The first-quarter 2020 results of Industrial Products, which is one of the 16 Zacks sectors, might mirror the adverse impacts of the coronavirus outbreak and other headwinds.
Earnings for the sector are predicted to decline 21.5% year over year for first-quarter 2020, while revenues and margins are expected to fall 4.8% and 1.9%, respectively. Notably, the sector’s earnings in the fourth quarter of 2019 increased 0.7%, while revenues declined 0.2% and margins grew 0.1% year over year.
Key Factors for Industrial Stocks
Operating conditions in the first quarter were weak for industrial stocks due to the pandemic-related worries. Per the official data, industrial production in the United States declined 5.4% (month over month) in March. The metric fell 0.5% in January, while inched up 0.5% in February.
In addition, the country’s Purchasing Managers' Index (“PMI”) also points toward difficulties for industrial stocks. The ISM’s report states that the country’s PMI fell from 50.1% in February to 49.1% in March. The index’s value below 50% indicates a contraction in manufacturing activities. Notably, PMI stood at 50.9% in January.
The measures undertaken to control the virus spread might have adversely impacted product demand, international operations, supply-chain activities, manufacturing actions, marketing techniques and others. However, actions — including interest rate cuts by the Federal Reserve and a $2-trillion relief package by the U.S. government — to fight the pandemic-related woes might have aided the companies in the sector.
Also, unfavorable movements in foreign currencies, cost-related woes and huge debts might have impacted industrial companies. Multiple sub-industries within the sector — including material handling, tools and products, industrial services, farm equipment, electronics, construction and mining equipment, and others — might have suffered due to the pandemic in the quarter.
Stocks Due for Earnings Release on Apr 22
Below, we briefly discussed what we expect from the three industrial stocks in the first quarter of 2020.
Graco Inc. GGG will release first-quarter results after market close. It delivered better-than-expected results in one of the last four quarters, while lagging estimates in others. Earnings surprise for the period was a positive 0.40%, on average.
Graco Inc. Price and EPS Surprise
Graco Inc. price-eps-surprise | Graco Inc. Quote
Our proven model provides some idea about stocks that are about to release earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Currently, Graco has a Zacks Rank #3 and an Earnings ESP of -5.46%. The company might have suffered from weakness in Industrial and Process segments as well as high costs and forex woes. However, innovation, investments in capacity expansion and shareholder-friendly policies might have aided.
The Zacks Consensus Estimate for the company’s quarterly earnings has been decreased by 4.2% to 46 cents per share in the past 60 days.
MSA Safety Incorporated MSA is expected to release its first-quarter results tomorrow. In the past four quarters, the company recorded better-than-expected results in two quarters, in-line results in one and weaker-than-expected results in one. Earnings surprise for the period was a negative 0.22%, on average.
MSA Safety Incorporporated Price and EPS Surprise
MSA Safety Incorporporated price-eps-surprise | MSA Safety Incorporporated Quote
Presently, the company has a Zacks Rank #3 and an Earnings ESP of 0.00%.
Over the past 60 days, the Zacks Consensus Estimate for its quarterly earnings has been lowered by 3.6% to $1.06 per share.
Silgan Holdings Inc. SLGN will report results for the first quarter, before market open. It recorded better-than-expected results in two of the last four quarters, while met estimates twice. Earnings surprise for the period was a positive 2.21%, on average.
Silgan Holdings Inc. Price and EPS Surprise
Silgan Holdings Inc. price-eps-surprise | Silgan Holdings Inc. Quote
Presently, the company has a Zacks Rank #2 and an Earnings ESP of +0.68%. Its results might have benefited from manufacturing efficiencies, acquired assets and footprint optimization measures. However, weakness in segments, inflated material costs and high freight expenses might have adversely influenced results.
Over the past 60 days, the Zacks Consensus Estimate for first-quarter earnings has increased 2.1% to 49 cents per share.
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