We expect diversified power management company Eaton Corporation (ETN - Free Report) to beat expectations when it reports third quarter 2013 results before the market opens on Oct 25.
The company had missed the earnings consensus in the second quarter by 1.80%.
Why a Likely Positive Surprise?
Our proven model shows that Eaton is likely to beat earnings because it has the right combination of two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +2.68%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.
Zacks Rank #3 (Hold): 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 Eaton Corporation’s Zacks Rank #3 (Hold) and +2.68% ESP makes us confident of an earnings beat this quarter.
What is Driving the Better-than-Expected Earnings?
Eaton’s presence in over 175 countries across the globe diversifies any region-specific risk with ample options to make up for any revenue shortfall in any particular region or market.
Consistent investment in Research & Development helps the company to improve the quality of its product offering and improvise new products. This expands the company’s operations and customer base.
In addition, solid performance from the acquired assets is helping the company to post better numbers. We expect this trend to continue this quarter.
Other Stocks to Consider
Eaton is not the only firm looking up this earnings season. We also see likely earnings beats coming from others operating in the sector:
Littelfuse Inc. (LFUS - Free Report) , with an Earnings ESP of +1.67% and Zacks #2 Rank (Buy)
Acuity Brands, Inc. (AYI - Free Report) , with an Earnings ESP of +1.18% and Zacks #3 Rank (Hold)
Sanmina Corporation (SANM - Free Report) , with an Earnings ESP of +2.86% and Zacks #3 Rank (Hold)