Credit: Shutterstock photoEaton CorporationETN is slated to report third-quarter 2017 financial results before the market opens on Oct 31. The power management company delivered a negative earnings surprise of 0.86% in the last quarter. Let's see how things are shaping up for this earnings season.
Factors to Consider
Eaton expects hurricanes Maria, Irma and Harvey, as well as the earthquake in Mexico City to have an adverse impact of 3 cents on its projected earnings per share guidance of $1.20 to $1.30.
The natural calamities will no doubt have a short-term effect on Eaton's performance. However, the company expects improvement in the end-market conditions to increase its organic revenues by 2.5% to 3.5% in the third quarter from the year-ago period. Eaton's restructuring initiatives are also likely to have a positive impact on its margins.
Electric Products segment is a major contributor to Eaton's total revenues. The Zacks Consensus Estimate projects this segment to contribute nearly 35.6% of total revenues in the third quarter, which is better than last-year quarter.
The Zacks Consensus Estimate for total revenues of $5,111 million in the third quarter reflects a 0.4% drop sequentially, primarily due to lower contribution expectation from its Vehicle segment.
Eaton Corporation, PLC Price and EPS Surprise
Eaton Corporation, PLC Price and EPS Surprise | Eaton Corporation, PLC Quote
Earnings Whispers
Our proven model does not conclusively show that Eaton is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as you will see below.
Zacks ESP : The company's Earnings ESP is -0.34%.
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Zacks Rank : Eaton's Zacks Rank #3, when combined with a negative Earnings ESP makes a beat unlikely this quarter.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks With Favorable Combination
One can consider a few other companies from the Zacks Industrial Products Sector that have the right combination of elements to post an earnings beat this quarter.
Deere & Company DE has an Earnings ESP of +0.71% and a Zacks Rank #3. It is expected to report fourth-quarter fiscal 2017 earnings on Nov 22. You can see the complete list of today's Zacks #1 Rank stocks here .
Barnes Group B has an Earnings ESP of +1.08% and a Zacks Rank #1. It is expected to report third-quarter earnings on Oct 27.
Terex Corporation TEX has an Earnings ESP of +3.17% and a Zacks Rank #2. It is expected to report third-quarter earnings on Nov 1.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
