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Machinery Stock Earnings to Watch on Oct 24: ITW, IR, GGG

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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
 

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

Our proven model provides some idea about stocks that are about to release earnings results. Per the model, a stock needs a combination of a positive Earnings ESP (the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Currently, Illinois Tool carries a Zacks Rank #3 and it has an Earnings ESP of -0.13%. The company stands to gain from solid product portfolio, Enterprise Strategy and sound capital-allocation policy. Further, investment to innovate products will be beneficial. However, raw material cost inflation, forex woes, high debts and geopolitical issues are worrying.

Over the past 60 days, the Zacks Consensus Estimate for the quarter under review has remained unchanged at $1.89. (For more please read: What's in the Offing for Illinois Tool in Q3 Earnings?)

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 revision momentum.

Ingersoll-Rand plc (IR - Free Report) : The company will report third-quarter 2018 results before the market opens. It recorded better-than-expected results in three of the trailing four quarters while met estimates once. Average earnings surprise was a positive 5.29%.

Ingersoll-Rand PLC (Ireland) Price, Consensus and EPS Surprise
 

Ingersoll-Rand PLC (Ireland) Price, Consensus and EPS Surprise | Ingersoll-Rand PLC (Ireland) Quote

Presently, Ingersoll-Rand carries a Zacks Rank #2 and has an Earnings ESP of -1.04%. The company is poised to gain from solid product demand, buyouts, higher productivity and better pricing actions. However, escalating costs can be worrying.

Over the past 60 days, the Zacks Consensus Estimate for the quarter under review increased 0.6% to $1.72. (For more please read: Ingersoll to Report Q3 Earnings: What's in the Cards?)

Graco Inc. (GGG - Free Report) : The company will report third-quarter 2018 results after the market closes. It recorded better-than-expected results in two of the last four quarters while lagged estimates in two. Average earnings surprise was a positive 4.26%.

Graco Inc. Price, Consensus and EPS Surprise
 

Graco Inc. Price, Consensus and EPS Surprise | Graco Inc. Quote

Presently, Graco carries a Zacks Rank #3 and has an Earnings ESP of 0%. The company will gain from strengthening segmental businesses, and elevated capital expenditure to boost competency and buyouts. However, inflation in material costs remains a concern.

Over the past 60 days, the Zacks Consensus Estimate for the quarter under review has remained unchanged at 46 cents.

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