trajectory that was set in the third quarter, after five quarters of back to back declines. (Read more: Q4 Earnings Growth the Highest in 8 Quarters).
As per the Federal Reserve, industrial output inched up 0.8% in December after a 0.7% dip in November and 0.2% rise in October. For the fourth quarter as a whole, the index slipped 0.6% at an annual rate. Manufacturing output gained 0.2% in December following a 0.1% dip in November and 0.3% rise in October. The index for manufacturing rose at an annual rate of 0.7% in the fourth quarter but was flat year over year.
It will be interesting to see how some of the machinery stocks fare when they release fourth-quarter 2016 numbers on Jan 26. Apart from beats and misses, focus will also be on their outlook.
One heavyweight that hogs the limelight in the industrial product sector is Caterpillar, Inc. (CAT - Free Report) , being the world's largest manufacturer of construction and mining equipment. Caterpillar’s top line and bottom line both declined in the third quarter on low-end user demand across many of its businesses due to economic weakness throughout the world. Investors will be keen to see how the company performs this quarter.
Caterpillar has an impressive earnings surprise history beating estimates in all the last four quarters. The company has a positive average surprise of 8.53%.
In the past three months, the Caterpillar stock has outperformed the Zacks Categorized Machinery – Construction/Mining industry with a 14.4% return, while the industry gained 13.7%.
Cost savings from Caterpillar’s recent enhanced restructuring actions will boost margins. Also, pickup in construction-related activity will help mitigate the headwinds from weak mining and agriculture.
Our proven model shows that Caterpillar is likely to beat earnings this quarter. This is because the company has the right combination of two key ingredients – a positive Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Caterpillar currently carries a Zacks Rank #3 and an Earnings ESP of +1.54%. (Read more: Caterpillar Q4 Earnings: Another Beat in the Cards?).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Dover Corporation (DOV - Free Report) is a diversified manufacturer of industrial products. Dover reported a year-over-year decrease in both earnings and sales in the third quarter as the prevailing weak macro environment, ongoing declines in longer cycle oil & gas exposed markets along with production inefficiencies in the retail refrigeration business impacted both volume and earnings in the quarter.
Dover has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average earnings beat of 0.85%.
In the last three months, Dover has outperformed the Zacks categorized Machinery-General subindustry with respect to price performance. The Dover stock rose 17.4%, exceeding sub industry’s gain of 13.2% over the same time frame.
Improvements in early cycle upstream oil and gas markets, strong performance in Printing & Identification as well as continued sequential growth in Fluids are anticipated to drive fourth-quarter results However, lower bookings in the third quarter, persistent headwinds in its refrigeration and food equipment segment remain headwinds. (Read more: Dover to Report Q4 Earnings: What's in the Cards?).
Stanley Black & Decker, Inc. (SWK - Free Report) , engages in tools and storage, security, and industrial product businesses. Stanley Black & Decker reported improvement in both revenues and earnings in the third quarter. Operational efficiency and lower share count helped offset the adverse impact of currency headwinds.
Stanley Black & Decker, Inc. Price and EPS Surprise
The company posted better-than-expected results in three of the four trailing quarters, while recording in-line results in one. Stanley Black & Decker delivered an average positive earnings surprise of 5.56% in the last four quarters
Stanley Black & Decker has underperformed the Zacks categorized Machinery-Tools & Related Products industry in the last three months. The shares increased 5%, falling behind the sub industry’s gain of 8.8% in the same time period.
Even though weak industrial activities, unfavorable foreign currency movements might dent Stanley Black & Decker’s results in the fourth quarter, a healthy U.S. housing market as well as the company’s organic and inorganic growth initiatives should provide some support. (Read more: Stanley Black's Q4 Earnings: What's in the Cards?)
The combination of Stanley Black & Decker’s Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% makes an earnings beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement.
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Machinery Stocks' Earnings Lineup for Jan 26: CAT, DOV, SWK
The machinery industry, which is broadly grouped under the Industrial Products sector (one of the 16 broad Zacks sectors), had logged a growth of 9.1% in third-quarter 2016. For the fourth quarter, a mere 4.5% of the S&P 500 members in the industrial products sector have reported their numbers so far putting up a 9.6% growth in earnings driven by a 6.4% rise in revenues. However, its too early to rejoice at the numbers as per our projections, the sector’s earnings is likely dip 1.3% in the fourth quarter despite a 4.3% increase in revenues.
Looking at the broader picture, of the 63 S&P 500 members that have reported across all sectors, that constitute 19.2% of the index’s total market capitalization, earnings has gone up 4.7% for the fourth quarter. Considering all the companies that are yet to report, the S&P 500 is expected to register a 4.8% growth in the quarter, maintaining the growth trajectory that was set in the third quarter, after five quarters of back to back declines. (Read more: Q4 Earnings Growth the Highest in 8 Quarters).
As per the Federal Reserve, industrial output inched up 0.8% in December after a 0.7% dip in November and 0.2% rise in October. For the fourth quarter as a whole, the index slipped 0.6% at an annual rate. Manufacturing output gained 0.2% in December following a 0.1% dip in November and 0.3% rise in October. The index for manufacturing rose at an annual rate of 0.7% in the fourth quarter but was flat year over year.
It will be interesting to see how some of the machinery stocks fare when they release fourth-quarter 2016 numbers on Jan 26. Apart from beats and misses, focus will also be on their outlook.
One heavyweight that hogs the limelight in the industrial product sector is Caterpillar, Inc. (CAT - Free Report) , being the world's largest manufacturer of construction and mining equipment. Caterpillar’s top line and bottom line both declined in the third quarter on low-end user demand across many of its businesses due to economic weakness throughout the world. Investors will be keen to see how the company performs this quarter.
Caterpillar, Inc. Price and EPS Surprise
Caterpillar, Inc. Price and EPS Surprise | Caterpillar, Inc. Quote
Caterpillar has an impressive earnings surprise history beating estimates in all the last four quarters. The company has a positive average surprise of 8.53%.
In the past three months, the Caterpillar stock has outperformed the Zacks Categorized Machinery – Construction/Mining industry with a 14.4% return, while the industry gained 13.7%.
Cost savings from Caterpillar’s recent enhanced restructuring actions will boost margins. Also, pickup in construction-related activity will help mitigate the headwinds from weak mining and agriculture.
Our proven model shows that Caterpillar is likely to beat earnings this quarter. This is because the company has the right combination of two key ingredients – a positive Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Caterpillar currently carries a Zacks Rank #3 and an Earnings ESP of +1.54%. (Read more: Caterpillar Q4 Earnings: Another Beat in the Cards?).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Dover Corporation (DOV - Free Report) is a diversified manufacturer of industrial products. Dover reported a year-over-year decrease in both earnings and sales in the third quarter as the prevailing weak macro environment, ongoing declines in longer cycle oil & gas exposed markets along with production inefficiencies in the retail refrigeration business impacted both volume and earnings in the quarter.
Dover Corporation Price and EPS Surprise
Dover Corporation Price and EPS Surprise | Dover Corporation Quote
Dover has outpaced the Zacks Consensus Estimate in three of the trailing four quarters, with an average earnings beat of 0.85%.
In the last three months, Dover has outperformed the Zacks categorized Machinery-General subindustry with respect to price performance. The Dover stock rose 17.4%, exceeding sub industry’s gain of 13.2% over the same time frame.
Improvements in early cycle upstream oil and gas markets, strong performance in Printing & Identification as well as continued sequential growth in Fluids are anticipated to drive fourth-quarter results However, lower bookings in the third quarter, persistent headwinds in its refrigeration and food equipment segment remain headwinds. (Read more: Dover to Report Q4 Earnings: What's in the Cards?).
Dover’s Earnings ESP of 0.00% and a Zacks Rank #3 make surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stanley Black & Decker, Inc. (SWK - Free Report) , engages in tools and storage, security, and industrial product businesses. Stanley Black & Decker reported improvement in both revenues and earnings in the third quarter. Operational efficiency and lower share count helped offset the adverse impact of currency headwinds.
Stanley Black & Decker, Inc. Price and EPS Surprise
Stanley Black & Decker, Inc. Price and EPS Surprise | Stanley Black & Decker, Inc. Quote
The company posted better-than-expected results in three of the four trailing quarters, while recording in-line results in one. Stanley Black & Decker delivered an average positive earnings surprise of 5.56% in the last four quarters
Stanley Black & Decker has underperformed the Zacks categorized Machinery-Tools & Related Products industry in the last three months. The shares increased 5%, falling behind the sub industry’s gain of 8.8% in the same time period.
Even though weak industrial activities, unfavorable foreign currency movements might dent Stanley Black & Decker’s results in the fourth quarter, a healthy U.S. housing market as well as the company’s organic and inorganic growth initiatives should provide some support. (Read more: Stanley Black's Q4 Earnings: What's in the Cards?)
The combination of Stanley Black & Decker’s Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% makes an earnings beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>