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Eaton (ETN) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research

Eaton Corporation ETN is slated to report fourth-quarter 2018 financial results on Jan 31, before the opening bell. The power management company delivered a negative earnings surprise of 0.69% in the last reported quarter.

Factors to Consider

Eaton expects fourth-quarter earnings in the range of $1.38-$1.48 per share and organic revenues to expand 6%. The company continues to lower its outstanding shares via share repurchase, which is anticipated to have a positive impact on earnings.

The Zacks Consensus Estimate for fourth-quarter total revenues of $5,423 million reflects 4.03% year-over-year growth. The Electric Products segment is a major contributor to Eaton’s revenues. The Zacks Consensus Estimate of $1,819 million for this segment’s revenues reflects a 1.7% sequential increase.

Eaton is expected to gain from its strategy of manufacturing in the zone of sale, which lowers the impact of tariffs on the company. In addition, it is restructuring the business in order to strengthen existing operations. Moreover, ongoing improvement in end-market conditions is likely to have a positive impact on its earnings.


Eaton Corporation, PLC Price and EPS Surprise


Eaton Corporation, PLC Price and EPS Surprise | Eaton Corporation, PLC Quote

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 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Eaton carries a Zacks Rank #3. Though the company’s favorable Zacks Rank increases the predictive power of ESP, an ESP of 0.00% makes us unsure about a positive earnings surprise this season.

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.

Columbus McKinnon Corporation CMCO has an Earnings ESP of +6.9% and a Zacks Rank #2. It is anticipated to report third-quarter fiscal 2019 earnings on Jan 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation CFX has an Earnings ESP of +1.43% and a Zacks Rank #2. It is expected to report fourth-quarter 2018 earnings on Feb 5.

Emerson Electric Co. EMR has an Earnings ESP of +0.84% and holds a Zacks Rank #3. It is slated to report first-quarter fiscal 2019 earnings on Feb 5.

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