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A global multi-industry leader in high-technology engineering and manufacturing, ITT Corporation (ITT - Analyst Report) is set to report its first quarter fiscal 2013 results on May 2. In the last reported quarter, it posted a 2.6% positive surprise. Let’s see how things are shaping up for this quarter.

Why a Likely Positive Surprise?

Our proven model shows that ITTis likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or Zacks Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for IIT is currently pegged at 4.65%. This is a leading indicator of a likely positive earnings surprise for shares.

Zacks #3 Rank (Hold): ITT currently has a Zacks Rank #3 (Hold).Stocks with a Zacks Rank #1, a Zacks Rank #2 and a Zacks Rank #3 have a significantly higher chance of beating earnings. The sell-rated stocks (Zacks Rank #4 and Zacks Rank #5) should ideally be avoided going into an earnings announcement. 

The combination of a Zacks Rank # 3 (Hold) and 4.65% ESP makes us bullish on ITT for the impending quarter.

What is Driving the Better-than-Expected Earnings?

ITT focuses on highly engineered solutions and has maintained an above average peer level of investment in research & development programs at approximately 3% of sales. However, the emerging markets have also been a major source of revenue driver for the company. This region represents approximately 30% of the total consolidated revenue for the company and in the last quarter (4Q12), ITT reported significant growth in automotive in China, chemical in the Middle East and mining in Latin America, among others. The aftermarket solutions are also very profitable for ITT. The company has been working on the expansion of its aftermarket service and in fiscal 2012, it contributed about 30% to the top line.

In addition, ITT has also made some strategic acquisitions in fiscal 2012, including the purchase of Bornemann Pumps, which will provide a global leadership position in advanced oil and gas pumping technologies. The company also acquired Blakers that enbaled ITT to expand its aftermarket footprint in Australia. A combination of all these makes us bullish about ITT’s earnings, and we expect the company to beat its estimates.

Other Stocks to Consider

Here are some other companies operating in the same sector that have the right combination of elements to post an earnings beat this quarter:

DXP Enterprises Inc.(DXPE - Snapshot Report)),Earnings ESP of +8.05% and a Zacks Rank #1(Strong Buy).

WorthingtonIndustries, Inc.(WOR - Snapshot Report), Earnings ESP of +14.39% and a Zacks Rank #2 (Buy).

United Technologies Corp. (UTX - Analyst Report),Earnings ESP of +0.63% and a Zacks Rank #3 (Hold)

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