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5 Industrial Stocks Set to Top Estimates This Earnings Season

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Earnings for the October-December quarter are anticipated to have been better on a sequential basis as evident from the S&P 500’s expected earnings decline of 5.6% compared with fall of 7% recorded in the prior quarter. Also, revenue growth of 1% is expected for the S&P 500 in contrast to 0.6% decline in the previous quarter.

Notably, seven out of the 16 Zacks sectors are predicted to have recorded earnings growth on a year-over-year basis in the October-December quarter of 2020. For instance, sectors including construction, autos, medical, basic materials and finance are expected to report impressive results despite the challenges caused by the coronavirus outbreak.

Per the latest Earnings Preview report, overall earnings for the Zacks Industrial Products sector are projected to witness year-over-year decline of 7.2% on 2.4% lower revenues. However, the projections for the to-be-reported quarter indicate an improvement from 7.8% earnings decline on 5.3% decrease in revenues witnessed in the previous quarter. The results of the industrial companies are likely to reflect the impacts of gradual reopening of major economies, improved business operating conditions and lingering effects of the pandemic as well.

Let’s discuss the factors that are likely to have shaped the to-be-reported quarter’s earnings of industrial stocks.

Major Factors at Play for Industrial Stocks

In the October-December quarter, the industrial companies are likely to have benefited from rise in manufacturing activities as more and more businesses resumed operations. Per the latest Institute for Supply Management’s (“ISM”) report released on Feb 1, the Purchasing Managers Index (PMI) came in at 58.7% in January. Also, ISM’s measure of production in the same month was 60.7%, reflecting growth for the eighth consecutive month. In addition, new orders index was 61.1%, indicating eighth consecutive month of increase.

In addition, in the to-be-reported quarter, the United States’ industrial production recorded a year-over-year increase of 8.4%, with manufacturing production rising 11.2%. Further, growth in the e-commerce business is likely to have been tailwinds for the sector.

Also, few companies are anticipated to have benefited from rise in demand for products related to personal safety and health, and robotic cleaning. This apart, focus on product innovation, along with cost-saving actions and marketing efforts by several companies, is expected to have been beneficial.

However, the quarter’s earnings are likely to have been marred by the lingering impact of the pandemic-led challenges. Also, high debts, competitive pressures and unfavorable movements in foreign currencies are expected to have affected the quarterly performance.

5 Stocks Poised for Earnings Beat This Season

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

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 October-December quarter:

Altra Industrial Motion Corp. AIMC: The company is one of the leading manufacturers and distributors of a diversified range of motion control, electromechanical power transmission and automation products. Strength in the company’s semiconductor, defense and transportation markets is likely to have driven its top line in the fourth quarter.

The company presently carries a Zacks Rank #2 and has an Earnings ESP of +0.48%. The Zacks Consensus Estimate for the quarter has been raised 1.4% to 70 cents in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Altra Industrial will release results on Feb 11, before market open.

Altra Industrial Motion Corp. Price and EPS Surprise

Altra Industrial Motion Corp. Price and EPS Surprise
Altra Industrial Motion Corp. Price and EPS Surprise

Altra Industrial Motion Corp. price-eps-surprise | Altra Industrial Motion Corp. Quote

iRobot Corporation IRBT: The company is one of the leading manufacturers of robots worldwide. Notably, the company’s fourth-quarter earnings are likely to have been gained from robust demand for Roomba and Braava products, strengthening sell-through, and spur in the e-commerce business. However, heavy marketing and development expenses, and the challenges pertaining to the pandemic are likely to have affected it.

The company presently carries a Zacks Rank #3 and has an Earnings ESP of +63.41%. The Zacks Consensus Estimate for quarterly earnings has been raised 71.4% to 36 cents in the past 60 days.

iRobot will release results on Feb 10, after market close.

iRobot Corporation Price and EPS Surprise

iRobot Corporation Price and EPS Surprise
iRobot Corporation Price and EPS Surprise

iRobot Corporation price-eps-surprise | iRobot Corporation Quote

Illinois Tool Works Inc. ITW: The company is a global manufacturer of highly engineered products and specialty systems. It is likely to have benefited from strong recovery in majority of its end markets and all geographies. The pandemic-related challenges might have played spoilsport.

It currently has a Zacks Rank #3 and an Earnings ESP of +0.71%. The Zacks Consensus

Estimate for fourth-quarter earnings has been raised 1.7% to $1.77 in the past 60 days.

Illinois Tool will release results on Feb 5, before market open.

Illinois Tool Works Inc. Price and EPS Surprise

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

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

The Middleby Corporation MIDD: The company is a provider of cooking, warming, food preparation and packaging equipment to commercial, industrial processing and residential markets. It is likely to have gained from the efforts to broaden the product portfolio, a healthy liquidity position and recovery in end markets.

It currently has a Zacks Rank #2 and an Earnings ESP of +8.67%. The Zacks Consensus Estimate for fourth-quarter earnings has been raised 3.7% to $1.40 in the past 60 days.

Middleby is expected to release its results on Feb 24.

The Middleby Corporation Price and EPS Surprise

The Middleby Corporation Price and EPS Surprise
The Middleby Corporation Price and EPS Surprise

The Middleby Corporation price-eps-surprise | The Middleby Corporation Quote

Parker-Hannifin Corporation PH: The company is a global diversified manufacturer of motion & control technologies and systems.

In second quarter of fiscal 2021 (ended December 2020), the company is expected to have gained from strength life science, semiconductor, military, rail and power generation end markets.

It currently has a Zacks Rank #2 and an Earnings ESP of +2.86%. The Zacks Consensus Estimate for quarterly earnings has been raised 8.3% to $2.60 in the past 60 days.

Parker-Hannifin will release results on Feb 4, before market open.

ParkerHannifin Corporation Price and EPS Surprise

ParkerHannifin Corporation Price and EPS Surprise
ParkerHannifin Corporation Price and EPS Surprise

ParkerHannifin Corporation price-eps-surprise | ParkerHannifin Corporation Quote

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