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Industrial Stocks Earnings Queued for Aug 1: EMR, ETN & XYL

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A few industrial products companies are gearing up to report quarterly numbers on Aug 1. The Q2 earnings season is in full swing, with about 286 S&P 500 companies having already reported results, reconfirming broad-based expectations of better-than-expected earnings (as on Jul 28).

Earnings of these companies (accounting for 68.8% of the index’s total market capitalization) are up 11.3% on 6.1% higher revenues. Of these companies, 74.5% have surpassed earnings estimates, with 69.2% coming ahead of revenue estimates.

As per our latest Earnings Preview, dated Jul 28, data projects that the total earnings for the S&P 500 companies are now on track to grow an impressive 9.2% from the year-ago period, on 5% 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 anticipated 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 17.6% in the quarter, on 13.8% higher sales compared with the last year.

Industrial products stocks have performed well in second-quarter 2017, with the industry gaining roughly 4.7%, outperforming the S&P 500’s rally of 2.7% (Apr 1 to Jun 30). 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 companies are positioned, ahead of their scheduled announcements tomorrow:

Emerson Electric Company (EMR - Free Report) is engaged principally in the worldwide design, manufacture, and sale of a broad range of electrical, electromechanical and electronic products and systems. The company has a modest earnings surprise history, having beaten estimates twice in the trailing four quarters, for an average positive surprise of 4.3%. In the last reported quarter, the company reported in-line earnings.

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 +2.94% (the Most Accurate estimate of 70 cents being higher than the Zacks Consensus Estimate of 68 cents), in addition to the favorable Zacks Rank.(For more details, read: Emerson to Report Q3 Earnings: Is a Beat in Store?).

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 3. It should be noted 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Emerson Electric Company Price, Consensus and EPS Surprise

 

Similarly, we expect Eaton Corporation, PLC (ETN - Free Report) to outperform estimates when it reports quarterly results tomorrow. The power management company has a decent earnings surprise history, having beaten estimates thrice in the trailing four quarters, for an average positive surprise of 3.3%. In the last reported quarter, the company surpassed estimates by 10.3%.

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 +1.72% and a favorable Zacks Rank #3 indicate that Eaton Corporation’s earnings will likely beat estimates this quarter. Its Most Accurate estimate of $1.18 is higher than the Zacks Consensus Estimate of $1.16. (Read more here: Can Eaton Keep Earnings Surprise Streak Alive in Q2?)

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

Eaton Corporation, PLC Price, Consensus and EPS Surprise

 

Xylem Inc. (XYL - Free Report) provides water technology solutions, water and wastewater treatment solutions, and industrial pumps and related technologies. The company has a modest earnings surprise history, having beaten estimates thrice in the trailing four quarters, for an average positive surprise of 0.1%. In the last reported quarter, the company missed estimates by 5.1%.

We do not expect Xylem 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 57 cents. (For more details, read: What's in the Offing for Xylem this Earnings Season?)

Xylem Inc. Price, Consensus and EPS Surprise

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

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Emerson Electric Company (EMR) - free report >>

Eaton Corporation, PLC (ETN) - free report >>

Xylem Inc. (XYL) - free report >>


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