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Machinery Stocks' Apr 24 Earnings Roster: CAT, IRBT & More


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The Q1 earnings season has kicked off on an impressive note, with total earnings for the 87 S&P 500 members that have released results so far, surging 25% year over year on 11.7% higher revenues, per the latest Earnings Trends report. It is noteworthy that of this, 62.1% of the companies have surpassed both EPS and revenue estimates.

The picture ahead is encouraging too. Taking into account the rest of the S&P 500 members that are yet to report, total earnings for the S&P 500 index is expected to be up 18.3% for this earnings season on the back of a 7.7% rise in revenues. If this materializes, it would surpass fourth-quarter 2017 results where the S&P 500 recorded 13.4% earnings growth on 8.6% revenue growth - the best quarterly performance in more than six years.

Industrial Sector Back on Track

The Industrial Products sector, currently placed at the top 6% out of the 16 Zacks sectors, is one of the sectors which are expected to record double-digit earnings growth, mainly driven by the U.S. tax reform. According to our latest projections, the sector is anticipated to log an earnings growth of 25.8% in first-quarter 2018 on the back of 12.8% rise in revenues.

After being straddled by soft commodity prices, reduced investment in the energy sector, dismal economic conditions in some developed and developing nations in the last few years, the Industrial Products sector seems to have regained its footing last year. The turnaround in its performance is primarily due to increased infrastructure spending and other growth-friendly policies of the new administration. Rise in manufacturing and mining activity also played a crucial role.

Upbeat Data Instils Confidence

Industrial production is one of the leading economic indicators for industrial stocks. For first-quarter 2018, industrial production - a measure of output at factories, mines and utilities - rose at an annual rate of 4.5%.

Further, the U.S Architecture Billings Index ("ABI"), an economic indicator that provides an approximately nine-to-12 month glimpse into the future of non-residential construction spending activity, was 51 in March - increasing for the sixth straight month. Notably, any score more than 50 indicates billings growth and reflects a healthy business environment.

Per the latest report of the Institute for Supply Management ("ISM"), Purchasing Managers Index ("PMI") was 59.3% in March. This indicates strong growth in manufacturing for the 19th consecutive month, led by continued expansion in new orders, production activity, employment and inventories. A reading above 50% indicates that the manufacturing economy is generally expanding. New orders index is at 61.9, remaining at or above 60 for the 11th straight month.  Of the 18 manufacturing industries, 17 industries reported growth in March. The only exception being Apparel, Leather & Allied Products.

It will be interesting to see how some of the machinery stocks fare when they release first-quarter 2018 numbers on Apr 24.

Being the world's largest manufacturer of construction and mining equipment Caterpillar, Inc. CAT , is one heavyweight that hogs the limelight in the industrial product sector. The company ended 2017 on a high, delivering year-over-year improvement in both the top and bottom lines thanks to its incessant efforts to cut down costs, improvement in construction sector and pickup in Resource Industries. Consequently, all eyes will be on the behemoth to see if the company can repeat the feat when it reports earnings before the opening bell.

Caterpillar has an impressive earnings surprise history beating estimates in the trailing four quarters. The company has a positive average surprise of 51.65%.

Caterpillar Inc. Price and EPS Surprise

Caterpillar Inc. Price and EPS Surprise

Caterpillar Inc. price-eps-surprise | Caterpillar Inc. Quote

The company will benefit from improved backlog and conducive end markets. In North America, continued improvement in residential and non-residential construction as well as revival in infrastructure demand will drive revenues. Increasing commodity prices is restoring miners' profitability and their resumption of capital spending bodes well for Caterpillar. Further, cost savings from recent enhanced restructuring actions will boost margins.

Our proven model shows that Caterpillar is likely to beat earnings this quarter. This is because the company has the right combination of two key ingredients - a positive Earnings ESP (the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate) and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today's Zacks #1 Rank stocks here .

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Caterpillar currently has a Zacks Rank #2 and an Earnings ESP of +4.07%. (Read more: Can Caterpillar Retain Its Beat Streak in Q1 Earnings? )

The leading global consumer robot company, iRobot Corporation IRBT , is set to release first-quarter 2018 results after the market closes . The company delivered a year-over-year improvement in both earnings and sales in the last reported quarter and also beat the respective Zacks Consensus Estimates. It has outpaced the Zacks Consensus Estimate in the trailing four quarters, with an impressive average earnings beat of 113.01%.

iRobot Corporation Price and EPS Surprise

iRobot Corporation Price and EPS Surprise

iRobot Corporation price-eps-surprise | iRobot Corporation Quote

iRobot has an Earnings ESP of -16.67%. This is because the Zacks Consensus Estimate of 53 cents is higher than the Most Accurate estimate of 45 cents per share. The company's favorable Zacks Rank of 3, when combined with a negative Earnings ESP, makes surprise predictions difficult.

It will benefit from solid demand for popular home-robotic products, such as Roomba 800, Roomba 900 and Braava jet as well as marketing programs and launch of innovative products. Lower corporate tax and greater operational efficacy will also bolster profitability. However, lingering headwinds in the consumer robotics market might dampen iRobot's results. (Read more:  Will iRobot Beat Q1 Earnings on Strong Robotic Sales? )

Leading global supplier of tooling, engineered components and advanced materials consumed in production processes,  Kennametal Inc. KMT will report results before the opening bell. In the last reported quarter, the company reported improvement in both the top and bottom lines. However, while sales beat the Zacks Consensus estimate, earnings missed the same.

Over the preceding four quarters, Kennametal beat estimates in three occasions and missed in the other, delivering an average positive surprise of 17.8%.

Kennametal Inc. Price and EPS Surprise

Kennametal Inc. Price and EPS Surprise

Kennametal Inc. price-eps-surprise | Kennametal Inc. Quote

The company has an Earnings ESP of +1.73% as the Most Accurate estimate is 74 cents, while the Zacks Consensus Estimate is pegged at 72 cents. We expect Kennametal to come up with a positive earnings surprise this season backed by its Zacks Rank #3 and an Earnings ESP of +1.73%.

Kennametal will gain from its diversified customer base and international operations. Moreover, it is on track to realize benefits from its modernization and end-to-end initiatives.

Astec Industries Inc. ASTE is a leading manufacturer and marketer of road building equipment. It is set to release first-quarter results before the market opens. In the last reported quarter, revenues and earnings declined on a year-over-year basis. While revenues beat the Zacks Consensus Estimate, earnings missed the consensus mark.

Notably, the company has missed the Zacks Consensus Estimate in the preceding four quarters, resulting in an average negative earnings surprise of 8.40%.

Astec Industries, Inc. Price and EPS Surprise

Astec Industries, Inc. Price and EPS Surprise


Astec Industries, Inc. price-eps-surprise
| Astec Industries, Inc. Quote

Astec's backlog improved across all its segments during the fourth quarter. The Infrastructure group won a number of orders during the quarter. The Energy group backlog also experienced increased quoting activity for oil and gas drilling products. The company's Brazil facility continues to record growth in quoting activity in the country. It anticipates revenues to grow on strong backlog, domestic infrastructure product sales activity, as well as momentum in international sales despite a strong U.S. dollar. The company expects that the first-quarter earnings per share will be better than first-quarter 2017.

The favorable combination of a Zacks Rank #3 and an Earnings ESP of +0.93% makes us reasonably confident of an earnings beat this quarter.

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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 Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: IRBT , KMT , CAT , ASTE



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