Back to top

Image: Bigstock

Machinery Stocks' Q2 Earnings to Watch on Jul 24: ITW & SWK

Read MoreHide Full Article

Machinery stocks have been strong performers since the beginning of second-quarter 2017 with the industry gaining roughly 10.55%, outperforming the S&P 500’s rally of 3.09%. We believe that the outperformance was driven by expectations of increased infrastructure spending and growth-friendly policies like better trade relations, job creation and high consumer-end demand, of the government.

In addition, few economic indicators have pointed toward healthy operating conditions in the industry. Industrial production – a measure of the level of output of manufacturing, mining and utilities sectors in a country – grew at an annual rate of 4.7% in the second quarter, driven by impressive growth in mining and utilities. Also, new orders for U.S.-manufactured machinery increased 4.6% in the first five months of 2017.

According to the Zacks Industry classification, the machinery industry is broadly grouped under Industrial Products, one of the 16 broad Zacks sectors. Below we briefly discuss the broader sectors’ earnings trend so far in the second quarter.

Per the latest Earnings Trends dated Jul 19, 2017, roughly 4.5% of Industrial stocks that reported their second-quarter results as of Jul 19 recorded 2% year-over-year growth in revenues. Collectively, earnings for these stocks have fallen 10.1%.    

Considering the results of all the Industrial stocks on the S&P 500, earnings for the sector are predicted to increase 13.4% while revenues will grow 12.8%.

What’s in Store for 2 Machinery Stocks, ITW & SWK in the Quarter?

Below we discuss briefly the expectations from the two machinery stocks slated to report their second-quarter numbers on Jul 24:

Illinois Tool Works Inc. (ITW - Free Report) : The company will release results before the market opens. It recorded better-than-expected results in all the four trailing quarters, pulling off an average positive earnings surprise of 3.16%.

Illinois Tool Works Inc. Price and EPS Surprise

 

Illinois Tool Works Inc. Price and EPS Surprise | Illinois Tool Works Inc. Quote

Our proven model shows that Illinois Tool Works is likely to beat earnings this quarter as it currently carries a Zacks Rank #2 (Buy) and +1.23% Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate). We believe that the company will gain from its focus on business structure simplification, portfolio management and sourcing strategies as well as synergistic benefits from acquired assets.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

For a possible earnings beat, the company should have the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Over the last 60 days, the Zacks Consensus Estimate for the second quarter remained   stable at $1.63. (For more please read: Can Illinois Tool Works Beat Earnings Estimates in Q2?)

Stanley Black & Decker, Inc. (SWK - Free Report) : The company is expected to release results before the market opens. It reported better-than-expected results in each of the last four quarters, with an average positive earnings surprise of 5.38%.

Our proven model shows the company is likely to beat earnings this quarter because it currently carries a Zacks Rank #3 and a +1.53% Earnings ESP. We believe that the company will reap benefits from constant innovation of new products and development of existing ones within the Industrial, Security and Tools & Storage segments. Also, its restructuring activities in the past few months might positively influence the quarter’s results.

Over the last 60 days, the Zacks Consensus Estimate for the stock remained stable at $1.96. (For more please read: Stanley Black & Decker Q2 Earnings: What's in Store?)

Stay tuned! Check back on our full write-up on earnings release of these stocks.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


Illinois Tool Works Inc. (ITW) - $25 value - yours FREE >>

Stanley Black & Decker, Inc. (SWK) - $25 value - yours FREE >>

Published in