3 Industrial Products Stocks to Beat Earnings - Earnings ESP

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3 Industrial Products Stocks to Beat Earnings


After a remarkable improvement in the second half of 2013, the pace of global economic growth seems to have floundered a little at the beginning of 2014. The U.S. is struggling with its labor market problems, as the recent job report showed job additions of just 113,000 in January, lower than the market expectation of 185,000 and much below the monthly average of 194,000 in 2013. However, the unemployment rate fell slightly to 6.6%. Problems multiplied as industrial production in January slipped 0.3% while manufacturing output recorded a 0.8% decline. As for the emerging nations, prevailing domestic weakness was compounded by the new Federal Reserve chair Janet Yellen's decision to continue with the Quantitative Easing (QE) tapering. This has softened the growth prospects of the developing nations.

Yet, things are not so bleak at home as the January job data would make you believe. There are evidences of strengthening demand in the housing as well as durable goods markets. In Jan 2014, job additions were the highest in construction, manufacturing, wholesale trade and mining industries. In China, investments made in the last few months of 2013 are yielding results. Exports improved 10.6% while credit growth also remained high to start off the year. The Chinese Central Bank, however, has a watchful eye on overall credit growth to avoid any risk from default in loan repayments. Roughly $7.9 billion has been squeezed out of the money market through bonds repurchase agreements. Japan is now on the verge of implementing a sales tax hike of 3% in Apr 2014 with a view to curb its ballooning debt levels. This measure combined with the stimulus promised, if successfully implemented, is expected to drive growth in the medium to long term.


Given the uncertain scenario, results in the Industrial Products sector are likely to remain weak in the initial quarter of 2014 with earnings likely to slip 0.8% year over year. Improvements are expected thereafter as demand in domestic and international markets gradually picks up. For the sector at large, earnings growth is predicted at 7.1% in 2014 and 12.2% in 2015. Much of the earnings growth is expected to come from margin improvements. Revenue growth is still likely to remain low at 0.2% in 2014 and 3.6% in 2015.

Let us take a look at how the sector has performed so far in the fourth quarter 2013. Of the total Industrial Products companies in the S&P 500 group, roughly 88% have already reported their fourth quarter results as of Feb 13. Earnings grew 11.2% while revenue recorded a meagre 0.1% rise. Both earnings and revenue beat ratios were at 59.1%. Overall earnings growth for the Industrial Products sector in the fourth quarter 2013 is expected at 9.1%.

Below we elaborate a few simple guidelines that will help investors to select the Industrial Products stocks that are likely to beat earnings estimates this season.

How to Pick?

Choosing the right stocks, with the potential to beat earnings estimates, from a plethora of industry players can be a daunting task. The Industrial Products sector includes machinery, pollution control, industrial products-services, construction building services and containers and glass industries. The procedure, however, can be simplified by selecting stocks with a favorable Zacks Rank - Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) - and a positive Zacks Earnings ESP .

Earnings ESP is our proprietary methodology for determining which stocks have the best chance to surprise in their next 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 positive earnings surprise is as high as 70%.

Here are three Industrial Products stocks that are currently equipped with the right combination of elements to post an earnings beat:

Zebra Technologies Corp. ( ZBRA ) currently has a $2.8 billion market capitalization and carries a Zacks Rank #2. Earnings ESP for the fourth quarter 2013 is at +2.53% and the Zacks Consensus Estimate for the quarter is at 79 cents.

Headquartered in Lincolnshire, Ill., Zebra Technologies is a leading manufacturer and seller of printers and related products. Well-known products include thermal printers, radio frequency identification products and real-time locating systems. The company serves customers in more than 100 countries.

-Zebra Technololgies is scheduled to announce its fourth quarter 2013 financial results on Feb 19.

Harsco Corporation ( HSC ) currently has a $2.02 billion market capitalization and carries a Zacks Rank #3. Earnings ESP for the fourth quarter 2013 is at +15.00% and the Zacks Consensus Estimate for the quarter is at 20 cents.

Harsco Corporation is headquartered in CanCamp Hill, Penn. The company is a leading provider of industrial services and engineered products in global infrastructure, metals, minerals, rail, and industrial sectors. Also, the company provides industrial mill services, gas control, and containment products, scaffolding services, and railway maintenance services.  

- Harsco Corporation is scheduled to announce its fourth quarter 2013 financial results before the opening bell on Feb 20.

Casella Waste Systems Inc. ( CWST ) currently has a $218.4 million market capitalization and carries a Zacks Rank #3. Earnings ESP for the fiscal third quarter 2014 (ended Jan 31, 2014) is at +5.88%; the Zacks Consensus Estimate for the quarter is pegged at a loss of 17 cents.

Casella Waste Systems is headquartered in Rutland, Vt. The company operates as a regional solid waste, recycling, and resource management services company. Prime area of its operations is the north-eastern U.S.

- Casella Waste Systems is scheduled to release its fiscal third quarter 2014 financial results after the market closes on Mar 5, 2014.

Going Forward

Albeit economic uncertainties still persist in many parts of the world, efforts are afoot in implementing better policies and improving trade relations.  Add to this a growing world population. This would inevitably make demands on improving infrastructure, and modernizing methods of agriculture as well as mining/manufacturing techniques - a sure impetuous for industrial products and services stocks.  In the light of this, a sneak peek at the space for some possible winners backed by a solid Zacks Rank and a positive Zacks Earnings ESP could be a great idea for investors to gain from this earnings season. 


CASELLA WASTE (CWST): Free Stock Analysis Report

HARSCO CORP (HSC): Free Stock Analysis Report

ZEBRA TECH CL A (ZBRA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Earnings

Referenced Stocks: CWST , HSC , ZBRA

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