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2 Machinery Stocks That Are Likely to Beat This Earnings Season
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With the fourth-quarter 2022 earnings season well underway, several machinery companies have already reported their financial numbers. Despite a soft demand environment, most companies held up well on the top-line front, owing to pricing actions and strength across key end-markets. The bottom line suffered the impacts of cost inflation and supply chain issues.
Caterpillar Inc. (CAT - Free Report) , one of the world’s largest machinery companies, reported fourth-quarter 2022 adjusted earnings per share of $3.86, which missed the Zacks Consensus Estimate of $3.95. The bottom line soared 43.5% year over year, driven by strong demand across most end markets and favorable price realization.
Caterpillar’s revenues of $16.6 billion surpassed the Zacks Consensus Estimate of $15.9 billion. The top line improved 20% from the year-ago quarter on favorable price realization and increased sales volumes. CAT currently carries a Zacks Rank #2 (Buy).
Some manufacturing companies like Deere & Company (DE - Free Report) and Lincoln Electric (LECO - Free Report) are scheduled to release earnings soon.
Machinery stocks are housed under the broader Zacks Industrial Products sector. Per the latest Earnings Trends report, 76% of the total industrial companies have already reported fourth-quarter earnings numbers, out of which 73.7% beat on earnings and 78.9% beat on revenues. 63.2% of the companies beat on both earnings and revenues.
On the whole, the Industrial Products sector’s fourth-quarter 2022 earnings are expected to climb 11.5% year over year, less than 20.5% increase recorded in the third quarter. The sector’s revenues are projected to increase 11.2% year over year, compared with 13.9% rise recorded in the third quarter.
What’s in Store for the Yet-to-Report Companies?
A soft demand environment, thanks to the slowdown in manufacturing activities, is likely to have weighed on the performance of manufacturing companies. Per the latest Institute for Supply Management (ISM) report, manufacturing activities contracted for the third consecutive month in January, with a decline in New Orders and Production indexes. In January, Manufacturing Purchasing Manager's Index touched 47.4%, 1 percentage point lower than the seasonally adjusted index of 48.4% recorded in December. The adversity can be linked to the Federal Reserve’s continued monetary policy tightening to curtail inflation.
Despite improving, supply chain disruptions continue to be a major headwind for machinery companies. Higher lead times and labor shortages from the supply chain crisis are likely to have hampered earnings performance.
High raw material and logistics costs are likely to have dented the bottom-line performances of machinery companies. Given substantial exposure to international markets, foreign currency headwinds are expected to have affected the top line.
However, pricing actions, cost-control measures and solid backlog levels are expected to have aided performance. Strength across end-markets such as oil & gas, chemical, power, general Industries, mining & construction, energy, transportation, medical and laboratory sciences are expected to have driven top-line performance.
How to Pick Winners?
Given the large number of players operating in the transportation space, picking the right stocks is not an easy task. But our proven model makes it fairly simple. One can shortlist with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they report earnings with our Earnings ESP Filter.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining the stocks with maximum chances of delivering positive earnings surprises in their next announcements. Our research shows that for stocks with this perfect combination, the chances of a beat are as high as 70%.
Our Choices
Below we list two machinery stocks that have the right mix of elements to pull off an earnings surprise this time around.
Deere & Company has an Earnings ESP of +5.20% and a Zacks Rank #2. The company is scheduled to release first-quarter fiscal 2023 earnings numbers on Feb 17.
Deere & Company’s fiscal first-quarter performance is likely to have been aided by demand for its agricultural equipment, thanks to the need for replacing aging equipment. Increased infrastructure spending is likely to have supported demand for construction equipment, thus aiding performance in the to-be-reported quarter. Cost management actions are expected to have supported DE’s margin performance.
Lincoln Electric has an Earnings ESP of +2.71% and a Zacks Rank #3. The company is slated to release fourth-quarter 2022 results on Feb 21.
Lincoln Electric’s fourth-quarter performance is expected to have benefited from improving order rates across end-markets, strong quoting activity and record backlogs for equipment systems and automation solutions. The acquisition of Fori Automation, which has boosted LECO’s automation portfolio, is expected to have driven the top line in the to-be-reported quarter. The company’s efforts to improve its business mix and advance operational excellence are also likely to have buoyed its fourth-quarter performance.
Lincoln Electric Holdings, Inc. Price and EPS Surprise
Image: Bigstock
2 Machinery Stocks That Are Likely to Beat This Earnings Season
With the fourth-quarter 2022 earnings season well underway, several machinery companies have already reported their financial numbers. Despite a soft demand environment, most companies held up well on the top-line front, owing to pricing actions and strength across key end-markets. The bottom line suffered the impacts of cost inflation and supply chain issues.
Caterpillar Inc. (CAT - Free Report) , one of the world’s largest machinery companies, reported fourth-quarter 2022 adjusted earnings per share of $3.86, which missed the Zacks Consensus Estimate of $3.95. The bottom line soared 43.5% year over year, driven by strong demand across most end markets and favorable price realization.
Caterpillar’s revenues of $16.6 billion surpassed the Zacks Consensus Estimate of $15.9 billion. The top line improved 20% from the year-ago quarter on favorable price realization and increased sales volumes. CAT currently carries a Zacks Rank #2 (Buy).
Some manufacturing companies like Deere & Company (DE - Free Report) and Lincoln Electric (LECO - Free Report) are scheduled to release earnings soon.
Machinery stocks are housed under the broader Zacks Industrial Products sector. Per the latest Earnings Trends report, 76% of the total industrial companies have already reported fourth-quarter earnings numbers, out of which 73.7% beat on earnings and 78.9% beat on revenues. 63.2% of the companies beat on both earnings and revenues.
On the whole, the Industrial Products sector’s fourth-quarter 2022 earnings are expected to climb 11.5% year over year, less than 20.5% increase recorded in the third quarter. The sector’s revenues are projected to increase 11.2% year over year, compared with 13.9% rise recorded in the third quarter.
What’s in Store for the Yet-to-Report Companies?
A soft demand environment, thanks to the slowdown in manufacturing activities, is likely to have weighed on the performance of manufacturing companies. Per the latest Institute for Supply Management (ISM) report, manufacturing activities contracted for the third consecutive month in January, with a decline in New Orders and Production indexes. In January, Manufacturing Purchasing Manager's Index touched 47.4%, 1 percentage point lower than the seasonally adjusted index of 48.4% recorded in December. The adversity can be linked to the Federal Reserve’s continued monetary policy tightening to curtail inflation.
Despite improving, supply chain disruptions continue to be a major headwind for machinery companies. Higher lead times and labor shortages from the supply chain crisis are likely to have hampered earnings performance.
High raw material and logistics costs are likely to have dented the bottom-line performances of machinery companies. Given substantial exposure to international markets, foreign currency headwinds are expected to have affected the top line.
However, pricing actions, cost-control measures and solid backlog levels are expected to have aided performance. Strength across end-markets such as oil & gas, chemical, power, general Industries, mining & construction, energy, transportation, medical and laboratory sciences are expected to have driven top-line performance.
How to Pick Winners?
Given the large number of players operating in the transportation space, picking the right stocks is not an easy task. But our proven model makes it fairly simple. One can shortlist with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they report earnings with our Earnings ESP Filter.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining the stocks with maximum chances of delivering positive earnings surprises in their next announcements. Our research shows that for stocks with this perfect combination, the chances of a beat are as high as 70%.
Our Choices
Below we list two machinery stocks that have the right mix of elements to pull off an earnings surprise this time around.
Deere & Company has an Earnings ESP of +5.20% and a Zacks Rank #2. The company is scheduled to release first-quarter fiscal 2023 earnings numbers on Feb 17.
Deere & Company’s fiscal first-quarter performance is likely to have been aided by demand for its agricultural equipment, thanks to the need for replacing aging equipment. Increased infrastructure spending is likely to have supported demand for construction equipment, thus aiding performance in the to-be-reported quarter. Cost management actions are expected to have supported DE’s margin performance.
Deere & Company Price and EPS Surprise
Deere & Company price-eps-surprise | Deere & Company Quote
Lincoln Electric has an Earnings ESP of +2.71% and a Zacks Rank #3. The company is slated to release fourth-quarter 2022 results on Feb 21.
Lincoln Electric’s fourth-quarter performance is expected to have benefited from improving order rates across end-markets, strong quoting activity and record backlogs for equipment systems and automation solutions. The acquisition of Fori Automation, which has boosted LECO’s automation portfolio, is expected to have driven the top line in the to-be-reported quarter. The company’s efforts to improve its business mix and advance operational excellence are also likely to have buoyed its fourth-quarter performance.
Lincoln Electric Holdings, Inc. Price and EPS Surprise
Lincoln Electric Holdings, Inc. price-eps-surprise | Lincoln Electric Holdings, Inc. Quote