Back to top

Image: Bigstock

Will Low Revenues & Margins Hurt Ingersoll (IR) Q3 Earnings?

Read MoreHide Full Article

Industrial goods manufacturer Ingersoll-Rand Plc (IR - Free Report) is scheduled to report third-quarter 2017 results before the opening bell on Oct 25. The company is likely to report lower revenues in the quarter due to a challenging macroeconomic environment.

This, in turn, is likely to result in lower earnings for the quarter.

Top-Line Woes

Ingersoll continues to reposition its portfolio to focus on high-barrier markets. While such efforts are encouraging, they involve upfront costs, which might lead to earnings dilution in the near term. Consequently, the company is continually under stress to maintain profitability through stringent cost-cutting measures.

In addition, when the economy in Europe is highly unpredictable post the Brexit referendum, it becomes difficult for the company to increase revenues and reduce costs. In addition, Ingersoll is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company.

The Zacks Consensus Estimate for Industrial Technologies segment revenues is currently pegged at $729 million, down from $765 million reported in the second quarter. Revenues from Climate Control Technologies are also expected to be $2,992 million compared with reported revenues of $3,144 million in the prior quarter.

Other Key Factors

Operating income for Industrial Technologies ad Climate Control Technologies segments are expected to be $88 million and $505 million, respectively, compared with the corresponding tallies of $92 million and $527 million in the prior quarter.

Moreover, our proven model does not conclusively show that Ingersoll is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.20%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ingersoll has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Applied Materials, Inc. (AMAT - Free Report) has an Earnings ESP of +0.37% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franklin Resources, Inc. (BEN - Free Report) has an Earnings ESP of +0.56% and a Zacks Rank #2.

KEMET Corporation (KEM - Free Report) has an Earnings ESP of +7.46% and a Zacks Rank #1.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Published in