Industrial tool maker Stanley Black & Decker, Inc.SWK is scheduled to report third-quarter 2015 results on Oct 22 before the market opens. The Zacks Consensus Estimate for the quarter is pegged at $1.52 per share.
Stanley Black & Decker performed well in the last four quarters, with an average positive earnings surprise of 4.9%. Last quarter, the company's earnings of $1.54 per share surpassed the Zacks Consensus Estimate of $1.53 by 0.7%. Let us see how things are shaping up for this quarter.
Factors to Affect Q3 Results
According to the Federal Reserve, industrial production in the U.S. declined 0.2% sequentially in September due to fall in manufacturing and mining outputs, partially offset by a slight improvement in utilities. In August, industrial production fell 0.1%, while an increase of 0.8% was recorded in July. Additionally, export demand for the U.S.-manufactured machinery has been adversely affected by unfavorable currency movements and prevailing uncertainties in major developed and emerging nations.
We believe macroeconomic headwinds, including uncertain global economic conditions, unfavorable forex impact and soft commodity prices, continue to cloud the near- to medium-term outlook of Stanley Black & Decker. Also, lower margin in the Security segment as well as higher restructuring expenses remain as major concerns.
However, Stanley Black & Decker's strategy of shifting its business portfolio toward better-growth markets as well as its commitment to reward its shareholders handsomely might work in its favor. The company also hopes to improve its organic growth on the back of efficient cost-saving measures.
Our proven model does not conclusively show that Stanley Black & Decker is likely to beat earnings this quarter. That is because 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. That is not the case here as you will see below.
Zacks ESP: Expected Surprise Prediction or ESP for the stock is currently 0.0%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.52 per share.
Zacks Rank: Stanley Black & Decker carries a Zacks Rank #4 (Sell).
However, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Stocks to Consider
Here are some companies you may want to consider in the sector as our model shows they have the right combination of elements to post an earnings beat this quarter:
ABB Ltd. ABB , with an Earnings ESP of +3.57% and a Zacks Rank #3.
Xylem Inc. XYL , with an Earnings ESP of +2.08% and a Zacks Rank #3.
Sealed Air Corporation SEE , with an Earnings ESP of +1.75% and a Zacks Rank #3.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.