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Industrial Products Stocks Earnings Lineup: FLS, AGCO & More

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A few industrial products companies are gearing up to report quarterly numbers on Jul 27. The Q1 earnings season is in full swing, with about 128 S&P 500 companies having already reported results, reconfirming broad-based expectations of better-than-expected earnings (as on Jul 25).

Earnings of these companies (accounting for 36.1% of the index’s total market capitalization) are up 7% on 4.2% higher revenues. (For more details, read our latest Earnings Outlook: Sizing Up the Q2 Earning Season). Of these companies, 77.3% have surpassed earnings estimates, with 70.3% coming ahead of revenue estimates.

As per our latest Earnings Preview, dated Jul 21, data projects that the total earnings for the S&P 500 companies are now on track to grow an impressive 8.6% from the year-ago period, on 4.7% higher revenues. This is comparable to earnings growth expectations of 5.6% recorded at the beginning of the reporting season.

The Industrial Products space (which accounts for about 2% of the S&P 500 index’s total market capitalization) is expected to chart one of the highest earnings growth rates this quarter amongst all Zacks sectors. In fact, its earnings are on track to be up 14.2% in the quarter, on 12.9% higher sales compared with the last year.

Industrial products stocks have been performing well since the beginning of second-quarter 2017, with the industry gaining roughly 4.7%, outperforming the S&P 500’s rally of 2.7%. We believe that growth-conducive policies of the government and expectations of higher infrastructure spending drove the shares’ performance.

Further, there are economic indicators which point toward a strong operating environment for the industry. Industrial production — which measures the level of output of manufacturing, mining and utilities sectors — grew at an annual rate of 4.7% in the second quarter, led by robust growth in mining and utilities. Additionally, new orders for U.S.-manufactured machinery rose 4.6% in the first five months of 2017, largely for the construction, mining and oil and gas field machinery. These indicators bode well for the industry.

Let’s have a look at how some industrial products companies are positioned, ahead of their scheduled announcements tomorrow:

Flowserve Corporation (FLS - Free Report) designs, manufactures, distributes, and services industrial flow management equipment worldwide. The company has a choppy earnings surprise history, having beaten estimates twice over the trailing four quarters for as many misses, for an average positive surprise of 3.6%. In the last reported quarter, the company surpassed estimates by 25%.

Our quantitative model hints at an earnings beat for this Zacks Rank #3 (Hold) company in Q2. This is because it has an Earnings ESP of +4.55% (the Most Accurate estimate of 46 cents being higher than the Zacks Consensus Estimate of 44 cents), in addition to the favorable Zacks Rank.(For more details, read: Will Flowserve Pull Off a Surprise in Q2 Earnings?).

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 (Buy) or at least 3. Conversely, 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.

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

Flowserve Corporation Price and EPS Surprise

 

Similarly, we expect AGCO Corporation (AGCO - Free Report) to outperform estimates when it reports quarterly results. The company manufactures and distributes agricultural equipment and related replacement parts. It has an impeccable earnings history, having beaten estimates strongly each time over the trailing four quarters, with an average positive surprise of 40.4%. In the last reported quarter, the company exceeded earnings estimates by a whopping 88.2%.

A favorable rank and positive Earnings ESP hint toward an earnings beat this season for the company.For the to-be-reported quarter, the company’s Earnings ESP of +2.89% and a favorable Zacks Rank #1 indicate that AGCO Corporation’s earnings will likely beat estimates this quarter. Its Most Accurate estimate of $1.07 is higher than the Zacks Consensus Estimate of $1.04. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corporation Price and EPS Surprise

 

Allegionplc (ALLE - Free Report) manufactures, and sells mechanical and electronic security products and solutions worldwide. The company has a choppy earnings surprise history, having beaten estimates twice over the trailing four quarters for as many misses, for an average positive surprise of 2%. In the last reported quarter, the company surpassed estimates by 5.8%.

We do not expect Allegion to beat expectations this quarter. Though the company’s Zacks Rank #2 increases the predictive power of ESP, its Earnings ESP of 0.00% makes surprise prediction difficult. The Zacks Consensus Estimate for the quarter is pegged at $1.00.

Allegion PLC Price and EPS Surprise

 

Johnson Controls International plc (JCI - Free Report) operates as a diversified technology and multi industrial company. The company has an impressive earnings surprise history, having beaten estimates thrice in the trailing four quarters, for an average positive surprise of 5.6%. In the last reported quarter, the company’s earnings were in line with estimates.

Our proven model does not conclusively show that Johnson Controlswill likely beat on earnings this quarter as it currently carries a Zacks Rank #4 and -1.41% Earnings ESP (as the Most Accurate estimate of 70 cents is lower than the Zacks Consensus Estimate of 71 cents). (For more details, read: Will Johnson Controls Stock Disappoint in Q3 Earnings?)

Johnson Controls International PLC Price and EPS Surprise

 

Keep an eye on our full earnings articles to see how these players finally fared in quarter.

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