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What's in Store for These 5 Industrial Stocks in Q2: Beat or Miss?
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The second-quarter earnings season for the Industrial Products sector is set to kick off this week. Per the Earnings Trends report dated Jul 17, the S&P 500 companies in the Industrial Sector are likely to witness a 7.4% decline in earnings for the second quarter of 2024 on the back of 2.2% lower revenues. The sector is among seven of the 16 Zacks Sectors that are anticipated to witness lower earnings than the year-ago quarter.
With major industrial stocks like Dover Corporation (DOV - Free Report) , Avery Dennison Corporation (AVY - Free Report) , Packaging Corporation of AmericaPKG, Pentair (PNR - Free Report) and A. O. Smith (AOS - Free Report) set to report earnings this week, these announcements will provide an insight on how things have shaped up for industrials this earnings season.
Factors at Play During Q2
The Industrial Products sector’s overall results are likely to reflect the contraction in the U.S. manufacturing sector seen through the second quarter of 2024. The Institute for Supply Management’s manufacturing index registered 48.5% in June 2024, which not only marked a deceleration from 48.7% in May and 49.2% in April, but it also remained below 50%, which indicates contraction.
Sector participants noted that demand remained subdued, as companies refrained from making capital investments due to current monetary policy and other conditions. This was evident from the New Orders Index, which also remained below 50 through April-June. The Index, however, registered 49.3% in June, higher than May’s 45.4%, reflecting a slight improvement at the end of the quarter.
The Production index slipped into contraction in June to 48.5% after displaying two months of expansion in April and May. As order rates remained weak and backlog levels continued to decline, companies lowered their production levels. However, for the second quarter, the production index averaged 50%. Also, per the Federal Reserve’s report, industrial production rose 0.6% in June 2024, following 0.9% growth in May and flat in April.
Despite the weakness in the manufacturing sector, some areas, such as Primary Metals, Petroleum & Coal Products, Furniture & Related Products; Computer & Electronic Products; and Chemical Products, are reported to have witnessed stable demand. Stable packaging demand for food, beverages and medicines, and in e-commerce are likely to have aided companies producing packaging materials. We also expect companies engaged in manufacturing mining and construction equipment to gain from favorable demand. Notably, per the Fed, the mining output rose at an annual rate of 3.4% in the second quarter. However, agricultural equipment makers are anticipated to have faced challenges due to weak agricultural commodity prices and lower farm income.
Despite improvements in the supply chain, the sector faces challenges from cost inflation, particularly for fuel, natural gas, aluminum and plastics. Although cost-control measures and productivity improvements have been implemented to mitigate their impacts on margins, weak demand is expected to weigh on the bottom-line performance in the quarter.
Key Predictions for DOV, AVY, PKG, PNR & AOS
Dover is set to release second-quarter 2024 results on Jul 25, before the opening bell. Over the trailing four quarters, the company topped earnings estimates twice, missed once, and met on one occasion. The company has a negative trailing four-quarter earnings surprise of 0.8%, on average.
Our proprietary model indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.
Our proven model predicts that DOV will register an earnings beat this earnings season as it has an Earnings ESP of +0.51% and a Zacks Rank #2 at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for Dover’s second-quarter earnings is pegged at $2.21 per share, indicating 7.8% year-over-year growth. The consensus mark for revenues is pegged at $2.15 billion, implying an upside of 2.2% from the year-ago reported figure.
We expect Dover’s top line to reflect the ongoing momentum in its order and backlog levels, as well as gains from the recent acquisitions. Its margins are likely to reflect strong volume growth, improved price-cost spread and the company’s effective cost-control methods. (Read more: Will Strong Order Trends Drive Dover's Q2 Earnings?)
Avery Dennison is scheduled to release second-quarter 2024 results on Jul 23. Over the trailing four quarters, the company beat earnings estimates thrice but missed in one quarter. The company has a positive trailing four-quarter earnings surprise of roughly 1%, on average.
Our proven model does not conclusively predict an earnings beat for Avery Dennison this time around, as the company has an Earnings ESP of -0.89% and a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for AVY’s earnings for the to-be-reported quarter is pegged at $2.25 per share, indicating a 17% year-over-year increase. The same for revenues is pegged at $2.18 billion, suggesting 4.4% year-over-year growth.
Avery Dennison has been witnessing solid demand for the labeling of non-durable consumer goods like food, beverage, and home and personal care products, which is expected to have aided its second-quarter 2024 revenue growth. While inflated input costs are anticipated to have impacted the company’s margins in the to-be-reported quarter, its pricing and cost-saving actions are expected to have negated these headwinds on its margins. (Read more: Avery Dennison to Report Q2 Earnings: What's in Store?)
Packaging Corp is slated to release second-quarter 2024 results on Jul 23. The company surpassed the Zacks Consensus Estimate in the trailing four quarters. PKG has a trailing four-quarter earnings surprise of 12.3%, on average.
Packaging Corporation of America Price and EPS Surprise
Our proven model predicts that PKG will register an earnings beat this season. PKG has an Earnings ESP of +0.13% and a Zacks Rank #2 at present.
The Zacks Consensus Estimate for the PKG’s second-quarter earnings is at $2.11 per share, suggesting an 8.7% year-over-year decline. The estimate for revenues is at $2.03 billion, which indicates 4% year-over-year growth.
The company’s packaging segment’s volume is expected to benefit from stable packaging demand in the quarter. However, this is likely to have been somewhat offset by ongoing weak demand in the paper segment. Higher operating costs, primarily labor and benefit costs, and increased energy costs are expected to have hurt the company’s profits in the quarter under review. Read more: What's in Store for Packaging Corp in Q2 Earnings?)
Pentair is scheduled to release second-quarter 2024 results on Jul 23. The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average of 5.5%.
Our proven model does not conclusively predict an earnings beat for Pentair this time around. PNR has an Earnings ESP of -0.80% and a Zacks Rank #4 (Sell).
The Zacks Consensus Estimate for Pentair’s second-quarter earnings is pegged at $1.15 per share, suggesting 11.7% year-over-year growth. The estimate for revenues is at $1.09 billion, indicating 0.8% year-over-year growth.
The company’s pool segment is likely to have been impacted by the weak demand for pool construction. However, the segment’s top-line performance is expected to have been supported by recurring pool maintenance and repair demand. The Flow segment’s revenues are expected to have been impacted by weakness in residential verticals due to high interest rates and the ongoing weakness in industrial verticals.
Despite the weakness in the pool segment and cost headwinds, the company is expected to have witnessed margin expansion across its segments, aided by pricing, cost savings and gains from its transformation initiatives. (Read more: Pentair to Report Q2 Earnings: What's in the Cards?)
A. O. Smith is slated to release second-quarter 2024 results on Jul 23. The company beat the Zacks Consensus Estimate in the trailing four quarters. AOS has a trailing four-quarter earnings surprise of 6.7%, on average.
The Zacks Consensus Estimate for revenues is pegged at $990 million for the quarter, which indicates growth of 3% from the year-ago quarter's actual. The consensus mark for A.O Smith’s earnings is pinned at $1.06 per share, suggesting a 5% year-over-year increase.
Our model predicts an earnings beat for AOS this time around. The company has an Earnings ESP of +0.78% and a Zacks Rank #3 at present.
A. O. Smith is expected to have benefited from strength on the commercial side and a favorable mix shift toward high-efficiency water heaters in the second quarter. Higher volumes of tankless water heaters and kitchen appliance products are likely to have boosted the performance of the Rest of the World segment. Contributions from acquisitions are also expected to have aided its quarterly top line. However, high costs and expenses are expected to have negated some of these gains in its second-quarter earnings. (Read more: Is a Beat in Store for A. O. Smith in Q2 Earnings?)
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What's in Store for These 5 Industrial Stocks in Q2: Beat or Miss?
The second-quarter earnings season for the Industrial Products sector is set to kick off this week. Per the Earnings Trends report dated Jul 17, the S&P 500 companies in the Industrial Sector are likely to witness a 7.4% decline in earnings for the second quarter of 2024 on the back of 2.2% lower revenues. The sector is among seven of the 16 Zacks Sectors that are anticipated to witness lower earnings than the year-ago quarter.
With major industrial stocks like Dover Corporation (DOV - Free Report) , Avery Dennison Corporation (AVY - Free Report) , Packaging Corporation of America PKG, Pentair (PNR - Free Report) and A. O. Smith (AOS - Free Report) set to report earnings this week, these announcements will provide an insight on how things have shaped up for industrials this earnings season.
Factors at Play During Q2
The Industrial Products sector’s overall results are likely to reflect the contraction in the U.S. manufacturing sector seen through the second quarter of 2024. The Institute for Supply Management’s manufacturing index registered 48.5% in June 2024, which not only marked a deceleration from 48.7% in May and 49.2% in April, but it also remained below 50%, which indicates contraction.
Sector participants noted that demand remained subdued, as companies refrained from making capital investments due to current monetary policy and other conditions. This was evident from the New Orders Index, which also remained below 50 through April-June. The Index, however, registered 49.3% in June, higher than May’s 45.4%, reflecting a slight improvement at the end of the quarter.
The Production index slipped into contraction in June to 48.5% after displaying two months of expansion in April and May. As order rates remained weak and backlog levels continued to decline, companies lowered their production levels. However, for the second quarter, the production index averaged 50%. Also, per the Federal Reserve’s report, industrial production rose 0.6% in June 2024, following 0.9% growth in May and flat in April.
Despite the weakness in the manufacturing sector, some areas, such as Primary Metals, Petroleum & Coal Products, Furniture & Related Products; Computer & Electronic Products; and Chemical Products, are reported to have witnessed stable demand. Stable packaging demand for food, beverages and medicines, and in e-commerce are likely to have aided companies producing packaging materials. We also expect companies engaged in manufacturing mining and construction equipment to gain from favorable demand. Notably, per the Fed, the mining output rose at an annual rate of 3.4% in the second quarter. However, agricultural equipment makers are anticipated to have faced challenges due to weak agricultural commodity prices and lower farm income.
Despite improvements in the supply chain, the sector faces challenges from cost inflation, particularly for fuel, natural gas, aluminum and plastics. Although cost-control measures and productivity improvements have been implemented to mitigate their impacts on margins, weak demand is expected to weigh on the bottom-line performance in the quarter.
Key Predictions for DOV, AVY, PKG, PNR & AOS
Dover is set to release second-quarter 2024 results on Jul 25, before the opening bell. Over the trailing four quarters, the company topped earnings estimates twice, missed once, and met on one occasion. The company has a negative trailing four-quarter earnings surprise of 0.8%, on average.
Dover Corporation Price and EPS Surprise
Dover Corporation price-eps-surprise | Dover Corporation Quote
Our proprietary model indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.
Our proven model predicts that DOV will register an earnings beat this earnings season as it has an Earnings ESP of +0.51% and a Zacks Rank #2 at present. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The Zacks Consensus Estimate for Dover’s second-quarter earnings is pegged at $2.21 per share, indicating 7.8% year-over-year growth. The consensus mark for revenues is pegged at $2.15 billion, implying an upside of 2.2% from the year-ago reported figure.
We expect Dover’s top line to reflect the ongoing momentum in its order and backlog levels, as well as gains from the recent acquisitions. Its margins are likely to reflect strong volume growth, improved price-cost spread and the company’s effective cost-control methods. (Read more: Will Strong Order Trends Drive Dover's Q2 Earnings?)
Avery Dennison is scheduled to release second-quarter 2024 results on Jul 23. Over the trailing four quarters, the company beat earnings estimates thrice but missed in one quarter. The company has a positive trailing four-quarter earnings surprise of roughly 1%, on average.
Avery Dennison Corporation Price and EPS Surprise
Avery Dennison Corporation price-eps-surprise | Avery Dennison Corporation Quote
Our proven model does not conclusively predict an earnings beat for Avery Dennison this time around, as the company has an Earnings ESP of -0.89% and a Zacks Rank of 2 at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for AVY’s earnings for the to-be-reported quarter is pegged at $2.25 per share, indicating a 17% year-over-year increase. The same for revenues is pegged at $2.18 billion, suggesting 4.4% year-over-year growth.
Avery Dennison has been witnessing solid demand for the labeling of non-durable consumer goods like food, beverage, and home and personal care products, which is expected to have aided its second-quarter 2024 revenue growth. While inflated input costs are anticipated to have impacted the company’s margins in the to-be-reported quarter, its pricing and cost-saving actions are expected to have negated these headwinds on its margins. (Read more: Avery Dennison to Report Q2 Earnings: What's in Store?)
Packaging Corp is slated to release second-quarter 2024 results on Jul 23. The company surpassed the Zacks Consensus Estimate in the trailing four quarters. PKG has a trailing four-quarter earnings surprise of 12.3%, on average.
Packaging Corporation of America Price and EPS Surprise
Packaging Corporation of America price-eps-surprise | Packaging Corporation of America Quote
Our proven model predicts that PKG will register an earnings beat this season. PKG has an Earnings ESP of +0.13% and a Zacks Rank #2 at present.
The Zacks Consensus Estimate for the PKG’s second-quarter earnings is at $2.11 per share, suggesting an 8.7% year-over-year decline. The estimate for revenues is at $2.03 billion, which indicates 4% year-over-year growth.
The company’s packaging segment’s volume is expected to benefit from stable packaging demand in the quarter. However, this is likely to have been somewhat offset by ongoing weak demand in the paper segment. Higher operating costs, primarily labor and benefit costs, and increased energy costs are expected to have hurt the company’s profits in the quarter under review. Read more: What's in Store for Packaging Corp in Q2 Earnings?)
Pentair is scheduled to release second-quarter 2024 results on Jul 23. The company beat the Zacks Consensus Estimate in the trailing four quarters, with an average of 5.5%.
Pentair plc Price and EPS Surprise
Pentair plc price-eps-surprise | Pentair plc Quote
Our proven model does not conclusively predict an earnings beat for Pentair this time around. PNR has an Earnings ESP of -0.80% and a Zacks Rank #4 (Sell).
The Zacks Consensus Estimate for Pentair’s second-quarter earnings is pegged at $1.15 per share, suggesting 11.7% year-over-year growth. The estimate for revenues is at $1.09 billion, indicating 0.8% year-over-year growth.
The company’s pool segment is likely to have been impacted by the weak demand for pool construction. However, the segment’s top-line performance is expected to have been supported by recurring pool maintenance and repair demand. The Flow segment’s revenues are expected to have been impacted by weakness in residential verticals due to high interest rates and the ongoing weakness in industrial verticals.
Despite the weakness in the pool segment and cost headwinds, the company is expected to have witnessed margin expansion across its segments, aided by pricing, cost savings and gains from its transformation initiatives. (Read more: Pentair to Report Q2 Earnings: What's in the Cards?)
A. O. Smith is slated to release second-quarter 2024 results on Jul 23. The company beat the Zacks Consensus Estimate in the trailing four quarters. AOS has a trailing four-quarter earnings surprise of 6.7%, on average.
A. O. Smith Corporation Price and EPS Surprise
A. O. Smith Corporation price-eps-surprise | A. O. Smith Corporation Quote
The Zacks Consensus Estimate for revenues is pegged at $990 million for the quarter, which indicates growth of 3% from the year-ago quarter's actual. The consensus mark for A.O Smith’s earnings is pinned at $1.06 per share, suggesting a 5% year-over-year increase.
Our model predicts an earnings beat for AOS this time around. The company has an Earnings ESP of +0.78% and a Zacks Rank #3 at present.
A. O. Smith is expected to have benefited from strength on the commercial side and a favorable mix shift toward high-efficiency water heaters in the second quarter. Higher volumes of tankless water heaters and kitchen appliance products are likely to have boosted the performance of the Rest of the World segment. Contributions from acquisitions are also expected to have aided its quarterly top line. However, high costs and expenses are expected to have negated some of these gains in its second-quarter earnings. (Read more: Is a Beat in Store for A. O. Smith in Q2 Earnings?)
Stay on top of the upcoming earnings announcements with the Zacks Earnings Calendar.