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Machinery Stocks Earnings Roster for Apr 25: CAT, IRBT & More

Zacks Equity Research

The Machinery industry, which is broadly grouped under the Industrial Products sector (one of the 16 broad Zacks sectors), had logged growth of 6% in fourth-quarter 2016. For first-quarter 2017, 18.2% of the S&P 500 members in the industrial products sector have reported their numbers as of Apr 21, putting up a 1.5% growth in earnings driven by a 5.3% rise in revenues. The sector’s earnings growth graph will eventually pick up with 7.9% growth expected in the quarter owing to 3.7% increase in revenues. (Read more: Earnings Growth Accelerates in Q1)

Looking at the broader picture, of the 95 S&P 500 members that have reported across all sectors, that constitute 24.9% of the index’s total market capitalization, earnings has gone up 14.3% for the first quarter. Considering all the companies that are yet to report, the S&P 500 is expected to register a 9.1% growth in the quarter, outperforming the 7.4% growth witnessed in the fourth quarter. It is worth mentioning that the earnings growth trajectory had entered the positive territory in third-quarter 2016, after five quarters of back to back declines.

Industrial production rose 0.5% in March, following a 0.1% move in February. Industrial production had dipped 0.3% in January. The increase in March was driven by a jump of 8.6% in the output of utilities, the largest in the history of the index as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February. For the first quarter as a whole, industrial production rose at an annual rate of 1.5 %.

It will be interesting to see how some of the machinery stocks fare when they release first-quarter 2017 numbers on Apr 25. Apart from beats and misses, focus will also be on their outlook.

One heavyweight that hogs the limelight in the sector is Caterpillar, Inc. CAT, being the world's largest manufacturer of construction and mining equipment. The company will report quaterly results, before the market opens.

Caterpillar’s earnings in the last reported quarter remained flat despite a 13% decline in revenues mainly attributed to the cost saving activities to negate the impact of a weak mining industry, low oil prices and stronger U.S. dollar.

The company has an impressive earnings surprise history beating estimates in the trailing four quarters. The company has a positive average surprise of 13.64%.

Caterpillar, Inc. Price and EPS Surprise

Caterpillar, Inc. Price and EPS Surprise | Caterpillar, Inc. Quote

The company will benefit from the recent pick up in construction-related activity. Further, cost savings from recently enhanced restructuring actions will boost margins. This will somewhat help mitigate the headwinds from weak mining and agriculture.

Our proven model shows that Caterpillar 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 uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that the stocks having a Zacks Rank #4 and 5 (Sell-rated stocks) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Caterpillar currently sports a Zacks Rank #1 and has an Earnings ESP of +4.84%. (Read more: Is Caterpillar Likely to Deliver a Beat in Q1 Earnings?)

iRobot Corporation IRBT is scheduled to report results after the market closes.

The company has an impressive average positive earnings surprise in the last four quarters of 174.22%.

iRobot Corporation Price and EPS Surprise

iRobot Corporation Price and EPS Surprise | iRobot Corporation Quote

However, our proven model does not conclusively show that iRobot is likely to beat earnings this quarter. Though iRobot’s Zacks Rank #3 increases the predictive power of ESP, its negative ESP of 3.85% makes a beat unlikely this quarter.

The company is poised to grow on the back of meaningful innovations, strategic marketing programs and diligent restructuring initiatives.

However, headwinds such as a stronger U.S. dollar and stiff industry rivalry might hurt results in the quarter under review. (Read more: iRobot Q1 Earnings: What's in Store for the Stock?)

John Bean Technologies Corporation JBT, will report quarterly numbers after the market closes. In the last reported quarter, the company registered year-over-year increase in both the top line and bottom line.

The company outpaced the Zacks Consensus Estimate in the preceding four quarters. The average positive surprise was 21.01%.

John Bean Technologies Corporation Price and EPS Surprise

John Bean Technologies Corporation Price and EPS Surprise | John Bean Technologies Corporation Quote

John Bean Technologies’ order and backlog both improved in the fourth quarter. This bodes well for the first-quarter performance.

The combination of John Bean Technologies’ Zacks Rank #1 and Earnings ESP of 0.00% makes earnings prediction difficult.

Pentair plc PNR will report results before the opening bell. In the fourth quarter, both earnings and revenues declined on a year-over-year basis.

Pentair has consecutive earnings beats in the four trailing quarters with an average positive earnings surprise of 5.04%.

Pentair PLC. Price and EPS Surprise

Pentair PLC. Price and EPS Surprise | Pentair PLC. Quote

Pentair continues to manage cost structure and drive productivity. Strength in order activity will also drive growth.

Pentair carries a Zacks Rank #3. The combination of the company’s favorable Zacks Rank with a positive ESP of 1.64% makes us reasonably confident of an earnings beat.

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iRobot Corporation (IRBT): Free Stock Analysis Report
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