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The Q1 earnings season performance so far has been promising and seems on track to deliver the best quarterly performance in more than six years. Total earnings for the S&P 500 index are expected to be up 20% for this earnings season driven by a 8% rise in revenues. If this materializes, it would surpass fourth-quarter 2017 results where the S&P 500 recorded 13.4% earnings growth on 8.6% revenue growth. To date, 154 S&P 500 members have released results, logging year-over-year earnings growth of 25% on 10.3% higher revenues, per the latest Earnings Trends.
Industrial Sector Poised for Double Digit Growth
The Industrial Products sector, currently placed at the top 6% out of the 16 Zacks sectors, is one of the sectors which are expected to record double-digit earnings growth, mainly driven by the U.S. tax reform. According to our latest projections, the sector is anticipated to log an earnings growth of 34.5% in first-quarter 2018 on the back of 15.2% rise in revenues. So far, 45.8% of the members in the sector have reported first-quarter numbers delivering 58% growth in earnings and 18.7% rise in revenues.
Industrial production is one of the leading economic indicators for industrial stocks. For first-quarter 2018, industrial production — a measure of output at factories, mines and utilities — rose at an annual rate of 4.5%.
Further, the U.S Architecture Billings Index (“ABI”), an economic indicator that provides an approximately nine-to-12 month glimpse into the future of non-residential construction spending activity, was 51 in March — increasing for the sixth straight month. Notably, any score more than 50 indicates billings growth and reflects a healthy business environment.
Per the latest report of the Institute for Supply Management (“ISM”), Purchasing Managers Index ("PMI”) was 59.3% in March. This indicates strong growth in manufacturing for the 19th consecutive month, led by continued expansion in new orders, production activity, employment and inventories. A reading above 50% indicates that the manufacturing economy is generally expanding. New orders index is at 61.9, remaining at or above 60 for the 11th straight month. Of the 18 manufacturing industries, 17 industries reported growth in March. The only exception being Apparel, Leather & Allied Products.
It will be interesting to see how some of the machinery stocks fare when they release first-quarter 2018 numbers on Apr 27.
Dover Corporation (DOV - Free Report) , a global diversified manufacturer of industrial products, is set to release quarterly results before the opening bell.
Dover reported a year-over-year increase in both revenues and earnings in the last reported quarter and also beat the respective Zacks Consensus Estimates. Dover has outpaced the Zacks Consensus Estimate in the trailing four quarters, with an average earnings beat of 7.26%.
Strong booking trends and significant drilling activity will drive the company’s performance in the first quarter. Per the Zacks Consensus Estimate, the Fluids, Energy and Engineered Systems segments is likely to witness revenue growth. However, the Refrigeration and Food Equipment segment is likely to observe a decline in revenues due to prevalent softness in the commercial cooking equipment markets.
Our proven model does not conclusively show that Dover is likely to beat on 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 at least 3 (Hold) for this to happen. This is not the case here.
Dover’s Zacks Rank #3 combined with an Earnings ESP of -0.64%, makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Global provider of highly engineered products and differentiated industrial technologies, Barnes Group Inc. (B - Free Report) is scheduled to release quarterly numbers, before the market opens. In the last quarter, the company reported improvement in both top and bottom lines.
The company delivered better-than-expected results in three of the four trailing quarters. Average positive earnings surprise for the four reported quarters is 8.95%.
Barnes Group’s exposure to various end-markets, as well as its efforts to provide high-quality industrial technologies and engineered products to its vast customer base, will continue to beneficial in the first quarter and quarters ahead. A solid backlog of approximately $1 billion at the end of 2017 indicates a healthy demand for its products and services offered under the Industrial and Aerospace segments. However, industry competition, delays or difficulties in research and development of products and technologies, inflation in input price or supply shortage and adversaries arising from businesses in international arenas might temper the growth momentum. (Read more: Barnes Set to Report Q1 Earnings: What's in the Offing?)
Altra Industrial Motion Corp. which designs, produces, and markets mechanical power transmission components worldwide, is scheduled to report quarterly results before the opening bell.
Altra Industrial Motion Corp. Price and EPS Surprise
Altra Industrial Motion is poised to benefit from its solid product portfolio, including various well-recognized brands. However, higher costs and operating expenses will continue to dampen margins.
Altra Industrial Motion sports a Zacks Rank #2, which increases the predictive power of the ESP. However, the company’s Earnings ESP of 0.00% makes surprise prediction difficult.
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Machinery Stocks' Q1 Earnings Lineup for Apr 27: DOV, B, AIMC
Dover Corporation price-eps-surprise | Dover Corporation Quote
Strong booking trends and significant drilling activity will drive the company’s performance in the first quarter. Per the Zacks Consensus Estimate, the Fluids, Energy and Engineered Systems segments is likely to witness revenue growth. However, the Refrigeration and Food Equipment segment is likely to observe a decline in revenues due to prevalent softness in the commercial cooking equipment markets.
Barnes Group, Inc. price-eps-surprise | Barnes Group, Inc. Quote
Barnes Group’s exposure to various end-markets, as well as its efforts to provide high-quality industrial technologies and engineered products to its vast customer base, will continue to beneficial in the first quarter and quarters ahead. A solid backlog of approximately $1 billion at the end of 2017 indicates a healthy demand for its products and services offered under the Industrial and Aerospace segments. However, industry competition, delays or difficulties in research and development of products and technologies, inflation in input price or supply shortage and adversaries arising from businesses in international arenas might temper the growth momentum. (Read more: Barnes Set to Report Q1 Earnings: What's in the Offing?)
The combination of Barne Group’s Zacks Rank #3 and an Earnings ESP of 0.00% makes surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion Corp. Price and EPS Surprise
Altra Industrial Motion Corp. price-eps-surprise | Altra Industrial Motion Corp. Quote
Altra Industrial Motion is poised to benefit from its solid product portfolio, including various well-recognized brands. However, higher costs and operating expenses will continue to dampen margins.