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Will Solid Order Levels Drive Milacron's (MCRN) Q1 Earnings?

Milacron Holdings Corp.MCRN is slated to report first-quarter 2018 results before the market opens on Apr 26.

In the last reported quarter, the company posted a positive earnings surprise of nearly 20.5%. Notably, Milacron surpassed the Zacks Consensus Estimate in three out of the last four quarters, resulting in an average surprise of 9.4%.

Let's see how things are shaping up prior to this announcement.

Milacron Holdings Corp. Price and EPS Surprise

Milacron Holdings Corp. Price and EPS Surprise | Milacron Holdings Corp. Quote

Key Factors to Consider

Milacron's orders increased 9% year over year to $1.3 billion in 2017. It also ended the year with a solid backlog of $287 million. This was driven by strong order levels in the aftermarket business in North America, China, and particularly in the hot-runner business and India-based equipment business. This robust backlog will drive the company's first-quarter performance.

On the equipment front, the company's India business delivered double-digit top line growth in 2017. The India manufacturing facility is undergoing another round of expansion in order to meet market demand. Thus, Milacron believes the country is an important element of equipment growth strategy, where business will continue to expand.

In addition, the company expects its profitability to be supported by revenue growth and margin expansion in the near term. Its focus on sales of aftermarket services and parts, execution of corporate buying agreements with select customers, geographic expansion of certain product lines, and incremental share gain from new products will drive revenues.

Notably, Milacron's Advanced Plastic Processing Technologies (APPT) segment will benefit from rising demand in the plastic processing machinery industry, backed by the overall estimated increase in plastic processing, increasing equipment age and continuing advancement in technology. The Zacks Consensus Estimate for the segment sales is pegged at $163 million for the first quarter, reflecting 3.8% year-over-year improvement.

In the Melt Delivery and Control Systems (MDCS) segment, the hot-runner market is predicted to grow faster than the overall global economy based on macro-economic drivers involving product life cycles, demographics, technology conversion and growing demand of plastic. Our consensus estimates indicate that sales of Milacron's MDCS segment will reach $106 million in the to-be-reported quarter, reflecting 6% year-over-year growth.

Further, its fluids segment will grow on elevated demand for technology fluids, driven by environmental and health concerns, and increasing prevalence of exotic metals. We expect that quarterly sales for the segment will likely be $31 million, up around 6% year over year.

Moreover, the Zacks Consensus Estimate for Milacron's earnings per share is pegged at 39 cents for the first quarter, underlining year-over-year growth of roughly 21.9%. The Zacks Consensus Estimate for total sales of $299 million also indicates nearly 5% growth from the prior-year quarter.

However, the company stated that the first-quarter equipment sales volume is typically the lowest of the year due to timing of customers' capital-spending programs. Furthermore, input-cost inflation, particularly steel, will continue to be a headwind and impact margins in the quarter to be reported.

Milacron's shares have underperformed the industry it belongs to over the past year, affected by the prevalent headwinds. The stock has gained around 10% compared to nearly 23% growth recorded by the industry.

Earnings Whispers

Our proven model shows that Milacron is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP , and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.

Zacks ESP: The Earnings ESP for Milacron is +2.33%. This is because the Most Accurate estimate of 40 cents comes in higher than the Zacks Consensus Estimate of 39 cents. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Milacron currently carries a Zacks Rank #3. It should be noted that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings.

Conversely, stocks with a Zacks Rank #4 or 5 (Sell rated) should never be considered going into an earnings announcement.

The combination of Milacron's Zacks Rank #3 and Earnings ESP of +2.33% makes us confident of a likely earnings beat.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Alarm.com Holdings, Inc. ALRM , with an Earnings ESP of +5.44% and a Zacks Rank #1. The stock has appreciated 29% in a year's time. You can see the complete list of today's Zacks #1 Rank stocks here .

Caterpillar Inc. CAT , with an Earnings ESP of +4.07% and a Zacks Rank #2. Its shares have rallied 58% in the past year.

Illinois Tool Works Inc. ITW , with an Earnings ESP of +1.02% and a Zacks Rank #3. The company's shares have been up 13% during the same time frame.

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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.

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