The October-December quarter’s results for the industrial companies are likely to reflect the impacts of better operating conditions in the country, revival in international trade and the lingering impacts of the pandemic. This week and the next are important as many industrial giants are slated to release their results.
Notably, the earnings and revenue outlook for the S&P 500 companies have improved for the quarter ended December 2020. As of Jan 26, earnings of the S&P 500 companies are expected to decline just 5% and revenues are anticipated to grow 0.7% compared with a 6.4% decline in earnings and a 0.5% increase in revenues mentioned on Jan 20. Notably, impressive performances by many S&P 500 players (with exposure in the industrial space) support the expectation of healthy industrial results for the October-December quarter of 2020. Per the Earnings Trend report released on Jan 20, earnings for the Zacks Industrial Products sector are likely to decline 8% year over year for the October-December quarter of 2020, while revenues are expected to fall 2.5%. Though the revenue projection suggests an improvement of more than a 5.3% decline recorded in the previous quarter, earnings estimates are almost in line with the previous quarter’s reported figure. Key Factors for Industrial Stocks
The operating environment for the industrial stocks in the October-December quarter of 2020 was quite favorable, evident from key indicators, including the industrial production and the ISM Purchasing Manager’s Index (“PMI”). Notably, industrial production in the United States increased 8.4% year over year in the quarter ended December 2020, with manufacturing production rising 11.2%. Also, the ISM’s PMI increased from 55.4% at the end of September to 60.7% at the end of December.
International trade too showed strength in the to-be-reported quarter as compared with the first two quarters of calendar 2020. In addition to these, the growing popularity of e-commerce business as well as new and effective promotional actions is likely to have played an important role in the quarter under review. Further, efforts to innovate products, keep costs under control and tackle competitive pressures are expected to have aided. On the flip side, the impacts of the pandemic-led woes and uncertainties as well as highly leveraged balance sheets cannot be ignored for some industrial players. Stocks to Report October-December Quarter Results on Jan 28
Below, we briefly discussed what we expect from the four industrial stocks in the upcoming results.
Stanley Black & Decker, Inc. ( SWK Quick Quote SWK - Free Report) will release fourth-quarter 2020 results, before market open. It delivered better-than-expected results in the last four quarters. The company has a trailing four-quarter earnings surprise of 10.34%, on average.
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