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The earnings season is off to a flying start with equity markets scaling record highs, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump's tax reform signed into law. However, the performance has been a mixed bag for industrials companies, with some beating market expectations, while a few failing to do so.
Shares of General Electric Company declined around 2.4% on Jan 24, 2018, as it failed to beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues of $31.402 billion decreased 5.1% in fourth-quarter 2017 on a year-over-year basis. Moreover, revenues decreased 6.2% on a sequential basis and came in below the Zacks Consensus Estimate of $32.693 billion. For full-year 2017, the company reported a loss of $1.13 per share against a profit of $0.40 per share in the prior period. It reported revenues of $31.402 billion in 2017 compared with $33.088 billion in the prior year.
General Electric reported non-GAAP earnings per share (EPS) of $0.27 for fourth-quarter 2017, decreasing 41.3% year over year and 6.9% on a sequential basis. Also, it failed to beat the Zacks Consensus Estimate of $0.28. However, GE offered upbeat guidance for 2018, as it expects adjusted EPS in the range of $1.00-$1.07 in 2018.
3M Company
Shares of 3M Company increased more than 2.0% at market close on Jan 25, 2018, after it beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 9.0% in fourth-quarter 2017 on a year-over-year basis. However, revenues decreased 2.2% on a sequential basis. Moreover, revenues of $7.990 billion beat the consensus mark of $7.878 billion. Revenues for full-year 2017 were $31.657 billion compared with $30.109 billion in the prior year. Non-GAAP earnings per share increased 12.4% year over year in 2017 to $9.17.
3M Company reported non-GAAP earnings per share (EPS) of $2.10 for fourth-quarter 2017, increasing 11.7% year over year but decreasing 9.9% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $2.03. The company now expects earnings for 2018 in the range of $10.20 to $10.70 per share, up from earlier projections of $9.60–$10.00.
Honeywell
Shares of Honeywell increased almost 1.9% at market close on Jan 26, 2018, after it surpassed the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 8.6% in fourth-quarter 2017 on a year-over-year basis. Also, revenues increased 7.1% on a sequential basis. Moreover, revenues of $10.843 billion beat the consensus mark of $10.689 billion. Revenues for full-year 2017 were $40.534 billion compared with $39.302 billion in the prior year. Non-GAAP earnings per share increased to $7.11 in 2017 from $6.46 in 2016.
Honeywell reported non-GAAP earnings per share (EPS) of $1.85 in fourth-quarter 2017, increasing 6.3% year over year and 5.7% on a sequential basis. It surpassed the Zacks Consensus Estimate of $1.84. Moreover, Honeywell updated full-year 2018 EPS guidance range to $7.75-$8.00 per share, up from earlier expectations of $7.55−$7.80.
Caterpillar Inc
Shares of Caterpillar increased 0.3% at market close on Jan 25, 2018. Although fears of a trade war weighed on the stock’s performance, it bounced back after the company surpassed the Zacks Consensus Estimate on both earnings and revenues. President Donald Trump imposed a 30% tariff on solar power imports recently, sparking fears among analysts that steel and aluminum imports may be next.
The company’s revenues increased 34.7% in fourth-quarter 2017 on a year-over-year basis. Moreover, revenues increased 13.0% on a sequential basis. Revenues of $12.896 billion beat the consensus mark of $12.012 billion. Revenues for full-year 2017 were $2.689 billion compared with $2.595 billion in the prior year. Adjusted earnings per share increased to $6.88 in fiscal 2017 from $3.42 in the prior period.
Caterpillar reported non-GAAP earnings per share (EPS) of $2.16 for fourth-quarter 2017, increasing 160% year over year and 10.8% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $1.77. Moreover, Caterpillar initiated adjusted earnings per share guidance to the range of $8.25-$9.25 for 2018.
Union Pacific
Shares of Union Pacific decreased almost 5.4% at market close on Jan 26, 2018, after surpassing the Zacks Consensus Estimate on revenues but failing to beat the earnings consensus.
The company’s revenues increased 5.5% in fourth-quarter 2017 on a year-over-year basis. Also, revenues increased 0.8% on a sequential basis. Revenues of $5.450 billion beat the consensus mark of $5.409 billion. Revenues for full-year 2017 were $21.2 billion compared with $19.9 billion in the prior year. Adjusted earnings per share increased to $5.79 in fiscal 2017, up 14% from the prior period.
Union Pacific reported non-GAAP earnings per share (EPS) of $1.53 for fourth-quarter 2017, up 10.1% year over year and 2.0% on a sequential basis. It missed the Zacks Consensus Estimate of $1.54.
In the current scenario, we believe it is prudent to discuss the following ETFs that have a relatively high exposure to the industrial companies discussed (see all Industrial ETFs here).
This fund focuses on providing exposure to the U.S. industrial sector. It has AUM of $15.6 billion and charges a fee of 14 basis points a year. It has a 6.0% allocation to 3M Co, 5.0% to Honeywell, 4.3% to Union Pacific, 4.0% to Caterpillar and 3.9% to General Electric (as of Jan 26, 2018). The fund has returned 27.4% in a year and 6.6% year to date. XLI has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
This ETF is a pure play on the U.S. industrials sector. It has AUM of $3.9 billion and charges a fee of 10 basis points a year. It has a 5.0% allocation to General Electric, 4.6% to 3M, 3.6% to Honeywell, 3.5% to Union Pacific and 3.1% to Caterpillar (as of Dec 31, 2017). The fund has returned 24.5% in a year and 5.9% year to date. VIS has a Zacks ETF Rank of 3 with a Medium risk outlook.
This ETF is a relatively costly bet on the U.S. industrial sector. It has AUM of $1.3 billion and charges a fee of 44 basis points a year. It has a 4.2% allocation to 3M Co, 3.8% to General Electric, 3.4% to Honeywell, 2.9% to Union Pacific and 2.7% to Caterpillar (as of Jan 26, 2018). The fund has returned 28.7% in a year and 7.3% year to date. IYJ has a Zacks ETF Rank of 3 with a Medium risk outlook.
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Industrials ETFs in Focus on Q4 Earnings
The earnings season is off to a flying start with equity markets scaling record highs, owing to a slew of upbeat economic data, strong corporate performance and President Donald Trump's tax reform signed into law. However, the performance has been a mixed bag for industrials companies, with some beating market expectations, while a few failing to do so.
We will now discuss the performance of a few industrials giants such as General Electric (GE - Free Report) , 3M Company (MMM - Free Report) , Honeywell (HON - Free Report) , Caterpillar Inc (CAT - Free Report) and Union Pacific (UNP - Free Report) .
General Electric
Shares of General Electric Company declined around 2.4% on Jan 24, 2018, as it failed to beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues of $31.402 billion decreased 5.1% in fourth-quarter 2017 on a year-over-year basis. Moreover, revenues decreased 6.2% on a sequential basis and came in below the Zacks Consensus Estimate of $32.693 billion. For full-year 2017, the company reported a loss of $1.13 per share against a profit of $0.40 per share in the prior period. It reported revenues of $31.402 billion in 2017 compared with $33.088 billion in the prior year.
General Electric reported non-GAAP earnings per share (EPS) of $0.27 for fourth-quarter 2017, decreasing 41.3% year over year and 6.9% on a sequential basis. Also, it failed to beat the Zacks Consensus Estimate of $0.28. However, GE offered upbeat guidance for 2018, as it expects adjusted EPS in the range of $1.00-$1.07 in 2018.
3M Company
Shares of 3M Company increased more than 2.0% at market close on Jan 25, 2018, after it beat the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 9.0% in fourth-quarter 2017 on a year-over-year basis. However, revenues decreased 2.2% on a sequential basis. Moreover, revenues of $7.990 billion beat the consensus mark of $7.878 billion. Revenues for full-year 2017 were $31.657 billion compared with $30.109 billion in the prior year. Non-GAAP earnings per share increased 12.4% year over year in 2017 to $9.17.
3M Company reported non-GAAP earnings per share (EPS) of $2.10 for fourth-quarter 2017, increasing 11.7% year over year but decreasing 9.9% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $2.03. The company now expects earnings for 2018 in the range of $10.20 to $10.70 per share, up from earlier projections of $9.60–$10.00.
Honeywell
Shares of Honeywell increased almost 1.9% at market close on Jan 26, 2018, after it surpassed the Zacks Consensus Estimate on both earnings and revenues.
The company’s revenues increased 8.6% in fourth-quarter 2017 on a year-over-year basis. Also, revenues increased 7.1% on a sequential basis. Moreover, revenues of $10.843 billion beat the consensus mark of $10.689 billion. Revenues for full-year 2017 were $40.534 billion compared with $39.302 billion in the prior year. Non-GAAP earnings per share increased to $7.11 in 2017 from $6.46 in 2016.
Honeywell reported non-GAAP earnings per share (EPS) of $1.85 in fourth-quarter 2017, increasing 6.3% year over year and 5.7% on a sequential basis. It surpassed the Zacks Consensus Estimate of $1.84. Moreover, Honeywell updated full-year 2018 EPS guidance range to $7.75-$8.00 per share, up from earlier expectations of $7.55−$7.80.
Caterpillar Inc
Shares of Caterpillar increased 0.3% at market close on Jan 25, 2018. Although fears of a trade war weighed on the stock’s performance, it bounced back after the company surpassed the Zacks Consensus Estimate on both earnings and revenues. President Donald Trump imposed a 30% tariff on solar power imports recently, sparking fears among analysts that steel and aluminum imports may be next.
The company’s revenues increased 34.7% in fourth-quarter 2017 on a year-over-year basis. Moreover, revenues increased 13.0% on a sequential basis. Revenues of $12.896 billion beat the consensus mark of $12.012 billion. Revenues for full-year 2017 were $2.689 billion compared with $2.595 billion in the prior year. Adjusted earnings per share increased to $6.88 in fiscal 2017 from $3.42 in the prior period.
Caterpillar reported non-GAAP earnings per share (EPS) of $2.16 for fourth-quarter 2017, increasing 160% year over year and 10.8% on a sequential basis. Also, it beat the Zacks Consensus Estimate of $1.77. Moreover, Caterpillar initiated adjusted earnings per share guidance to the range of $8.25-$9.25 for 2018.
Union Pacific
Shares of Union Pacific decreased almost 5.4% at market close on Jan 26, 2018, after surpassing the Zacks Consensus Estimate on revenues but failing to beat the earnings consensus.
The company’s revenues increased 5.5% in fourth-quarter 2017 on a year-over-year basis. Also, revenues increased 0.8% on a sequential basis. Revenues of $5.450 billion beat the consensus mark of $5.409 billion. Revenues for full-year 2017 were $21.2 billion compared with $19.9 billion in the prior year. Adjusted earnings per share increased to $5.79 in fiscal 2017, up 14% from the prior period.
Union Pacific reported non-GAAP earnings per share (EPS) of $1.53 for fourth-quarter 2017, up 10.1% year over year and 2.0% on a sequential basis. It missed the Zacks Consensus Estimate of $1.54.
In the current scenario, we believe it is prudent to discuss the following ETFs that have a relatively high exposure to the industrial companies discussed (see all Industrial ETFs here).
Industrial Select Sector SPDR Fund (XLI - Free Report)
This fund focuses on providing exposure to the U.S. industrial sector. It has AUM of $15.6 billion and charges a fee of 14 basis points a year. It has a 6.0% allocation to 3M Co, 5.0% to Honeywell, 4.3% to Union Pacific, 4.0% to Caterpillar and 3.9% to General Electric (as of Jan 26, 2018). The fund has returned 27.4% in a year and 6.6% year to date. XLI has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Vanguard Industrials ETF (VIS - Free Report)
This ETF is a pure play on the U.S. industrials sector. It has AUM of $3.9 billion and charges a fee of 10 basis points a year. It has a 5.0% allocation to General Electric, 4.6% to 3M, 3.6% to Honeywell, 3.5% to Union Pacific and 3.1% to Caterpillar (as of Dec 31, 2017). The fund has returned 24.5% in a year and 5.9% year to date. VIS has a Zacks ETF Rank of 3 with a Medium risk outlook.
iShares U.S. Industrials ETF (IYJ - Free Report)
This ETF is a relatively costly bet on the U.S. industrial sector. It has AUM of $1.3 billion and charges a fee of 44 basis points a year. It has a 4.2% allocation to 3M Co, 3.8% to General Electric, 3.4% to Honeywell, 2.9% to Union Pacific and 2.7% to Caterpillar (as of Jan 26, 2018). The fund has returned 28.7% in a year and 7.3% year to date. IYJ has a Zacks ETF Rank of 3 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>