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How are Industrial Product Stocks Placed for Q1 Earnings?
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The U.S. market seems to have lost sheen on the adverse impacts of the coronavirus outbreak. Its major stock indexes are in the red territory, as many sectors — including transportation, finance, aerospace, energy and others — have lost growth momentum since the virus start spreading.
The first-quarter 2020 results — which will be in full swing from the next week — are likely to reflect the negative impacts of the pandemic. Per Earnings Trend report dated Apr 15, the S&P 500 group’s earnings are predicted to fall 13.9% on 1.2% marginal growth in revenues. Margins will likely decline 1.7% from the year-ago quarter.
Of the 16 Zacks sector, 11 sectors are likely to report dismal earnings performances for the quarter, including the Zacks Industrial Products sector. With regard to the price performance, the sector has declined 26.4% so far in 2020 compared with the S&P 500 index’s fall of 13.6%. Price chart of the sector, the S&P 500 and a few selected companies is provided below.
Industrial Products in Q1
Within the Industrial Products sector, many sub-industries have been severely impacted by the virus outbreak. These include manufacturers of industrial tools and products, farm equipment, construction and mining equipment, and electronics as well as industrial service providers and others.
Restrictions imposed to contain the virus spread adversely impacted product demand, supply-chain activities, international operations, manufacturing actions, marketing techniques and others. Also, weakness in the country’s industrial production and Purchasing Managers' Index (“PMI”) for March points toward difficult operating conditions faced by the industrial players.
Per the recently released data, industrial production in the United States declined 5.4% (month over month) in March mainly due to the pandemic-related woes. Manufacturing output fell 6.3% from the previous month, while utilities and mining outputs declined 3.9% and 2%, respectively. Also, the country’s PMI fell from 50.1% in February to 49.1% in March, per ISM’s recent report. The index’s value below 50% indicates a contraction in manufacturing activities.
Earnings and revenues for Industrial Products are expected to decline 21.2% and 4.7%, respectively, in the quarter. Margins too are predicted to fall 1.9%. Notably, in the previous quarter, the sector’s earnings and margins grew 0.7% and 0.1%, respectively. Revenues in the previous quarter fell 0.2%.
Companies’ Projection for Q1
A few players in the sector have revised their projections for first-quarter 2020, while many suspended it. iRobot Corporation (IRBT - Free Report) — the manufacturer of industrial robots — lowered its sales projection for the first quarter to $175-$185 million. This suggests a 22-26% decline from the previous-year quarter's reported figure as compared with an 8-12% fall mentioned earlier. The company currently carries a Zacks Rank #3 (Hold).
Another company, Stanley Black & Decker, Inc. (SWK - Free Report) , mentioned that the pandemic will hurt its revenue-generation capabilities for March and April. Also, Caterpillar Inc. (CAT - Free Report) believes that the outbreak will affect its results for the first quarter. Further, Xylem Inc. (XYL - Free Report) withdrew its projections for the first quarter of 2020. Earlier, it anticipated the virus outbreak to adversely impact organic sales by 1-2% and earnings per share by 3-4 cents. All three companies currently carry a Zacks Rank #4 (Sell).
On the contrary, Rexnord Corporation anticipates sales in the fiscal fourth quarter (ended March 2020, results are awaited) to increase 2% year over year, with core sales increasing 1%. Adjusted EBITDA is predicted to grow 3.3% year over year. It presently carries a Zacks Rank #4.
Way Ahead
With infected cases and fatalities still rising in the United States and internationally, the impact of the outbreak-led woes might also be visible in the second-quarter results. The S&P 500’s earnings and revenues in the second quarter are predicted to decline 24.4% and 5.2%, respectively, while that of the Industrial Products sector will likely fall 35.4% and 11.4%, respectively.
The International Monetary Fund’s report, suggesting a 3% decline in the global output for 2020, is adding to the concerns. Advanced nations are predicted to fall 6.1% and emerging nations are likely to slip 1%. The United States’ output is predicted to decrease 5.9% in the current year.
However, several measures to fight the pandemic and deal with the related economic slowdown — including the U.S. government’s economic package of $2 trillion and interest rate cuts by the Federal Reserve — might provide some relief to the corporate world.
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How are Industrial Product Stocks Placed for Q1 Earnings?
The U.S. market seems to have lost sheen on the adverse impacts of the coronavirus outbreak. Its major stock indexes are in the red territory, as many sectors — including transportation, finance, aerospace, energy and others — have lost growth momentum since the virus start spreading.
The first-quarter 2020 results — which will be in full swing from the next week — are likely to reflect the negative impacts of the pandemic. Per Earnings Trend report dated Apr 15, the S&P 500 group’s earnings are predicted to fall 13.9% on 1.2% marginal growth in revenues. Margins will likely decline 1.7% from the year-ago quarter.
Of the 16 Zacks sector, 11 sectors are likely to report dismal earnings performances for the quarter, including the Zacks Industrial Products sector. With regard to the price performance, the sector has declined 26.4% so far in 2020 compared with the S&P 500 index’s fall of 13.6%. Price chart of the sector, the S&P 500 and a few selected companies is provided below.
Industrial Products in Q1
Within the Industrial Products sector, many sub-industries have been severely impacted by the virus outbreak. These include manufacturers of industrial tools and products, farm equipment, construction and mining equipment, and electronics as well as industrial service providers and others.
Restrictions imposed to contain the virus spread adversely impacted product demand, supply-chain activities, international operations, manufacturing actions, marketing techniques and others. Also, weakness in the country’s industrial production and Purchasing Managers' Index (“PMI”) for March points toward difficult operating conditions faced by the industrial players.
Per the recently released data, industrial production in the United States declined 5.4% (month over month) in March mainly due to the pandemic-related woes. Manufacturing output fell 6.3% from the previous month, while utilities and mining outputs declined 3.9% and 2%, respectively. Also, the country’s PMI fell from 50.1% in February to 49.1% in March, per ISM’s recent report. The index’s value below 50% indicates a contraction in manufacturing activities.
Earnings and revenues for Industrial Products are expected to decline 21.2% and 4.7%, respectively, in the quarter. Margins too are predicted to fall 1.9%. Notably, in the previous quarter, the sector’s earnings and margins grew 0.7% and 0.1%, respectively. Revenues in the previous quarter fell 0.2%.
Companies’ Projection for Q1
A few players in the sector have revised their projections for first-quarter 2020, while many suspended it. iRobot Corporation (IRBT - Free Report) — the manufacturer of industrial robots — lowered its sales projection for the first quarter to $175-$185 million. This suggests a 22-26% decline from the previous-year quarter's reported figure as compared with an 8-12% fall mentioned earlier. The company currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Another company, Stanley Black & Decker, Inc. (SWK - Free Report) , mentioned that the pandemic will hurt its revenue-generation capabilities for March and April. Also, Caterpillar Inc. (CAT - Free Report) believes that the outbreak will affect its results for the first quarter. Further, Xylem Inc. (XYL - Free Report) withdrew its projections for the first quarter of 2020. Earlier, it anticipated the virus outbreak to adversely impact organic sales by 1-2% and earnings per share by 3-4 cents. All three companies currently carry a Zacks Rank #4 (Sell).
On the contrary, Rexnord Corporation anticipates sales in the fiscal fourth quarter (ended March 2020, results are awaited) to increase 2% year over year, with core sales increasing 1%. Adjusted EBITDA is predicted to grow 3.3% year over year. It presently carries a Zacks Rank #4.
Way Ahead
With infected cases and fatalities still rising in the United States and internationally, the impact of the outbreak-led woes might also be visible in the second-quarter results. The S&P 500’s earnings and revenues in the second quarter are predicted to decline 24.4% and 5.2%, respectively, while that of the Industrial Products sector will likely fall 35.4% and 11.4%, respectively.
The International Monetary Fund’s report, suggesting a 3% decline in the global output for 2020, is adding to the concerns. Advanced nations are predicted to fall 6.1% and emerging nations are likely to slip 1%. The United States’ output is predicted to decrease 5.9% in the current year.
However, several measures to fight the pandemic and deal with the related economic slowdown — including the U.S. government’s economic package of $2 trillion and interest rate cuts by the Federal Reserve — might provide some relief to the corporate world.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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