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Will Organic Growth Benefit Eaton's Earnings (ETN) in Q1?

Zacks Equity Research

Eaton Corporation ETN is slated to report first-quarter 2019 financial results on Apr 30, before the opening bell. Notably, the power management company delivered a positive earnings surprise of 2.10% in the last reported quarter.

Factors to Consider

The ongoing improvement in major end markets served by Eaton is expected to increase organic revenues in excess of 4% year over year in the first quarter. Strong contribution from its segments is expected to drive first-quarter earnings per share, which are projected in the range of $1.18-$1.28.

Eaton is expected to gain from the strategy of manufacturing in the zone of sale, which lowers the impact of tariffs on the company.  Buyback of shares is also anticipated to have a positive impact on earnings.

The Zacks Consensus Estimate for first-quarter total revenues of $5,397 million indicates 2.8% year-over-year growth. The Electric Products segment continues to be a major contributor to Eaton’s revenues. The Zacks Consensus Estimate of $1,768 million for this segment’s revenues suggests a 2.1% increase from the year-ago reported figure. However, lower sales from the Vehicles segment are expected to marginally offset the benefits.

Eaton Corporation, PLC Price and EPS Surprise

Eaton Corporation, PLC Price and EPS Surprise | Eaton Corporation, PLC Quote

What Our Quantitative Model Predicts

Our proven model shows that Eaton is unlikely to beat estimates in the upcoming quarterly release. A stock needs to have both a positive Earnings ESP (which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to surpass estimates. That is not the case here as you will see below.

Earnings ESP: Earnings ESP of the company is pegged at -1.21%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Currently, Eaton carries a Zacks Rank #3. Although the company’s favorable Zacks Rank increases the predictive power of ESP, a negative ESP makes us unsure about a positive earnings surprise this season.

Conversely, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks With Favorable Combination

Investors can consider a few companies from the same sector that have the right combination of elements to post earnings beat in the to-be-reported quarter.

Sun Hydraulics Corporation SNHY has an Earnings ESP of +1.05% and sports a Zacks Rank #1. It is anticipated to report first-quarter 2019 earnings on May 6. You can see see the complete list of today’s Zacks #1 Rank stocks here.

Century Aluminum Company CENX has an Earnings ESP of +1.06% and holds a Zacks Rank #2. It is slated to report first-quarter 2019 earnings on Apr 30.

Colfax Corporation CFX has an Earnings ESP of +2.27% and a Zacks Rank #3. It is expected to report first-quarter 2019 earnings on May 8.

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Eaton Corporation, PLC (ETN) : Free Stock Analysis Report
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