Illinois Tool (ITW) To Report Q4 Earnings: What to Expect?
Industrial products and equipment manufacturer Illinois Tool Works Inc. ITW is scheduled to report fourth-quarter 2015 results on Jan 27, 2016, before the market opens. The Zacks Consensus Estimate for the quarterly earnings is pegged at $1.21 per share.
The company’s financial results impressed in the last four quarters, with a positive average earnings surprise of 2.90%. Last quarter, the company’s earnings of $1.39 per share surpassed the Zacks Consensus Estimate of $1.36 by 2.21%. Let us see how things are shaping up prior to this announcement.
Factors to Influence Q4 Results
Macro headwinds characterized by fluctuating currency movements, weak economic conditions particularly in the formerly fast-growing markets like China, and soft commodity prices played spoilsport for the U.S.-based machinery companies in fourth-quarter 2015. Also, per the Federal Reserve, industrial production in the U.S. declined 3.4% year over year in fourth quarter.
Since the end markets served by Illinois Tool Works are highly susceptible to global economic conditions as well as level of industrial activities in the U.S., we believe the above-mentioned negatives have affected demand for Illinois Tool Works’ products in the fourth quarter.
Moreover, Illinois Tool Works has soft top-line expectations for the quarter. While organic revenue is predicted to decline in a range of 1−2% in fourth-quarter 2015, total revenue is anticipated to fall roughly 7%. Moreover, the company is exposed to risks arising from high debt levels and stiff competition in the industry.
Despite such weaknesses, Illinois Tool Works’ organic plans and current long-term Enterprise Strategy will likely prove beneficial, going forward. Also, the company’s solid cash position as well as sound capital allocation policy will ensure solid rewards for its shareholders.
Earnings Whispers
Our proven model does not conclusively show that Illinois Tool Works will be able to pull a surprise this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for a likely earnings beat. That is not the case here as you will see below.
Zacks ESP: Illinois Tool Works has an ESP of -0.83% for fourth-quarter 2015. This is because the Most Accurate Estimate of $1.20 per share stands lower than the Zacks Consensus Estimate of $1.21.
Zacks Rank: Illinois Tool Works currently carries a Zacks Rank #3 (Hold).
However, note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision.
Stocks to Consider
Here are some companies in the industrial products sector you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Codexis, Inc. CDXS, with an Earnings ESP of +20.00% and a Zacks Rank #1.
Sealed Air Corporation SEE, with an Earnings ESP of +2.00% and a Zacks Rank #2.
UniFirst Corp. UNF, with an Earnings ESP of +0.80% and a Zacks Rank #3.
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SEALED AIR CORP (SEE): Free Stock Analysis Report
UNIFIRST CORP (UNF): Free Stock Analysis Report
ILL TOOL WORKS (ITW): Free Stock Analysis Report
CODEXIS INC (CDXS): Free Stock Analysis Report
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