Yahoo Finance 4 Industrial Stocks Set to Deliver a Beat This Earnings Season
The first-quarter 2023 earnings season is in the nascent stage for the Zacks Industrial Products sector. The handful of companies that have reported earnings so far have put up better-than-expected performances on strength across key end markets, improving supply chains and robust price realization. However, cost inflation has played a spoilsport for these companies.
Amid a softer demand environment, the latest Earnings Trends report reflects muted earnings and revenue growth for the S&P 500 companies within the Industrial Products sector. First-quarter 2023 earnings are expected to increase 1.6% year over year for the sector compared with a 15.9% rise recorded in the fourth quarter of 2022. Revenues for the sector are estimated to climb 5.9% year over year compared with a 9.7% increase reported in the fourth quarter of 2022.
Out of the 20% of the S&P 500 companies within the Industrial Products sector that have reported earnings numbers, 60% each beat on earnings and revenues, while 40% surpassed both earnings and revenue estimates.
Below we have discussed industrial companies like Ingersoll Rand IR, Johnson Controls International JCI, Parker-Hannifin Corporation PH and Zebra Technologies ZBRA that are set to trump earnings estimates this reporting cycle.
Key Factors for Q1
A low-demand environment, thanks to weakness in the manufacturing sector, is likely to have weighed on the first-quarter performances of sector participants. Per the Institute for Supply Management’s latest report, the Manufacturing Purchasing Manager's Index touched 46.3% in March, reflecting a contraction in manufacturing activities for the fifth consecutive month. A figure below 50 indicates a contraction in manufacturing activity. The New Orders Index has remained in contraction territory for the past several months.
Despite easing, cost inflation remains a major challenge for industrial companies. An anticipated increase in raw material costs is expected to have affected the bottom-line performance of these companies. A stronger U.S. dollar might also have impacted the overseas business performance of these companies.
Despite a slowdown in the manufacturing sector, strength across prominent end markets, such as life science, water & wastewater, chemical, agricultural, food and energy industries, is expected to have aided performance. Cost-control measures, effective pricing and operational execution are expected to have driven the top line of industrial companies.
Improving supply chains and faster deliveries, and better availability of raw materials are expected to have benefited performance in the to-be-reported quarter.
How to Pick Winners?
Given the large number of players operating in the transportation space, picking the right stocks is not an easy task. But our proven model makes it fairly simple. One can shortlist with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which increases the odds of an earnings beat. 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 report earnings with our Earnings ESP Filter.
Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining the stocks with maximum chances of delivering positive earnings surprises in their next announcements. Our research shows that for stocks with this perfect combination, the chances of a beat are as high as 70%.
Our Choices
Below we list four industrial stocks that have the right mix of elements to pull off an earnings surprise this time around.
Ingersoll Rand has an Earnings ESP of +2.32% and a Zacks Rank #1. The company is scheduled to release first-quarter 2023 results on May 3.
Ingersoll Rand’s first-quarter performance is expected to have benefited from higher orders for compressors, vacuum and blowers, power tools and lifting. Pricing actions and acquired assets are likely to have boosted the company’s top line.
Ingersoll Rand Inc. Price and EPS Surprise
Ingersoll Rand Inc. price-eps-surprise | Ingersoll Rand Inc. Quote
Johnson Controls has an Earnings ESP of +1.02% and a Zacks Rank #2. The company is slated to release second-quarter fiscal 2023 (ended Mar 31, 2023) results on May 5.
Strength in the Building Solutions North America segment due to growth in project-based business and continued improvement in HVAC & Controls are expected to have driven Johnson Controls’ fiscal second-quarter performance. Pricing actions and cost-control measures are likely to have supported the company’s margin performance.
Johnson Controls International plc Price and EPS Surprise
Johnson Controls International plc price-eps-surprise | Johnson Controls International plc Quote
Parker-Hannifin has an Earnings ESP of +2.43% and a Zacks Rank #2. The company is set to release third-quarter fiscal 2023 (ended Mar 31, 2023) financial numbers on May 4.
Parker-Hannifin’s fiscal third-quarter performance is expected to have benefited from strength in the Diversified Industrial segment due to broad-based growth in the North American region. The Meggitt acquisition, which has expanded PH’s presence in the UK, positioning it well to provide a broader suite of solutions for aircraft, and aeroengine components and systems, is expected to have boosted the company’s top line.
Parker-Hannifin Corporation Price and EPS Surprise
Parker-Hannifin Corporation price-eps-surprise | Parker-Hannifin Corporation Quote
Zebra Technologies has an Earnings ESP of +3.06% and a Zacks Rank #2. The company will announce first-quarter 2023 results on May 2.
Growth across data capture solutions, printing and rugged tablets business as well as improved supply chains are expected to have buoyed Zebra Technologies’ first-quarter performance. The top line is expected to have been impacted by benefits from the June 2022 acquisition of Matrox Imaging.
Zebra Technologies Corporation Price and EPS Surprise
Zebra Technologies Corporation price-eps-surprise | Zebra Technologies Corporation Quote
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Johnson Controls International plc (JCI) : Free Stock Analysis Report
Parker-Hannifin Corporation (PH) : Free Stock Analysis Report
Ingersoll Rand Inc. (IR) : Free Stock Analysis Report
Zebra Technologies Corporation (ZBRA) : Free Stock Analysis Report
