Will Eaton Corp. (ETN) Disappoint this Quarter? - Analyst Blog

By Zacks Equity Research,

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Eaton Corporation plc ( ETN ) is scheduled to release its first quarter 2014 financial results before the market bell on Apr 29, 2014. The company posted a positive earnings surprise of 1.89% in the preceding quarter. Eaton Corp. currently has a Zacks Rank #3 (Hold). Let's see how things are shaping up prior to this announcement.

Factors to Consider this Quarter

Although Eaton posted healthy earnings growth in the fourth quarter, the company might face certain challenges in the first quarter of 2014. The Electrical Service and Systems segment registered weak data center bookings in 2013. Besides, the continued soft market conditions in Asia could affect the first-quarter performance.

The company's (light-emitting diode) LED electrical products received a lukewarm response in Europe, Middle East and Africa. In Asia-Pacific too LED product sales declined 5% in the fourth quarter with demand yet to pick up.   

However, given the rising demand in the commercial airline space, the Aerospace segment will prove to be a major revenue driver. In addition, positive economic fundamentals in the auto industry will propel Eaton's heavy-duty vehicle sales.

Earnings Whispers

Accordingly, our proven model does not conclusively show that Eaton Corp. is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Negative Zacks ESP:  The Most Accurate estimate stands at 98 cents while the Zacks Consensus Estimate is pegged higher at $1.00 per share, resulting in a -2.00% ESP.

Zacks Rank #3 (Hold): The combination of a Zacks Rank #3 and a negative ESP makes an earnings surprise prediction difficult. Meanwhile, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement.  

Other Stocks to Consider

Here are some companies in the diversified machinery industry having the right combination of elements to post an earnings beat this quarter.

Advanced Energy Industries Inc. ( AEIS ) has an earnings ESP of +10.00% and carries a Zacks Rank #1 (Strong Buy).

AO Smith Corp. ( AOS ) has an earnings ESP of +1.67% and carries a Zacks Rank #2 (Buy).

Actuant Corporation ( ATU ) has an earnings ESP of +1.59% and carries a Zacks Rank #3 (Hold).

ADV ENERGY INDS (AEIS): Free Stock Analysis Report

SMITH (AO) CORP (AOS): Free Stock Analysis Report

ACTUANT CORP (ATU): Free Stock Analysis Report

EATON CORP PLC (ETN): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Stocks
Referenced Stocks: AEIS , AOS , ATU , ETN

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