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Industrial Stocks' Earnings to Watch on Jul 29: JBT, TEX, NPO

Madhurima Das

The earnings season for the Industrial Products sector has gotten off to a disappointing start. With 28% of the companies in the sector releasing their numbers so far, the sector has witnessed a decline of 6.3% in earnings. Per the latest Earnings Preview, the the sector is anticipated to witness a decline of 1.1% in the second quarter of 2019. However, the slump is not limited to this sector alone as nine of the 16 Zacks sectors are expected to log declines this quarter. However, on a positive note, the Industrial Products Sector’s decline is expected to be on the lower side.

Driving Factors for the Sector 

Industrial production is one of the leading economic indicators for industrial stocks. Industrial production had remained unchanged in June compared with the prior year, as increases for both manufacturing and mining offset decline for utilities. This followed a rise of 0.4% in May and a dip of 0.5% in April. Overall, for the second quarter, industrial production declined at an annual rate of 1.2% – the second consecutive quarterly decrease. In the second quarter, factory production dipped at an annual rate of 2.2%, about the same pace as in the first quarter.

Further, per the Institute for Supply Management’s latest report, Purchasing Managers’ Index (PMI) for June was 51.7%, lower than 52.1% in May and 52.8% in April. Even though the reading remains above 50, which indicates expansion, there has been a slowdown over the past few months owing to U.S.-China trade turbulence, potential Mexico trade actions and concerns over the global economy. Further, higher input costs owing to the imposition of tariffs has been plaguing the sector since last year. However, the manufacturing companies continue to combat cost inflation through pricing actions, cost control, increasing productivity and eliminating waste.

We take a look at four industrial companies that are gearing up to report their June-end quarter numbers on Jul 29.

John Bean Technologies Corporation JBT: The company is set to release results for the second quarter of fiscal 2019, after the closing bell. Our proven model shows that John Bean Technologies is likely to beat earnings this quarter. 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.

John Bean Technologies currently has a Zacks Rank #1 and an Earnings ESP of +1.41%.

The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with an average positive surprise of 25.14%.

John Bean Technologies Corporation Price and EPS Surprise
 

John Bean Technologies Corporation Price and EPS Surprise

John Bean Technologies Corporation price-eps-surprise | John Bean Technologies Corporation Quote

For the quarter to be reported, the Zacks Consensus Estimate for earnings is pegged at $1.07, indicating an improvement of 13.71% from the year-ago quarter. The same for revenues is currently pegged at $479.8 million, suggesting decline of 2.34% from the year-ago reported figure.

The company will benefit from strong order, backlog levels and acquisitions in the quarter. Further, productivity improvement from continuing restructuring activities will aid margins. However, unfavorable foreign currency impact will act as a headwind in the to-be-reported quarter. Moreover, revenues will be lower in the second quarter of 2019 owing to a one-time transition benefit in 2018 from adoption of ASC 606. In 2018, the company adopted the new revenue recognition standard (ASC 606) which led to an adjustment in revenues that was allowed in the year of transition only. The absence of this benefit in 2019 will lead to a decline in the company’s top and bottom line.

Terex Corporation TEX is slated to report second-quarter 2019 results after the closing bell. Notably, Terex surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average positive surprise of 15.77%.

Terex Corporation Price and EPS Surprise

 

Terex Corporation Price and EPS Surprise

Terex Corporation price-eps-surprise | Terex Corporation Quote

For the to-be-reported quarter, the Zacks Consensus Estimate for earnings is pegged at $1.34, suggesting growth of 36.73% from the year-ago quarter. The same for revenues is at $1.32 billion, indicating a decline of 6% from the year-ago reported figure.

Terex’s Aerial Work Platforms segment will benefit from strong global markets, operational execution and innovative new products. The segment is well poised for the second quarter with $1.1 billion of backlog. The Zacks Consensus Estimate for second-quarter revenues for the segment is currently pegged at $890 million, indicating an improvement of 19% year over year. The Zacks Consensus Estimate for the segment’s operating profit is at $116 million compared with $102 million reported in the prior-year quarter.

For the Material Processing segment, backlog was up 11% in the last reported quarter. This, along with strong market momentum will aid the segment’s performance in the to-be-reported quarter. The Zacks Consensus Estimate for revenues for the segment is $358 million, suggesting year-over-year growth of 21%. The Zacks Consensus Estimate for the segment’s operating profit is at $47 million, indicating an improvement of 11% from the year-ago reported figure.

However, higher input costs due to the imposition of tariffs on steel imports and foreign-exchange headwinds are expected to hurt the company’s performance in the upcoming quarterly results.

We reasonably confident of the company delivering a positive earnings surprise as it has an Earnings ESP of +1.56% and a Zacks Rank #3.

EnPro Industries NPO) is scheduled to report second-quarter 2019 results, after the closing bell. The company beat the Zacks Consensus Estimate for earnings in one of the trailing four quarters, missing twice and meeting the same once, with an average negative surprise of around 8.98%.

EnPro Industries Price and EPS Surprise


 

EnPro Industries Price and EPS Surprise

EnPro Industries price-eps-surprise | EnPro Industries Quote

The Zacks Consensus Estimate for EnPro’s second-quarter earnings and revenues is pegged at $1.00 and $391.5 million, respectively. While the estimate for revenue indicates year-over-year decline of 0.52%, the same for earnings suggests an improvement of 33.33%.

The company’s earnings will likely benefit from its cost control measures. However, negative foreign currency impact will dent results. The Power Systems segment will gain on strong demand for military marine engines, and aftermarket parts and service. The Sealing segment will benefit from strength in food & pharma, which will be offset by a softer semiconductor market. . However, softness in Engineered Products’ auto and general industrial businesses due to weakness in Europe and Asia, and last year’s exit from the industrial gas turbine business will weigh on 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.

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Terex Corporation (TEX) : Free Stock Analysis Report
 
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