The October-December quarter’s results for the industrial companies are likely to reflect the impacts of better operating conditions in the country, revival in international trade and the lingering impacts of the pandemic. This week and the next are important as many industrial giants are slated to release their results.
Notably, the earnings and revenue outlook for the S&P 500 companies have improved for the quarter ended December 2020. As of Jan 26, earnings of the S&P 500 companies are expected to decline just 5% and revenues are anticipated to grow 0.7% compared with a 6.4% decline in earnings and a 0.5% increase in revenues mentioned on Jan 20.
Notably, impressive performances by many S&P 500 players (with exposure in the industrial space) support the expectation of healthy industrial results for the October-December quarter of 2020.
Per the Earnings Trend report released on Jan 20, earnings for the Zacks Industrial Products sector are likely to decline 8% year over year for the October-December quarter of 2020, while revenues are expected to fall 2.5%. Though the revenue projection suggests an improvement of more than a 5.3% decline recorded in the previous quarter, earnings estimates are almost in line with the previous quarter’s reported figure.
Key Factors for Industrial Stocks
The operating environment for the industrial stocks in the October-December quarter of 2020 was quite favorable, evident from key indicators, including the industrial production and the ISM Purchasing Manager’s Index (“PMI”). Notably, industrial production in the United States increased 8.4% year over year in the quarter ended December 2020, with manufacturing production rising 11.2%. Also, the ISM’s PMI increased from 55.4% at the end of September to 60.7% at the end of December.
International trade too showed strength in the to-be-reported quarter as compared with the first two quarters of calendar 2020. In addition to these, the growing popularity of e-commerce business as well as new and effective promotional actions is likely to have played an important role in the quarter under review.
Further, efforts to innovate products, keep costs under control and tackle competitive pressures are expected to have aided. On the flip side, the impacts of the pandemic-led woes and uncertainties as well as highly leveraged balance sheets cannot be ignored for some industrial players.
Stocks to Report October-December Quarter Results on Jan 28
Below, we briefly discussed what we expect from the four industrial stocks in the upcoming results.
Stanley Black & Decker, Inc. SWK will release fourth-quarter 2020 results, before market open. It delivered better-than-expected results in the last four quarters. The company has a trailing four-quarter earnings surprise of 10.34%, on average.
Stanley Black & Decker, Inc. Price, Consensus and EPS Surprise
Stanley Black & Decker, Inc. price-consensus-eps-surprise-chart | Stanley Black & Decker, Inc. Quote
Our proven model conclusively predicts an earnings beat for Stanley Black this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of beating estimates. That is exactly the case with Stanley Black. 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, Stanley Black has a Zacks Rank #3 and an Earnings ESP of +0.72%. The company has likely gained from healthy product demand in the Industrial, and Tools & Storage segments. Also, acquired assets are anticipated to have aided. (For further information please read: Will Stanley Black Keep Its Earnings Streak Alive in Q4?)
The Zacks Consensus Estimate for the company’s quarterly earnings has moved up 8.8% to $2.98 per share in the past 60 days.
Dover Corporation DOV is expected to release fourth-quarter 2020 results, before market open. In the last four quarters, the company recorded better-than-expected results. It has a trailing four-quarter earnings surprise of +18.10%, on average.
Dover Corporation Price, Consensus and EPS Surprise
Dover Corporation price-consensus-eps-surprise-chart | Dover Corporation Quote
Presently, the company has a Zacks Rank #2 and an Earnings ESP of +5.55%. The results are expected to reflect the impacts of strengthening end markets, solid product offerings, cost actions and improved productivity. (For further information please read: Dover to Report Q4 Earnings: What's in the Cards?)
In the past 60 days, the Zacks Consensus Estimate for its quarterly earnings has risen 0.7% to $1.37 per share.
Pentair plc PNR will report results for the fourth quarter of 2020, before market open. It recorded better-than-expected results in the last four quarters. The company has a trailing four-quarter earnings surprise of +20.09%, on average.
Pentair plc Price, Consensus and EPS Surprise
Pentair plc price-consensus-eps-surprise-chart | Pentair plc Quote
Presently, Pentair has a Zacks Rank #3 and an Earnings ESP of -1.49%. Benefits from cost actions and improved demand in residential businesses are anticipated to have aided its performance. However, weakness in commercial fronts is expected to have been concerning. (For further information please read: Pentair to Report Q4 Earnings: What's in the Offing?)
In the past 60 days, the Zacks Consensus Estimate for the quarter earnings increased 1.6% to 63 cents per share.
Applied Industrial Technologies, Inc. AIT will report results for the second quarter of fiscal 2021, before market open. It recorded better-than-expected results in three of the last four quarters and met estimates once. The company has a trailing four-quarter earnings surprise of +14.68%, on average.
Applied Industrial Technologies, Inc. Price, Consensus and EPS Surprise
Applied Industrial Technologies, Inc. price-consensus-eps-surprise-chart | Applied Industrial Technologies, Inc. Quote
Presently, it has a Zacks Rank #3 and an Earnings ESP of 0.00%. The company is expected to have gained from acquired assets, value-added services and cost savings. However, headwinds related to the pandemic are anticipated to have ailed.
In the past 60 days, the Zacks Consensus Estimate for the quarter earnings has been unchanged at 72 cents per share.
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