Leggett & Platt, IncorporatedLEG is scheduled to release third-quarter 2018 results on Oct 25. In the last reported quarter, the company's earnings surpassed the Zacks Consensus Estimate by a margin of 3.3%.
How are Estimates Faring?
Let's look at earnings estimate revisions in order to get a clear picture of what analysts are thinking about the company prior to the release. For the quarter under review, the Zacks Consensus Estimate is pegged at 72 cents, flat over the past 30 days. This reflects a gain of 18% from 61 cents in the year-ago quarter. Revenues are expected to be $1,102 million, up more than 9% year over year.
Factors at Play
Leggett's third-quarter 2018 results are likely to be driven by an increase in raw material price and currency alongside volume growth. Also, the company has been experiencing higher sales, as evident from its 9.3% year-over-year net sales growth in the first six months of 2018.
Moreover, the company's long-term strategic plan bode well. Leggett has successfully completed the first two parts of its strategic plan. While the first part was to divest low-performing businesses, the second part comprised an improvement in margins and returns. Currently, it is working on the third part of the plan that aims at achieving top-line growth of 4-5% annually. Further, solid market demand coupled with market share gains has been enhancing capacity utilization over the years.
Furthermore, acquisitions contributed around 3% and 2% to sales in the second and first quarter of 2018, respectively. Notably, the company's 2018 sales view was backed by expectation of mid-single-digit volume growth, raw material price increases and favorable currency. The PHC acquisition is likely to contribute 2% to sales growth as well.
However, margin in the quarter will continue to be hurt by commodity and steel cost inflation. In second-quarter 2018, margin contracted 230 basis points (bps) to 21%.
Leggett & Platt, Incorporated Price and Consensus
Leggett & Platt, Incorporated Price and Consensus | Leggett & Platt, Incorporated Quote
Our Model Suggests a Beat
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP . Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Leggett has an Earnings ESP of +1.04% and a Zacks Rank #3, a combination that suggests that the company is likely to beat estimates this quarter.
Stocks With Favorable Combination
Here are some companies you may want to consider as our model shows that these also have the right combination of elements to post earnings beat:
KBR, Inc. KBR has an Earnings ESP of +0.65% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .
M.D.C. Holdings, Inc. MDC has an Earnings ESP of +4.28% and a Zacks Rank #3.
Dycom Industries, Inc. DY has an Earnings ESP of +3.53% and a Zacks Rank #3.
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