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Another Beat for Emerson?

by Zacks Equity Research

February 01, 2013 | Comments : 0 Recommended this article: (0)

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We expect diversified technology company Emerson Electric Company ( EMR - Analyst Report ) to beat expectations when it reports first quarter 2013 financial results on Feb 5, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Emerson is likely to beat earnings because it has the right combination of two key ingredients, namely a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3.

Positive ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +3.23%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks #3 Rank (Neutral): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Emerson’s Zacks Rank #3 (Hold) and +3.23% ESP makes us very confident of a positive earnings beat on Feb 5.

What is Driving the Better Than Expected Earnings?

Continued strength in Process Management, increased investments in energy projects, strong backlog and deferred recovery of sales from the Thailand flooding are expected to lead to a positive earnings surprise in the upcoming quarter.

The positive trend is seen in the trailing four-quarter average surprise of 0.36%, which was greatly helped by the 5.71% surprise in the last reported quarter. This was possible because Emerson did a good job of controlling expenses leveraging sales volume. Strong end markets of the Process Management division also helped.

Other Stocks to Consider

Emerson is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:

Interdigital Inc. ( IDCC - Snapshot Report ) , earnings ESP of +350% and Zacks #2 Rank (Strong Buy)

Juniper Networks Inc. ( JNPR - Analyst Report ) , earnings ESP of +7.14% and Zacks #2 Rank (Buy)

Clean Energy Fuels Corp. ( CLNE - Snapshot Report ) , earnings ESP of +87.50% and Zacks #2 Rank (Buy)

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