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Hillenbrand (HI) to Report Q4 Earnings: What's in Store?

HI MIDD ENS MRC

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Hillenbrand Inc. (HI - Free Report) , the holding company for Batesville Casket Company, a leader in the North American death care industry, is set to report fourth-quarter fiscal 2016 results on Nov 16. Last quarter, this global diversified industrial company posted a positive earnings surprise of 3.92%.

However, it has posted negative surprises in three of the trailing four quarters with an average of 6.32%.

Let’s see how things are shaping up prior to this announcement.

HILLENBRAND INC Price, Consensus and EPS Surprise

HILLENBRAND INC Price, Consensus and EPS Surprise | HILLENBRAND INC Quote

Factors to Consider

Hillenbrand’s focus on acquisitions, its global presence and margin expansion through operational improvement have been driving earnings since the past few quarters.

Hillenbrand’s acquisition of Red Valve Company, a global leader in highly-engineered valves in Feb 2016 is complementing the buyout of ABEL, completed in Nov 2015. Both the acquisitions have marked a significant presence in the flow control market and boosted margins. We expect these buyouts to boost growth in the to-be-reported quarter as well.

However, Hillenbrand has been facing certain challenges over the past year, including unfavorable currency, deficit environment for capital investments and a slowdown in some key markets, especially China.

Additionally, the company projects lower volume in the burial market this year due to an increase in cremation rate. Management continues to expect challenging end markets for the Process Equipment Group and Batesville in fiscal 2016.

Also, order volume fell short of expectations in the third quarter, particularly in the area of large systems projects, resulting in lower-than-anticipated backlog heading into the fourth quarter.  While project pipeline activity level remains solid, increased uncertainty stemming from general economic conditions is leading to extended customer decision timelines. This has had a greater-than-expected impact on order timing.  

Earnings Whispers

Our proven model does not conclusively show that Hillenbrand is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP for Hillenbrand is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 57 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Hillenbrand’s Zacks Rank #3 increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Stocks in the industrial sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

EnerSys (ENS - Free Report) , with an Earnings ESP of +2.86% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

MRC Global Inc. (MRC - Free Report) , with an Earnings ESP of +10.00% and a Zacks Rank #2.

Middleby Corp. (MIDD - Free Report) , with an Earnings ESP of +1.60% and a Zacks Rank #2.

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