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Emerson (EMR) to Report Q1 Earnings: Beat in the Cards?

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Emerson Electric Co. (EMR - Free Report) is set to release first-quarter fiscal 2019 (ended December 2018) results on Feb 5, before market open.

The company pulled off average positive earnings surprise of 3.38% over the last four quarters, beating estimates thrice. Notably, in the last reported quarter, Emerson’s earnings of 89 cents per share missed the Zacks Consensus Estimate by 3.26%.

In the past month, the company’s shares have rallied 9.6% compared with the industry’s rise of 7.3%.

 

We expect it to score an earnings beat in the fiscal first quarter.

Why a Likely Positive Surprise

Our proven model shows that Emerson has the right combination of the two key ingredients to beat earnings. 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 the case here as you will see below:

Earnings ESP: Emerson has an Earnings ESP of +0.84% as the Most Accurate Estimate is pegged at 67 cents, higher than the Zacks Consensus Estimate of 66 cents.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Factors Likely to Drive Better-Than-Expected Q1 Results

Emerson is well positioned to benefit from global infrastructure growth, as its core businesses hold dominant positions in markets tied to energy efficiency and infrastructure spending. Going forward, the company expects to benefit from a strong macroeconomic environment, favorable trends in its short cycle end-markets as well as longer cycle capital investments.

Emerson expects strength in Maintenance, Repair and Operations projects to bolster revenues of its Automation Solutions segment in the fiscal first quarter. On the other hand, continued growth in air conditioning demand and strong demand in cold chain and professional tools markets will likely drive the top line of the company’s Commercial & Residential Solutions segment.

Amid this backdrop, the Zacks Consensus Estimate for revenues from the Automation Solutions segment is currently pegged at $2,822 million, higher than $1,967 million reported in the year-ago quarter. Revenues from Commercial & Residential Solutions segment are expected to be $1,390 million compared with $1,252 million reported a year ago.

Moreover, Emerson believes that benefits from its restructuring and cost-reduction efforts, greater operational efficacy as well as lower corporate taxes will continue driving its profitability in the quarters ahead.

Other Key Picks

Here are some other 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:

Terex Corp. (TEX - Free Report) has an Earnings ESP of +3.17% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Manitowoc Company, Inc. (MTW - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +44.44%.

Lincoln Electric Holdings, Inc. (LECO - Free Report) carries a Zacks Rank #3 and has an Earnings ESP of +1.42%.

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