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Inspite of the optimistic start by the big banks this earnings season, looking at projected estimates in our Earnings Preview for the still-to-report 464 companies, total S&P 500 earnings are expected to be down 8.6% on the back of a 5.6% decline in revenues. It seems the quarter is on track to be the fifth consecutive quarter of earnings decline.
The earnings season is yet to take off for the industrial products sector (one of the 16 broad Zacks sectors), with companies gearing up to play the beat-and-miss game this week. The report reveals that the sector's earnings are projected to fall 8.6% this quarter. Though still in the negative territory, the projected decline is much narrower than the 22.2% plunge witnessed in the first quarter. The decline will be more broad-based, with 9 out of the 16 Zacks sectors expected to remain in the negative territory.
Industrial production increased 0.6% in June, after declining 0.3% in May. In the second quarter, industrial production suffered its third consecutive quarterly decline, falling at an annual rate of 1%. Industrial demand remained challenged in the quarter, hurt by the weak global oil & gas markets. Capacity utilization is decreasing, reflecting slow industrial capex spending. On the positive side, market conditions were favorable in the U.S. construction space.
The International Monetary Fund (“IMF”) has reduced its growth projections for the U.S. economy by 20 basis points (bps), to 2.6% for 2016. As per the organization, overall activity remains strong in the United States, supported by still-easy financial conditions and strengthening housing and labor markets. However, a stronger dollar and weaker oil prices continue are likely to weigh on manufacturing activity, curtailing investment in mining structures and equipment.
With plenty of companies coming out with their results starting this week, let’s see how it unfolds for these three industrial players that are going to report their first-quarter numbers on Tuesday, Jul 19, 2016.
W.W. Grainger, Inc. (GWW - Free Report) , the provider of maintenance, repair, and operating (MRO) supplies, beat both on earnings and revenues in the last quarter. The company has an average earnings beat of 7.24% in the trailing four quarters.
While the company will benefit from acquisitions and focus on restructuring activities, weak monthly sales, lower oil and gas prices, currency headwinds and weak macroeconomic conditions in Canada will weigh on near-term results. The Zacks Consensus Estimate for earnings for the second quarter is $3.19 per share, reflecting a 2.50% year-over-year decline. Grainger has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). (Read More: Will Soft Monthly Sales Drag Grainger's Q2 Earnings?).
Belden, Inc. (BDC - Free Report) , which designs, manufactures, and markets signal transmission solutions worldwide, also surpassed both earnings and revenues in the last quarter. The company effectively beat the Zacks Consensus Estimate in all the last four quarters, averaging 4.77%. The company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold).
For the second quarter, the Zacks Consensus Estimate stands at $1.26, reflecting a 4.13% year-over-year increase and within the company’s guidance of $1.20 to $1.30.
The company’s industrial platforms will continue to experience market softness, while productivity measures undertaken by the company will help mitigate much of the impact on earnings. Its broadband, enterprise and network security businesses will continue to perform well and benefit from favorable end-market conditions. However, though backlog and order rates were strong, lower oil prices and a stronger US dollar remained headwinds.
Cintas Corporation (CTAS - Free Report) , that provides corporate identity uniforms and related business services primarily in North America, Latin America, Europe, and Asia, beat on both the top and bottom line last quarter. The company has an average positive earnings surprise of 4.51% in the last four quarters. The company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
In the quarter, Cintas is expected to achieve broad-based revenue growth with persistent improvements in the pricing environment and higher operational efficiency. Further, increasing the existing customer penetration level and broadening the customer base to include business segments that are not historically served, will help boost revenues. A more favorable pricing scenario and cost-streamlining initiatives are expected to drive incremental margins. (Read more: Can Cintas (CTAS - Free Report) Beat Earnings Estimate Yet Again in Q4?)
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Industrial Product Stocks' Earnings Preview: BDC, CTAS, GWW
Inspite of the optimistic start by the big banks this earnings season, looking at projected estimates in our Earnings Preview for the still-to-report 464 companies, total S&P 500 earnings are expected to be down 8.6% on the back of a 5.6% decline in revenues. It seems the quarter is on track to be the fifth consecutive quarter of earnings decline.
The earnings season is yet to take off for the industrial products sector (one of the 16 broad Zacks sectors), with companies gearing up to play the beat-and-miss game this week. The report reveals that the sector's earnings are projected to fall 8.6% this quarter. Though still in the negative territory, the projected decline is much narrower than the 22.2% plunge witnessed in the first quarter. The decline will be more broad-based, with 9 out of the 16 Zacks sectors expected to remain in the negative territory.
Industrial production increased 0.6% in June, after declining 0.3% in May. In the second quarter, industrial production suffered its third consecutive quarterly decline, falling at an annual rate of 1%. Industrial demand remained challenged in the quarter, hurt by the weak global oil & gas markets. Capacity utilization is decreasing, reflecting slow industrial capex spending. On the positive side, market conditions were favorable in the U.S. construction space.
The International Monetary Fund (“IMF”) has reduced its growth projections for the U.S. economy by 20 basis points (bps), to 2.6% for 2016. As per the organization, overall activity remains strong in the United States, supported by still-easy financial conditions and strengthening housing and labor markets. However, a stronger dollar and weaker oil prices continue are likely to weigh on manufacturing activity, curtailing investment in mining structures and equipment.
With plenty of companies coming out with their results starting this week, let’s see how it unfolds for these three industrial players that are going to report their first-quarter numbers on Tuesday, Jul 19, 2016.
W.W. Grainger, Inc. (GWW - Free Report) , the provider of maintenance, repair, and operating (MRO) supplies, beat both on earnings and revenues in the last quarter. The company has an average earnings beat of 7.24% in the trailing four quarters.
GRAINGER W W Price and EPS Surprise
GRAINGER W W Price and EPS Surprise | GRAINGER W W Quote
While the company will benefit from acquisitions and focus on restructuring activities, weak monthly sales, lower oil and gas prices, currency headwinds and weak macroeconomic conditions in Canada will weigh on near-term results. The Zacks Consensus Estimate for earnings for the second quarter is $3.19 per share, reflecting a 2.50% year-over-year decline. Grainger has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). (Read More: Will Soft Monthly Sales Drag Grainger's Q2 Earnings?).
Belden, Inc. (BDC - Free Report) , which designs, manufactures, and markets signal transmission solutions worldwide, also surpassed both earnings and revenues in the last quarter. The company effectively beat the Zacks Consensus Estimate in all the last four quarters, averaging 4.77%. The company has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold).
BELDEN INC Price and EPS Surprise
BELDEN INC Price and EPS Surprise | BELDEN INC Quote
For the second quarter, the Zacks Consensus Estimate stands at $1.26, reflecting a 4.13% year-over-year increase and within the company’s guidance of $1.20 to $1.30.
The company’s industrial platforms will continue to experience market softness, while productivity measures undertaken by the company will help mitigate much of the impact on earnings. Its broadband, enterprise and network security businesses will continue to perform well and benefit from favorable end-market conditions. However, though backlog and order rates were strong, lower oil prices and a stronger US dollar remained headwinds.
Cintas Corporation (CTAS - Free Report) , that provides corporate identity uniforms and related business services primarily in North America, Latin America, Europe, and Asia, beat on both the top and bottom line last quarter. The company has an average positive earnings surprise of 4.51% in the last four quarters. The company has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell).
CINTAS CORP Price and EPS Surprise
CINTAS CORP Price and EPS Surprise | CINTAS CORP Quote
In the quarter, Cintas is expected to achieve broad-based revenue growth with persistent improvements in the pricing environment and higher operational efficiency. Further, increasing the existing customer penetration level and broadening the customer base to include business segments that are not historically served, will help boost revenues. A more favorable pricing scenario and cost-streamlining initiatives are expected to drive incremental margins. (Read more: Can Cintas (CTAS - Free Report) Beat Earnings Estimate Yet Again in Q4?)
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