Per the latest Earnings Trends, total earnings for the Industrial Products are anticipated to decline 20.8%, while revenues are projected to drop 5.4% as the coronavirus pandemic crippled supply chain globally, impacted manufacturing activity and weakened demand. However, the slump is not restricted to this sector alone, as 11 of the 16 Zacks sectors are expected to log declines this earnings season.
Key Factors to Note
Per the Federal Reserve, industrial production contracted 7.5% in the first quarter of 2020 — the steepest since second-quarter 2009. Manufacturing output also slumped at an annual rate of 7.1% in the first quarter, the sharpest since first-quarter 2009. Meanwhile, per the Institute for Supply Management, the Manufacturing Purchasing Managers’ Index (PMI), after recording 50.9 in January, and 50.1 in February (indicating expansion), contracted again to 49.1% in March. These figures clearly indicate that the manufacturing sector has been impacted by the pandemic and energy market volatility in the January-March period.
Hence, the sector’s performance in the first quarter is likely reflect the challenges associated with COVID-19 outbreak, which include factory closures worldwide owing to restrictions imposed by several governments, supply chain disruptions, low demand for goods, and logistic costs. Moreover, low oil prices on account of weak demand and excess supply also is likely to get reflected in the sector’s performance.
Further, capital expenditures in oil & gas, mining and construction are likely to have been restrained. However, the sector players, which are engaged in packaging for food, medicines, home and personal-care products, are likely to have benefited from higher demand during the pandemic. Meanwhile, many of the sector participants have been focusing on extensive cost cutting and lean manufacturing actions in a bid to mitigate the impact of the coronavirus outbreak somewhat.
It will be interesting to see how some of the industrial companies fare when they release quarterly financial numbers on Apr 28.
Caterpillar Inc. CAT is expected to report first-quarter 2020 results before the market opens. The company has surpassed the Zacks Consensus Estimate in two of the four trailing quarters while missing the same in the other two. The company has a trailing four-quarter negative earnings surprise of 0.12%, on average.
Caterpillar Inc. Price and EPS Surprise
Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote
A weak manufacturing sector and the impact of the coronavirus pandemic are likely to get reflected on the company’s performance in the to-be-reported quarter. A lower backlog and the company’s steps to cut production to match lower demand are likely to have impacted the first-quarter performance. Its supply chain has been disrupted owing to the pandemic and the company had to temporarily suspend operations at certain facilities on account of weak demand and restrictions imposed by governments to contain the spread of the virus. All these factors and record low oil prices are expected to get reflected on the to-be-reported quarter’s results.
Per the Zacks quantitative model, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Caterpillar has a Zacks Rank #4 (Sell) and an Earnings ESP of -3.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for Caterpillar’s first-quarter 2020 earnings is currently pegged at $1.77, which indicates a decline of 39.8% from the year-ago quarter. The estimates have gone down 3% in the past 30 days. (Read more: Likely Coronavirus Impact on Caterpillar's Q1 Earnings)
Roper Technologies, Inc. ROP is scheduled to report first-quarter 2020 results before the opening bell. The company has a trailing four-quarter positive earnings surprise of 6.08%, on average.
Roper Technologies, Inc. Price and EPS Surprise
Roper Technologies, Inc. price-eps-surprise | Roper Technologies, Inc. Quote
Roper is likely to have benefited from strong momentum across its network software and medical products businesses in the first quarter. However, softness in the company’s industrial businesses is likely to have been dented the performance in the quarter to be reported. In addition, the impact of the coronavirus outbreak on the demand for the company’s products and the governmental regulations imposed in response to the crisis might get reflected in Roper’s first-quarter results.
The company currently has a Zacks Rank #3 and an Earnings ESP of -5.05%. Over the past 30 days, the Zacks Consensus Estimate for its quarterly earnings has moved south by 2% to $2.85 per share. This indicates a year-over-year drop of 13.6%. (Read more: Roper to Report Q1 Earnings: What's in the Offing?)
Rockwell Automation, Inc. ROK is scheduled to report second-quarter fiscal 2020 results before the opening bell. The company has surpassed the Zacks Consensus Estimate in two of the trailing four quarters, while coming in-line in one and missing on one occasion. It has a trailing four-quarter positive earnings surprise of 1.54%, on average.
Rockwell Automation, Inc. Price and EPS Surprise
Rockwell Automation, Inc. price-eps-surprise | Rockwell Automation, Inc. Quote
A sluggish automotive market and the overall slowdown in the U.S manufacturing sector primarily due to the coronavirus pandemic might have thwarted demand for the company’s products in the to-be-reported quarter. Further, weak semiconductor and chemical markets are likely to have dampened the company’s performance during the quarter to be reported.
The company currently has a Zacks Rank of 3 and an Earnings ESP of -1.48%.
The consensus mark for earnings has gone down 5% to $1.83 per share over the past 30 days, suggesting a decline of 10.3% from the prior-year reported figure. (Read more: What's in Store for Rockwell Automation's Q2 Earnings?)
Zebra Technologies ZBRA is scheduled to report first-quarter 2020 results before the market opens. The company surpassed the Zacks Consensus Estimate in three of the trailing four quarters. It has a trailing four-quarter positive earnings surprise of 1.92%, on average.
Zebra Technologies Corporation Price and EPS Surprise
Zebra Technologies Corporation price-eps-surprise | Zebra Technologies Corporation Quote
The coronavirus outbreak is likely to have weighed on demand across Zebra’s end-markets in first-quarter 2020. Given that retail and manufacturing sectors account for more than half of the company’s sales, lower capital expenditure in both the sectors is likely to get reflected in first-quarter results. However, increased e-commerce activities and higher demand from the healthcare industry are likely to have negated these negatives in the to-be-reported quarter.
The company currently has a Zacks Rank of 4 and an Earnings ESP of -6.31%.
Over the past 30 days, the Zacks Consensus Estimate for the to-be-reported earnings has gone down 10% to $2.67. This suggests a decline of 8.6% from the prior-year reported figure.
iRobot Corporation IRBT is scheduled to report first-quarter 2020 results after the closing bell. The company beat estimates in the trailing four quarters with a positive earnings surprise of 242.7%, on average.
iRobot Corporation Price and EPS Surprise
iRobot Corporation price-eps-surprise | iRobot Corporation Quote
The pandemic has impacted some of its sales activities and manufacturing supply chain, which is likely to have impacted the company’s first-quarter performance. The global industrial robotics market has been facing headwinds due to the imposition of trade tariffs for robotic vacuums. This, in turn, is likely to get reflected in the company’s first-quarter results.
The company currently carries a Zacks Rank of 3 and Earnings ESP of -21.82%.
The Zacks Consensus Estimate for the first quarter is currently pegged at a loss of 55 cents per share, which is a significant decline from the earnings of 96 cents reported in the prior-year quarter. The estimate has remained stable over the past 30 days.
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