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4 Industrial Stocks Set to Outpace Q1 Earnings Estimates
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The Zacks Industrial Products sector is anticipated to have performed well in the January-March quarter of 2022, backed by a solid demand environment and growth in e-commerce activities. However, supply-chain bottlenecks, cost inflation and labor issues are likely to have affected the sector’s performance.
Per the latest Earnings Trend report, the Industrial Products sector’s first-quarter earnings are anticipated to witness year-over-year growth of 3.7%, lower than 8.6% rise recorded in the previous quarter. The sector’s revenues are projected to increase 11%, while margins are expected to decline 0.9%. The October-December quarter had witnessed 10.3% revenue growth and a 0.2% decline in margin.
Let us discuss the factors that might have played a key role in shaping the performance of industrial stocks in the quarter.
Key Factors to Consider for Industrial Stocks
The operating environment for industrial companies has been favorable in the January-March quarter, courtesy of higher manufacturing activities with more businesses operating at an increased level, supported by growth in demand for industrial products and services. Per the latest Institute for Supply Management’s (“ISM”) report released on Apr 1, the Purchasing Managers Index (PMI) registered 57.6%, 58.6% and 57.1% in January, February and March, respectively. ISM’s measure of production in March was 54.5%, reflecting growth for the 22nd consecutive month. Also, the new orders index was 53.8%, indicating the 22nd successive month of increase. It’s worth noting here that in the to-be-reported quarter, the United States’ industrial production recorded an annual increase of 8.1%, with factory output rising 5.4%.
Growth in demand for products across several end markets, including water treatment, process automation and residential heating, ventilation and air conditioning end markets, is anticipated to have been a tailwind for some companies. Also, the companies are likely to have benefited from focus on product innovation, multiple promotional efforts, effective pricing and cost-management actions.
Despite the positives, the lingering impact of the pandemic-led challenges is likely to have weighed on the sector’s performance. Also, shortages in the supply of semiconductor chips and components, inflation in raw materials and other costs, along with logistic and labor issues, are likely to have affected the margins and profitability of the sector participants.
Earnings ESP is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
The combination of a favorable ranking and positive ESP increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Below we have listed four industrial stocks, with the right combination of elements to post an earnings beat in the first quarter:
Illinois Tool Works Inc. (ITW - Free Report) : Headquartered in Glenview, IL, the company is a worldwide manufacturer of highly engineered products and specialty systems. It is anticipated to have benefited from its diversified businesses, solid product offerings and strong market presence. Also, its strong innovation capabilities, acquired assets and healthy liquidity position are likely to have been tailwinds.
ITW presently carries a Zacks Rank #3 and has an Earnings ESP of +0.46%. The Zacks Consensus Estimate for the to-be-reported quarter has been stable at $2.07 in the past 60 days.
Illinois Tool will release its quarterly results on May 3, before market open.
Stanley Black & Decker, Inc. (SWK - Free Report) : Headquartered in New Britain, CT, the company manufactures and provides tools (power and hand tools) and related accessories, engineered fastening systems and several other items and services. In the first quarter, it is likely to have benefited from solid product offerings, a positive e-commerce trend and strengthening demand in end markets. The MTD Holdings and Excel Industries buyouts are expected to have boosted its performance. Inflation on logistics and other costs and high growth investments expenses might have played spoilsport.
SWK currently has a Zacks Rank #3 and an Earnings ESP of +0.18%. The Zacks Consensus Estimate for first-quarter earnings has declined 2.3% to $1.68 in the past 60 days.
Stanley Black is expected to release its results on Apr 28, before market open.
Stanley Black & Decker, Inc. Price and EPS Surprise
A. O. Smith Corporation (AOS - Free Report) : Based in Milwaukee, WI, the company is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products in the world. The company is likely to have benefited from robust demand for products, supported by its strong retail and direct-to-consumer sales channel and pricing actions. Its healthy liquidity position and dedicated capital deployment strategies are also likely to have been tailwinds.
AOS presently carries a Zacks Rank #3 and has an Earnings ESP of +0.67%. The Zacks Consensus Estimate for the to-be-reported quarter has been stable at 75 cents in the past 60 days.
A. O. Smith will release its quarterly results on Apr 28, before market open.
Sealed Air Corporation (SEE - Free Report) : Based in Charlotte, NC, the company is a global leader in food safety and security and product protection. It caters to a diverse set of end markets, including food and beverage processing, food service, retail, healthcare and industrial. Sealed Air is expected to have gained from healthy demand for automated equipment and sustainable packaging solutions along with a focus on product innovation, investment in automation and acquired assets in the first quarter. However, supply chain challenges and higher input costs might have weighed on its margins.
SEE currently has a Zacks Rank #3 and an Earnings ESP of +1.24%. The Zacks Consensus Estimate for first-quarter earnings has been stable at 92 cents in the past 60 days.
Sealed Air is expected to release results on May 3, before market open.
Image: Bigstock
4 Industrial Stocks Set to Outpace Q1 Earnings Estimates
The Zacks Industrial Products sector is anticipated to have performed well in the January-March quarter of 2022, backed by a solid demand environment and growth in e-commerce activities. However, supply-chain bottlenecks, cost inflation and labor issues are likely to have affected the sector’s performance.
Per the latest Earnings Trend report, the Industrial Products sector’s first-quarter earnings are anticipated to witness year-over-year growth of 3.7%, lower than 8.6% rise recorded in the previous quarter. The sector’s revenues are projected to increase 11%, while margins are expected to decline 0.9%. The October-December quarter had witnessed 10.3% revenue growth and a 0.2% decline in margin.
Let us discuss the factors that might have played a key role in shaping the performance of industrial stocks in the quarter.
Key Factors to Consider for Industrial Stocks
The operating environment for industrial companies has been favorable in the January-March quarter, courtesy of higher manufacturing activities with more businesses operating at an increased level, supported by growth in demand for industrial products and services. Per the latest Institute for Supply Management’s (“ISM”) report released on Apr 1, the Purchasing Managers Index (PMI) registered 57.6%, 58.6% and 57.1% in January, February and March, respectively. ISM’s measure of production in March was 54.5%, reflecting growth for the 22nd consecutive month. Also, the new orders index was 53.8%, indicating the 22nd successive month of increase. It’s worth noting here that in the to-be-reported quarter, the United States’ industrial production recorded an annual increase of 8.1%, with factory output rising 5.4%.
Growth in demand for products across several end markets, including water treatment, process automation and residential heating, ventilation and air conditioning end markets, is anticipated to have been a tailwind for some companies. Also, the companies are likely to have benefited from focus on product innovation, multiple promotional efforts, effective pricing and cost-management actions.
Despite the positives, the lingering impact of the pandemic-led challenges is likely to have weighed on the sector’s performance. Also, shortages in the supply of semiconductor chips and components, inflation in raw materials and other costs, along with logistic and labor issues, are likely to have affected the margins and profitability of the sector participants.
4 Stocks Poised for Earnings Beat This Season
Investors looking for options in the sector can select stocks with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings ESP is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
The combination of a favorable ranking and positive ESP increases the odds of an earnings beat.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Below we have listed four industrial stocks, with the right combination of elements to post an earnings beat in the first quarter:
Illinois Tool Works Inc. (ITW - Free Report) : Headquartered in Glenview, IL, the company is a worldwide manufacturer of highly engineered products and specialty systems. It is anticipated to have benefited from its diversified businesses, solid product offerings and strong market presence. Also, its strong innovation capabilities, acquired assets and healthy liquidity position are likely to have been tailwinds.
ITW presently carries a Zacks Rank #3 and has an Earnings ESP of +0.46%. The Zacks Consensus Estimate for the to-be-reported quarter has been stable at $2.07 in the past 60 days.
Illinois Tool will release its quarterly results on May 3, before market open.
Illinois Tool Works Inc. Price and EPS Surprise
Illinois Tool Works Inc. price-eps-surprise | Illinois Tool Works Inc. Quote
Stanley Black & Decker, Inc. (SWK - Free Report) : Headquartered in New Britain, CT, the company manufactures and provides tools (power and hand tools) and related accessories, engineered fastening systems and several other items and services. In the first quarter, it is likely to have benefited from solid product offerings, a positive e-commerce trend and strengthening demand in end markets. The MTD Holdings and Excel Industries buyouts are expected to have boosted its performance. Inflation on logistics and other costs and high growth investments expenses might have played spoilsport.
SWK currently has a Zacks Rank #3 and an Earnings ESP of +0.18%. The Zacks Consensus Estimate for first-quarter earnings has declined 2.3% to $1.68 in the past 60 days.
Stanley Black is expected to release its results on Apr 28, before market open.
Stanley Black & Decker, Inc. Price and EPS Surprise
Stanley Black & Decker, Inc. price-eps-surprise | Stanley Black & Decker, Inc. Quote
A. O. Smith Corporation (AOS - Free Report) : Based in Milwaukee, WI, the company is one of the leading manufacturers of commercial and residential water heating equipment and water treatment products in the world. The company is likely to have benefited from robust demand for products, supported by its strong retail and direct-to-consumer sales channel and pricing actions. Its healthy liquidity position and dedicated capital deployment strategies are also likely to have been tailwinds.
AOS presently carries a Zacks Rank #3 and has an Earnings ESP of +0.67%. The Zacks Consensus Estimate for the to-be-reported quarter has been stable at 75 cents in the past 60 days.
A. O. Smith will release its quarterly results on Apr 28, before market open.
A. O. Smith Corporation Price and EPS Surprise
A. O. Smith Corporation price-eps-surprise | A. O. Smith Corporation Quote
Sealed Air Corporation (SEE - Free Report) : Based in Charlotte, NC, the company is a global leader in food safety and security and product protection. It caters to a diverse set of end markets, including food and beverage processing, food service, retail, healthcare and industrial. Sealed Air is expected to have gained from healthy demand for automated equipment and sustainable packaging solutions along with a focus on product innovation, investment in automation and acquired assets in the first quarter. However, supply chain challenges and higher input costs might have weighed on its margins.
SEE currently has a Zacks Rank #3 and an Earnings ESP of +1.24%. The Zacks Consensus Estimate for first-quarter earnings has been stable at 92 cents in the past 60 days.
Sealed Air is expected to release results on May 3, before market open.
Sealed Air Corporation Price and EPS Surprise
Sealed Air Corporation price-eps-surprise | Sealed Air Corporation Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.