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Key Predictions for Q3 Earnings Reports of FLR and PWR

Zacks Equity Research

A few industrial companies are gearing up to report quarterly numbers later this week. The Q3 earnings season is in full swing, with about 272 S&P 500 companies having already reported results, reconfirming broad-based expectations of impressive earnings (as on Oct 27).

Earnings of these companies (accounting for 64.2% of the index’s total market capitalization) are up 8.7% on 6.7% higher revenues. Of these companies, 75.7% have surpassed earnings estimates, with 66.2% coming ahead of revenue estimates.

As per the latest Earnings Preview, dated Oct 27, data projects that total earnings for the S&P 500 companies are now on track to be up an impressive 5.4% from the year-ago period, on 5.5% higher revenues.

The Industrial Products space (which accounts for about 2% of the S&P 500 index’s total market capitalization) is anticipated to chart the highest earnings growth rate this quarter amongst all Zacks sectors. In fact, its earnings are on track to be up 18% in the quarter, on 4.2% higher sales compared with last year.

The Industrial Products stocks have performed well in the past six months, with the sector gaining roughly 10.4%, outperforming the S&P 500’s rally of 7.6%. We believe growth-conducive policies of the government and expectations of higher infrastructure spending drove the shares’ performance.

Further, there are economic indicators which point toward a strong operating environment for the industry. Industrial production — which measures the level of output of manufacturing, mining and utilities sectors — grew at an annual rate of 4.7% in the second quarter, led by robust growth in mining and utilities. Other tailwinds are the strengthening housing, automotive and commercial construction markets, as well as steady growth in new job additions. These indicators bode well for the industry.

Let’s have a look at how some industrial companies are positioned, ahead of their scheduled announcements this week:

Fluor Corporation FLR offers engineering, procurement, construction and maintenance services through a number of subsidiaries. The company also provides its operations and maintenance services to major industrial clients. It has a decent earnings surprise history, having beaten estimates thrice in the trailing four quarters, with an average positive surprise of 9.9%. In the last reported quarter, the company surpassed estimates by 22%.

Fluor is unlikely to beat expectations this quarter. Though the company has a positive Earnings ESP, its Zacks Rank #5 (Strong Sell) makes surprise prediction difficult. The Zacks Consensus Estimate for the quarter is pegged at 58 cents. (For more details, read: Fluor to Report Q3 Earnings: What's in the Cards?)

For a possible earnings beat, the company should have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold). It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fluor Corporation Price and EPS Surprise

Fluor Corporation Price and EPS Surprise | Fluor Corporation Quote

Quanta Services, Inc. PWR is a leading national provider of specialty contracting services, and one of the largest contractors serving the transmission and distribution sector of the North American electric utility industry. The company has grown organically and made strategic acquisitions to expand its geographic presence and scope of services, along with developing new capabilities to meet consumers’ evolving needs.

Quanta Services has had a dismal earnings surprise history, with three misses and one in-line earnings over the trailing four quarters, for an average negative surprise of 4.5%. Last quarter, the company’s earnings missed the Zacks Consensus Estimate by 7.4%.

However, our quantitative model hints at a likely earnings beat for this Zacks Rank #3 company in Q3. This is because it has anESP of +1.05% (the Most Accurate estimate of 60 cents being higher than the Zacks Consensus Estimate of 59 cents), in addition to the favorable Zacks Rank. (For more details, read: Quanta Services Poised to Beat Q3 Earnings: Here's Why).

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

Quanta Services, Inc. Price and EPS Surprise

Quanta Services, Inc. Price and EPS Surprise | Quanta Services, Inc. Quote

Keep an eye on our full earnings articles to see how these players finally fared in quarter.

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