Industrial Stocks Earnings Due On Jan 30: AVY, IR, CMPR, RXN

The Zacks Industrial Products sector seems to have regained its momentum after struggling with weak productivity and sluggish growth over the last few years. The rebound can be attributed to increased capital spending and hiring as well as rise in manufacturing activity, backed by President Donald Trump’s business-friendly policies.

Notably, Industrial Products is one of the eight sectors that are anticipated to record double-digit earnings growth for the October-December quarter. According to the latest Earnings Preview, total earnings of the sector participants are likely to increase 14.4% year over year on 5.5% higher revenues.

What’s Working in Favor of the Sector?

The U.S. economy is benefiting from factors such as low unemployment level and improved business sentiment, which have aided the industrial sector. In addition, Trump’s policies, including massive tax overhaul, deregulatory measures and higher government spending are likely to continue aiding manufacturing activities in the economy.

Industrial production is one of the key economic indicators for industrial stocks. Notably, per the latest Federal Reserve report published on Jan 18, the manufacturing output jumped 1.1% in December 2018, marking its highest gain in 10 months. As a result, U.S. industrial production rose 0.3% in December, outpacing the consensus estimate of 0.2%. Also, the metric recorded growth 0.4% and 0.2% in November and October, respectively. As a matter of fact, this helped industrial production to grow at an annual rate of 3.8% in the October-December quarter.

Notably, per the latest Institute for Supply Management report, in December 2018, the U.S. manufacturing expanded for the 116th consecutive month. Further, the Purchasing Managers’ Index for December recorded growth of 54.1%, following readings of 59.3% and 57.7% in November and October, respectively. As a matter of fact, any reading above 50 indicates overall growth of the manufacturing sector.

Moreover, per the Department of Labor’s latest report, the manufacturing sector is also witnessing healthy job creations. Notably, in 2018, the manufacturing sector generated around 284,000 jobs, with three-fourths of the addition in durable goods industries. These strong numbers, along with strength in the domestic economy and the Trump administration’s friendly policies, bode well for the sector.

Given this healthy backdrop, it will be interesting to see how some of the industrial stocks fare in their upcoming results on Jan 30.

Avery Dennison Corporation (NYSE:AVY) is scheduled to report fourth-quarter 2018 results before the opening bell. The company’s performance is likely to be aided by growth in emerging markets, focus on high-value categories (including specialty labels), as well as contributions from productivity initiatives. However, negative impact of currency translation and raw material price inflation is likely to dent performance. (Read more: Avery Dennison to Report Q4 Earnings: What to Expect?)

For the fourth quarter, the company’s earnings are expected to improve 12.8% year over year on 2.4% higher revenues. Earnings ESP, (the difference between the Most Accurate Estimate and the Zacks Consensus Estimate) is -3.01%. The Most Accurate Estimate is pegged at $1.45 and the Zacks Consensus Estimate at $1.50.

Negative ESP combined with a Zacks Rank #3 (Hold), makes an earnings surprise prediction difficult. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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.

Ingersoll-Rand Plc’s (NYSE:IR) fourth-quarter 2018 earnings are expected to rise 25.5% year over year on 6.3% higher revenues. Strong end markets in Heating, Ventilation and Air Conditioning business coupled with strength in the Transport Solutions, Industrial Fluid Management and Material Handling businesses should supplement the company’s sales performance.

The Zacks Consensus Estimate for revenues of the company’s Climate and Industrial segments is currently pegged at $2,943 million and $902 million, respectively. The Climate segment reported revenues of $2,760 million and Industrial segment generated $858 million in the year-ago quarter.

Our quantitative model hints at an earnings beat for this Zacks Rank #3 company in the upcoming quarterly results. This is because Ingersoll has an Earnings ESP of +0.13% in addition to a favorable Zacks Rank. Notably, the Most Accurate Estimate is pegged at $1.29 and the Zacks Consensus Estimate at $1.28. (Read More: Ingersoll-Rand to Post Q4 Earnings: Beat in the Cards?).

Cimpress N.V (NASDAQ:CMPR) is scheduled to report fiscal second-quarter results. For the quarter, the company’s earnings are expected to rise 147.3% year over year on 12.8% higher revenues. Steady progress with investments in new markets should continue to supplement the company’s sales performance.

However, our quantitative model does not show an earnings beat for this Zacks Rank #3 company. This is because it has an Earnings ESP of 0.00%, which makes surprise prediction difficult.

Rexnord Corporation (NYSE:RXN) is scheduled to report third-quarter fiscal 2019 financial results.

Notably, the Zacks Consensus Estimate for fiscal third-quarter revenues of the company’s Process and Motion Control segment is currently pegged at $333 million, reflecting growth of 13.7% year over year.

For the quarter, the company’s earnings are expected to improve 8.1% year over year while its revenues are likely to drop 1.2%. Earnings ESP for the company is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 40 cents. This along with the company’s Zacks Rank #4 makes earnings surprise prediction difficult.

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