U.S. Markets open in 8 hrs 52 mins

Industrial Stocks' Earnings to Watch on Feb 1: ITW, JCI, ROP

Zacks Equity Research

The Zacks Industrial Products sector is one of the eight sectors, which is likely to record double-digit earnings growth for the October-December quarter. According to the latest Earnings Trends, total earnings of the sector participants are likely to increase 14.2% year over year on 5.5% higher revenues.

Factors Working in Favor of the Sector

The industrial sector is showing impressive momentum, driven by factors like increased capital spending and hiring, coupled up with rise in manufacturing activity and improved business sentiment in the U.S. economy. Also, President Trump’s business-friendly policies, such as deregulatory measures, massive tax overhaul and higher government spending are likely to continue aiding manufacturing activities.

Total manufacturing output in the United States increased 1.1% in December, marking its 116th straight month of gains. Notably, industrial production rose 0.3% in December and recorded growth 0.4% and 0.2% in November and October, respectively. As a matter of fact, this helped industrial production to increase at an annual rate of 3.8% in the October-December quarter.

Moreover, per the latest Manufacturing ISM Report published on Jan 3, the Purchasing Managers’ Index for December increased 54.1%. Also, the metric registered readings of 59.3% and 57.7% in November and October, respectively. As a matter of fact, any reading above 50 indicates the manufacturing sector is experiencing overall growth.

Further, the manufacturing sector is also creating healthy job opportunities. Notably, per the Department of Labor’s latest report published on Jan 4, the manufacturing sector generated 284,000 jobs in 2018. It’s worth noting here that most of the job additions were in durable goods industries.

Amid this backdrop, it will be interesting to wait and see how some of the sector participantsfare in their upcoming results on Feb 1.

Illinois Tool Works Inc. ITW is scheduled to report fourth-quarter 2018 results before the opening bell. The company’s performance is likely to be aided by strengthening housing market, advancements in industrial production, healthy demand for machinery made in the country and infrastructural developments. However, negative impact of raw material cost inflation, as well as unfavorable movements in foreign currencies are likely to its dent performance. (Read more: Illinois Tool to Report Q4 Earnings: What to Expect?)

For the fourth quarter, the company’s earnings are expected to improve 7.1% year over year while revenues are likely to decline 0.3%. Earnings ESP(the difference between the Most Accurate Estimate and the Zacks Consensus Estimate) is -0.38%.

Illinois Tool Works Inc. Price and EPS Surprise

Illinois Tool Works Inc. Price and EPS Surprise | Illinois Tool Works Inc. Quote

Negative ESP combined with a Zacks Rank #3 (Hold), makes an earnings surprise prediction difficult. This is because a stock with a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have high chances of beating estimates. 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.

Johnson Controls International plc JCI is scheduled to report first-quarter fiscal 2019 results before the opening bell. Weakening automotive production in China is expected to negatively impact the company’s results. Further, rise in commodity prices, owing to high tariffs, is anticipated to create a dent in the company’s profit margins. (Read more:What's in Store for Johnson Controls in Q1 Earnings?)

For the quarter, the company’s earnings are expected to decline 55.6% year over year on 26.6% lower revenues. Earnings ESP is -2.08%. This combined with a Zacks Rank #5 (Strong Sell), makes an earnings surprise prediction difficult.

Johnson Controls International plc Price and EPS Surprise

Johnson Controls International plc Price and EPS Surprise | Johnson Controls International plc Quote

As it is, we caution against stocks with a Zacks Rank #4 (Sell) or 5 going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Roper Technologies, Inc. ROP is scheduled to report fourth-quarter 2018 financial results, before market open.

In the quarter, rising cost of sales has been a major concern for Roper. Material price inflation (on account of tariffs) might continue to escalate costs, in turn, hurting its profitability in the upcoming quarters. However, the company’s innovative product pipeline is likely to be a major growth driver. (Read More: What's in the Cards for Roper This Earnings Season?)

Roper Technologies, Inc. Price and EPS Surprise

Roper Technologies, Inc. Price and EPS Surprise | Roper Technologies, Inc. Quote

For the quarter, the company’s earnings are expected to improve 15.9% year over year while revenues are likely to increase 10.3%. Earnings ESPfor the company is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at $3.13. This along with the company’s Zacks Rank #4 makes earnings surprise prediction difficult.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>


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
 
Roper Technologies, Inc. (ROP) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research