U.S. Markets open in 4 hrs 7 mins

Industrial Stocks' Earnings on Jan 29: ROK, DOV, AOS, PNR

Zacks Equity Research

The Industrial Products sector is one of the eight sectors that are expected to record double-digit earnings growth in fourth-quarter 2018. According to the latest projections, the sector’s earnings are on track to rise 14.4% year over year in the quarter on the back of 5.5% rise in revenues. 

 

Driving Factors for the Sector 

 

Industrial production is one of the leading economic indicators for industrial stocks. U.S. industrial production rose 0.3% in December, following growth 0.4% and 0.2% in November and October, respectively. Overall, for the fourth quarter, industrial production improved at an annual rate of 3.8% — marking its fifth consecutive quarterly increase. 

 

Further, per the Institute for Supply Management’s latest report, Purchasing Managers’ Index (“PMI”) for December rose 54.1%, following readings of 59.3% and 57.7% in November and October, respectively. It also marked strong growth in manufacturing for the 28th consecutive month. The upbeat performance continues to be led by strong production output and persistent strength in new orders despite the impact of tariffs on input costs. This signals strong economic momentum. Notably, the PMI has averaged 58.8% over the last 12 months. A reading above 50% indicates expansion in manufacturing economy.

 

These strong data numbers are an indication that the sector is on a firm footing. Ongoing momentum in new orders, strong housing and commercial construction markets, growth in job additions, positive consumer confidence and the Trump administration’s economic policies such as tax cuts bode well for the sector.

 

It will be interesting to see how some of the industrial companies fare when they release their December-end quarter numbers on Jan 29.

 

Rockwell Automation Inc. ROK: The company is set to release results for the first quarter of fiscal 2019 before the market opens. In the last reported quarter, it reported year-over-year improvement in both its top and bottom line. It reported better-than-expected results in the last four quarters delivering average positive earnings surprise of 7.00%.

 

Rockwell Automation, Inc. Price and EPS Surprise


 

Rockwell Automation, Inc. Price and EPS Surprise

Rockwell Automation, Inc. price-eps-surprise | Rockwell Automation, Inc. Quote

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at $1.98, up 1% year over year. The same for revenues is at $1.6 billion, reflecting an increase of 2.8% year over year.

Rockwell Automation’s first-quarter results are likely to gain from the momentum in heavy industries, led by semiconductor, metals and chemicals. Global industrial capital spending is on the rise and anticipated to be a tailwind in the to-be-reported quarter. However, the impact of tariffs on raw material costs will be deterring factor.

 

Our proven model does not conclusively show a beat for Rockwell Automation this earnings season. This is because the company has the right combination of two key ingredients — a positive Earnings ESP (the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

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

 

Rockwell Automation currently has a Zacks Rank #3 and an Earnings ESP of -0.95%. (Read more: Rockwell Automation Q1 Earnings: What's in the Offing?)

 

Dover Corporation DOV is slated to report fourth-quarter 2018 results before the market opens. In the last reported quarter, the company witnessed a year-over-year improvement in earnings while revenues remained flat. Notably, Dover surpassed the Zacks Consensus Estimate in the last four quarters, recording average surprise of 6.04%. 

 

Dover Corporation Price and EPS Surprise

 

 

Dover Corporation Price and EPS Surprise

Dover Corporation price-eps-surprise | Dover Corporation Quote

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $1.29, projecting year-over-year growth of 14%. The same for revenues is at $1.8 billion, reflecting year-over-year decline of 12%.

The company’s cost-cutting initiative, which includes overhead reduction, will boost margins in the to-be-reported quarter. Strong order flow and improved performance by the Fluids segment will help offset persistently weak demand in the Refrigeration & Food Equipment segment. Backed by solid bookings and backlog growth, the company is poised for an improved fourth-quarter performance. However, input cost inflation due to the implementation of tariffs on steel and aluminum is likely to dent margins. (Read more: Dover to Report Q4 Earnings: What's in the Offing?)

 

The company has a Zacks Rank #3 and an Earnings ESP of 0.00%, a combination that makes surprise prediction difficult.

 

A.O. Smith Corporation AOS is scheduled to report fourth-quarter 2018 results, before the market opens. The company beat estimates in three of the trailing four quarters, recording average positive earnings surprise of 3.47%. In the last reported quarter, the company delivered year-over-year improvement in earnings and revenues.

 

A. O. Smith Corporation Price and EPS Surprise


 

A. O. Smith Corporation Price and EPS Surprise

A. O. Smith Corporation price-eps-surprise | A. O. Smith Corporation Quote

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at 71 cents, projecting year-over-year growth of 18%. The same for revenues is at $826 million, reflecting year-over-year rise of 7.5%.

A.O. Smith's results are likely to gain on the strong replacement market for U.S. water heaters and boilers. However, higher steel prices, high freight and other costs, softer volumes for water heaters and others will adversely impact its results. 

 

The company carries a Zacks Rank #3, which increases the predictive power of the ESP. However, its ESP of 0.00% makes surprise prediction difficult. (Read more: A.O. Smith to Report Q4 Earnings: What's in the Cards?)

 

Pentair plc PNR is slated to report fourth-quarter 2018 results, before the market opens. In the last reported quarter, Pentair delivered an increase in both earnings and revenues. Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, leading to average positive surprise of 2.93%.

 

Pentair plc Price and EPS Surprise

 

 

Pentair plc Price and EPS Surprise

Pentair plc price-eps-surprise | Pentair plc Quote

The Zacks Consensus Estimate for Pentair’s fourth-quarter earnings and revenues is pegged at 59 cents and $736.5 million, respectively.

Pentair’s overall results in the December-end quarter will benefit from growth in its segments. Its ongoing restructuring initiatives aimed at reducing fixed cost structure will contribute to margin growth. Pentair has also been facing inflation in material and other costs owing to the impact of tariffs. The company has implemented price hikes to counter the impact of higher input costs. This along with productivity improvement is likely to aid earnings. (Read more: Pentair to Report Q4 Earnings: What's in the Offing?)

 

Pentair has an Earnings ESP of -0.43% and a Zacks Rank #3, which makes surprise prediction inconclusive.

 

Zacks' Top 10 Stocks for 2019

 

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

 

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

 

See Latest Stocks Today >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
A. O. Smith Corporation (AOS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research