Eaton (ETN) Q1 Earnings: Will It Beat Estimates Yet Again?

We expect Eaton Corporation (NYSE:ETN) to beat earnings estimates when it reports its first-quarter 2017 financial results before the market opens on May 2. The power management company reported a positive earnings surprise in three out of the last four quarters, resulting in an average surprise of 1.56%.

Why a Likely Positive Surprise?

Our proven model shows that Eaton Corporation is likely to beat estimates because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates and Eaton Corporation has the right mix.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The company’s Earnings ESP stands at +2.30%. This is because the Most Accurate estimate is pegged at 89 cents, higher than the Zacks Consensus Estimate of 87 cents. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Eaton currently carries a Zacks Rank #2. The combination of Eaton’s favorable Zacks Rank and positive ESP makes us reasonably confident of a positive surprise this season.

Conversely, we caution against stocks with Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

Eaton expects its earnings per share to be between 80–90 cents in first-quarter 2017. Segment margins are expected in the range of 13.6–14%, including restructuring costs.

To cope with the challenging environment, the company had planned a restructuring program. Eaton will continue the program and reap its benefits in the first quarter and throughout 2017.

Eaton continues to invest in R&D development activities to churn out new products and upgrade the existing ones to facilitate effective and easy power management. We expect the new products to help the company secure more orders.

Stocks to Consider

Apart from Eaton Corporation, one can consider few other companies from the Zacks categorized Industrial Product sector that have the right combination of elements to post an earnings beat this quarter.

Deere & Company (NYSE:DE) has an Earnings ESP of +0.62% and a Zacks Rank #2. It is expected to report second quarter fiscal 2017 earnings on May 19. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation (NYSE:CFX) has an Earnings ESP of +10.0% and a Zacks Rank #3. It is expected to report first-quarter earnings on May 5.

Flowserve Corporation (NYSE:FLS) has an Earnings ESP of +14.29% and a Zacks Rank #3. It is expected to report first-quarter earnings on May 1.

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