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Eaton (ETN) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Eaton Corporation ETN is slated to report second-quarter 2019 financial results on Jul 30, before the opening bell. Notably, the power management company delivered a positive earnings surprise of 0.8% in the last reported quarter.

Factors to Consider

Ongoing improvement in major end markets served by Eaton is expected to increase organic revenues in excess of 4% year over year in the second quarter. Eaton is expected to benefit from contribution from acquired assets in the quarter. Buyback of shares is anticipated to have a positive impact on earnings. However, negative foreign exchange translation is likely to offset some of the positives.

The Zacks Consensus Estimate for second-quarter earnings per share and total revenues of $1.52 and $5,648 million indicates year-over-year growth of 9.35% and 2.93%, respectively. Eaton’s all other segments (except the Vehicles segment) are expected to perform better than the prior-year quarter. The company expects second-quarter earnings per share in the range of $1.45-$1.55, whose midpoint is higher than the year-ago reported figure of $1.39.

The Electric Products segment continues to be a major contributor to its revenues. The Zacks Consensus Estimate of $1,871 million for this segment’s revenues suggests a 3.6% increase from the year-ago reported figure. The Ulusoy Electric business acquisition, which was completed this April, further strengthened Eaton’s electric business.

What Our Quantitative Model Predicts

Our proven model shows that Eaton is unlikely to beat estimates in the upcoming quarterly release. A stock needs to have both a positive Earnings ESP (which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass estimates. That is not the case here as you will see below.

Earnings ESP: Earnings ESP of the company is pegged at -1.32%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Eaton Corporation, PLC Price and EPS Surprise

Eaton Corporation, PLC Price and EPS Surprise

Eaton Corporation, PLC price-eps-surprise | Eaton Corporation, PLC Quote

Zacks Rank: Currently, Eaton carries a Zacks Rank #3. Although the company’s favorable Zacks Rank increases the predictive power of ESP, a negative ESP makes us unsure about a positive earnings surprise in the quarter to be reported.

Conversely, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

Investors can consider a few companies from the same sector that have the right combination of elements to post an earnings beat in the to-be-reported quarter.

John Bean Technologies Corporation JBT has an Earnings ESP of +1.71% and sports a Zacks Rank #1. It is anticipated to report second-quarter 2019 earnings on Jul 29. You can see the complete list of today’s Zacks #1 Rank stocks here.

CIRCOR International, Inc. CIR has an Earnings ESP of +1.10% and sports a Zacks Rank #1. It is slated to report second-quarter 2019 earnings on Aug 1.

Terex Corporation TEX has an Earnings ESP of +1.56% and a Zacks Rank #3. It is expected to report second-quarter 2019 earnings on Jul 30.

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