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5 Industrial Stocks Poised for an Earnings Beat in Q2

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Payal Jalan
·6 min read
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Earnings releases across sectors — including industrial products, aerospace and transportation — are expected to mirror the impacts of operational disturbances as well as opportunities created by the pandemic during the April-June quarter of 2020.

Among the 16 Zacks sectors, 15 are predicted to report a year-over-year earnings decline in double or triple digits for the second quarter of 2020. Earnings of Industrial Products are expected to decline 49.9% year over year in the quarter. Revenues are predicted to fall 18.2% and margin is anticipated to decline 4.5%.

Collective results of 3.4% of Industrial Products companies released until Jul 22 suggest that the second quarter was quite challenging. Per the latest Earnings Trend report, the sector’s earnings and revenues declined 28.4% and 4% year over year, respectively. Earnings beat was 100% and for revenues, it was 0%.

Let us discuss the factors that might have played a key role in shaping the results for industrial stocks.

Factors at Play

The second quarter was worrisome for industrial products companies. Product demand for industrial tools, machinery, automotive parts and others has been severely impacted as customers across multiple sectors curtailed their purchases. Also, international businesses have been hit hard by the preventive measures in other countries against the pandemic.

Not only lower demand, restricted manufacturing activities, disturbances in the supply chain, and subdued marketing actions are expected to have hurt industrial performances in the quarter. Also, a year-over-year decline of 42.6% in the U.S. industrial production in second-quarter 2020 points toward difficult operating conditions that prevailed for the industrial players.

In addition to the pandemic-led woes, companies might have suffered from tariff-related issues, unfavorable movements in foreign currencies, stiff competition and geopolitical issues.

On the contrary, some companies are believed to have benefited from the pandemic-induced demand for products — including robotic cleaners, medical equipment, protective gears and others. Here it is worth mentioning that business derived from the e-commerce facility has been on the rise for many companies amid the pandemic.

For instance, the specialist in manufacturing robotic cleaners, iRobot Corporation IRBT, delivered impressive results for second-quarter 2020. Also, it anticipates business in the second half of 2020 to grow in mid-single digits on the back of healthy product demand, spur in the e-commerce business and healthy sell-through.

Also, innovative marketing ideas, focus on product development, cost-saving measures, pro-active actions taken by the government (including $2 trillion worth of economic package) and others might have aided.

With regard to the price performance, the sector grew 21.6% in the second quarter of 2020. During the same timeframe, the S&P 500 rose 20%, the NYSE grew 15.5% and the NASDAQ expanded 25.8%.

Stocks Worth Considering

Investors looking for options in the sector can select stocks with the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.

Earnings ESP is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. The combination of a favorable ranking and positive ESP points toward stocks with a high probability of surpassing estimates in the quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Below we have listed five industrial stocks, with the right combination of elements to post an earnings beat in the second quarter:

Fortune Brands Home & Security, Inc. FBHS, with a market capitalization of $9.7 billion, manufactures and provides home and security products.

It currently sports a Zacks Rank #1 and has an Earnings ESP of +7.11%. The Zacks Consensus Estimate for the quarter has been raised by 18% to 59 cents in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fortune Brands Home Security, Inc. Price, Consensus and EPS Surprise

 

Fortune Brands Home  Security, Inc. Price, Consensus and EPS Surprise
Fortune Brands Home Security, Inc. Price, Consensus and EPS Surprise

Fortune Brands Home Security, Inc. price-consensus-eps-surprise-chart | Fortune Brands Home Security, Inc. Quote

Fortune Brands will likely release results on Jul 29, after market close.

Regal Beloit Corporation RBC engages in the manufacturing of electrical and mechanical motion control products. Currently, it has a market capitalization of $3.7 billion.

The company presently carries a Zacks Rank #2 and has an Earnings ESP of +8.81%. The Zacks Consensus Estimate for the quarter has increased 22.6% to 65 cents in the past 60 days. It is expected to release results on Aug 3, after market close.

Regal Beloit Corporation Price, Consensus and EPS Surprise

 

Regal Beloit Corporation Price, Consensus and EPS Surprise
Regal Beloit Corporation Price, Consensus and EPS Surprise

Regal Beloit Corporation price-consensus-eps-surprise-chart | Regal Beloit Corporation Quote

Illinois Tool Works Inc. ITW manufactures highly engineered products and specialty systems. It has a market capitalization of $57.7 billion.

It currently carries a Zacks Rank #3 and has an Earnings ESP of +8.23%. The Zacks Consensus Estimate for quarterly earnings has been raised by 7.5% to 72 cents in the past 60 days. It will release results on Jul 31, before market opens.

Illinois Tool Works Inc. Price, Consensus and EPS Surprise

 

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

Illinois Tool Works Inc. price-consensus-eps-surprise-chart | Illinois Tool Works Inc. Quote

Ingersoll Rand Inc. IR: The company presently has a $13.2 billion market capitalization. It is a specialist in industrial and mission-critical flow creation technologies.

The company currently has a Zacks Rank #2 and an Earnings ESP of +6.02%. The Zacks Consensus Estimate for the quarter has been raised by 10.5% to 21 cents in the past 60 days. It will release results on Aug 3, after market close.

Ingersoll Rand Inc. Price, Consensus and EPS Surprise

 

Ingersoll Rand Inc. Price, Consensus and EPS Surprise
Ingersoll Rand Inc. Price, Consensus and EPS Surprise

Ingersoll Rand Inc. price-consensus-eps-surprise-chart | Ingersoll Rand Inc. Quote

Xylem Inc. XYL: The company, with a market capitalization of $13.4 billion, is a well-recognized provider of water solutions — including collection, distribution and returning of water to the environment — worldwide.

It currently has a Zacks Rank #3 and an Earnings ESP of +69.40%. The Zacks Consensus Estimate for the quarter has been raised by 360% to 23 cents in the past 60 days.

Xylem Inc. Price, Consensus and EPS Surprise

 

Xylem Inc. Price, Consensus and EPS Surprise
Xylem Inc. Price, Consensus and EPS Surprise

Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote

Xylem is slated to release results on Jul 30, before market open.

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Regal Beloit Corporation (RBC) : Free Stock Analysis Report
 
Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report
 
Ingersoll Rand Inc. (IR) : Free Stock Analysis Report
 
Fortune Brands Home Security, Inc. (FBHS) : Free Stock Analysis Report
 
iRobot Corporation (IRBT) : Free Stock Analysis Report
 
Xylem Inc. (XYL) : Free Stock Analysis Report
 
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