3 Hot Earnings Surprises in Metal Fabrication
The direct correlation between increasing economic activity and the
prospects of the metal fabrication industry implies that the
industry is set to do well this year, as economic numbers show
improvement across the board. The expected increase in demand for
metal structures that the industry deals with by the cutting,
bending, and assembling processes should bode well for the industry
With the overall improvement in the, energy, oil & gas,
residential and construction markets and the aerospace industry,
where the fabricated metals are primarily used, the demand for
metal fabrication is increasing.
The performance of the metal fabrication sector varies from company
to company, according to the different economic factors, the range
of markets catered to and each industry member's specific area of
concentration. In the recent past, the metal fabrication sector
faced severe headwinds with the global turmoil in the industrial
According to a report by the Manufacturers Alliance for
Productivity and Innovation (MAPI), fabricated metals production
increased 4% in 2013. Almost all major types of fabricated metal
products witnessed a year-over-year surge in production in the
year. Forging and stamping was up 1%, architectural and structural
metals rose 7%, machine shop turned products and fasteners grew 2%
and coating, engraving and heat treating grew 3% in the last
quarter of 2013 versus the same period a year ago.
Further, the fabricated materials production is expected to grow 3%
in 2014 and 5% in 2015. Production is predicted to grow at an
average annual rate of 3% from 2016 to 2018.
Given the solid prospects, the industry offers solid investment
opportunities at this point. Particularly, metal fabrication stocks
with the potential to beat earnings this quarter should see faster
price appreciation in the short term.
The Way to Pick Right Stocks
Picking the right stocks within the industry might be a difficult
task unless one knows the tactic to narrow down the list. One way
to do that is by choosing stocks that have the combination of a
favorable Zacks Rank - Zacks Rank #3 (Hold) or better - and a
Earnings ESP is our proprietary methodology for identifying stocks
that have high chances of surprising with their upcoming earnings
announcement. It shows the percentage difference between the Most
Accurate estimate and the Zacks Consensus Estimate.
Our research shows that for stocks with this combination, the
chance of a positive earnings surprise is as high as 70%.
Here are 3 major metal fabrication stocks that have the right
combination of elements to deliver earnings surprises in their
Precision Castparts Corp.
) is a Zacks Rank #2 (Buy) stock with an earnings ESP of +0.63%.
The Zacks Consensus Estimate for first-quarter 2014 is $3.20 per
Precision Castparts is a manufacturer of complex metal components
and products - providing high-quality investment castings, forgings
and fasteners/fastener systems for critical aerospace and
industrial gas turbine (IGT) applications. It also supplies
investment castings and forgings for general industrial,
automotive, armament, medical and other applications.
The company has registered an average positive earnings surprise of
0.25% over the trailing four quarters.
Precision is scheduled to announce its fiscal fourth-quarter
2014 results before the opening bell on May 8.
) carries a Zacks Rank #3 and has an earnings ESP of +1.82%. The
Zacks Consensus Estimate for the first quarter is pegged at 55
cents per share.
Based in Netherlands, Constellium primarily engages in the design,
manufacture, and sale of specialty rolled and extruded aluminum
Constellium is expected to announce its fiscal first-quarter
2014 results before the market opens on Jun 16.
Worthington Industries, Inc.
) carries a Zacks Rank #3 and has an earnings ESP of +1.52%. The
Zacks Consensus Estimate for the first quarter is 66 cents per
Headquartered in Columbus, OH, Worthington Industries, Inc. is a
leading metals manufacturing company, focusing on value-added steel
processing and manufactured metal products in the United States,
Canada, Europe and internationally.
-- Worthington is expected to announce its fiscal fourth
quarter 2014 results after the market closes on Jun 26.
The overall situation for the metal fabrication industry is
expected to improve through 2014 and beyond. Demand for forging and
casting of various metals is expected to grow in the U.S. on the
back of an improving global economy and a strong momentum in the
automotive markets and the burgeoning demand for increased aircraft
production. Further, the turnaround in the construction sector will
definitely provide the much-needed boost to the fabricated metals
CONSTELLIUM NV (CSTM): Free Stock Analysis
PRECISION CASTP (PCP): Free Stock Analysis
WORTHINGTON IND (WOR): Free Stock Analysis
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