The U.S. economy is benefitting from expanding industrial production, favorable tax policy changes implemented in December 2017, rising demand for machinery made within the country and healthy job market. Further, infrastructural development will be beneficial.
Amid all positives, rising trade tension — due to the imposition of import tariffs on steel, aluminum and many other items — between the United States and foreign countries, especially China, is worrying. The protectionism policy of the government had an adverse impact on corporate margins.
In addition, the market is currently abuzz with corporate earnings releases for Jul-Sep quarter. In this week many S&P 500 companies across multiple sectors will release their numbers. As of Oct 19, roughly 16.8% of the S&P 500 members reported results. So far, earnings of the companies that already reported results have increased 19.2% year over year while revenues have expanded 8.4%. Beat was measured at 82.1% for earnings and 61.9% for revenues.
Here, we will discuss the machinery industry, broadly grouped under Industrial Products — one of the 16 Zacks sectors. The sector declined 12.3% in the past month. We believe that important releases in this week and the next will be a major determinant in movements of the sector.
The Industrial Products sector is one of the fourteen sectors that are expected to record positive earnings growth in the third quarter of 2018. Earnings for the sector is predicted to increase approximately 18.7% year over year and its revenues are likely to increase 7.4%.
For the S&P 500 group, earnings in the third quarter are projected to grow 19.2% year over year while revenues are anticipated to increase 7.2%.
Below, we briefly discussed what we expect from the three machinery stocks ITW, IR and GGG, which are slated to report their numbers for the Jul-Sep quarter on October 24.
Illinois Tool Works Inc. (ITW - Free Report) : This machinery company will release third-quarter results before the market opens. Illinois Tool delivered better-than-expected results in three of the last four quarters while lagged estimates in one. The average earnings surprise was a positive 2.69%.
Illinois Tool Works Inc. Price, Consensus and EPS Surprise