Mettler-Toledo (MTD) Q1 Earnings: Is A Beat In The Cards?

Mettler-Toledo International Inc. (NYSE:MTD) will report first-quarter 2017 earnings on May 4 after the bell.

Last quarter, the company posted a positive earnings surprise of 3.33%. In fact, Mettler-Toledo boasts a solid surprise history, having beaten estimates in each of the trailing four quarters. The average earnings surprise over the last four quarters is a positive 3.4%.

We also note that year to date, shares of Mettler-Toledo outperformed the Zacks categorized Instruments - Scientific industry. While the stock recorded growth of 23.4%, the industry gained 19.6%.

Why a Likely Positive Surprise?

The company has a Zacks Rank #2 (Buy) and an Earnings ESP of +0.33%, a combination that increases the probability of a positive surprise. This is because, per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement.

What Happened in the Fourth Quarter?

Mettler-Toledo delivered strong fourth-quarter 2016 results, beating the Zacks Consensus Estimate on both counts.

Net revenue of $709.7 million was up 5.4% on a year-over-year basis. Non-GAAP net income was $141.9 million compared with $130.6 million a year ago. The better-than-expected results were the result of strong market conditions and good execution.

Mettler-Toledo International, Inc. Price and EPS Surprise

Mettler-Toledo’s strong global network of sales and service organizations offer significant revenue opportunities.

The company is focused on the development of advanced products and cost reductions by making prudent investments in research and development.

On the technological advancement front, the focus is on new or enhanced functionality, new applications, more accurate or reliable measurement, automation through robotics and additional software capability.

On the cost reduction front, the focus is on reduction of manufacturing cost through design and serviceability enhancements. We believe technology development and cost management will impact margins positively.

We remain positive about the company’s Stern Drive program aimed at operational improvement through material cost reductions, shop floor productivity and back office productivity. We expect this program to complement existing Spinnaker and Blue Ocean programs and enhance supply chain and manufacturing efficiencies.

For the first quarter, Mettler-Toledo expects local currency sales to grow approximately 8% Adjusted EPS is expected to grow 24% to 26% to $3.05 to $3.10.

Note that the company’s business segments, especially the high-end laboratory instruments business experiences seasonality. This segment experiences stronger demand in the fourth quarter and weaker demand in the first quarter, relative to second and third quarters. The seasonality causes considerable fluctuations in revenues and profits and makes forecasting difficult.

Summing Up

Mettler-Toledo’s leading market position, focus on product development and cost reduction, sales and marketing efforts and the Blue Ocean program bode well. The company has a solid history of positive surprises and this quarter may not be different. Its positive Earnings ESP and a favorable Zacks Rank #2 enhance the likelihood of a positive surprise.

Other Stocks to Consider

Here are some companies which, as per our model, also have the right combination of elements to post an earnings beat this quarter:

EGain Corp. (NASDAQ:EGAN) , with an Earnings ESP of +50.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Priceline Group Inc. (NASDAQ:PCLN) , with an Earnings ESP of +2.06% and a Zacks Rank #3.

PerkinElmer, Inc. (NYSE:PKI) , with an Earnings ESP of +1.85% and a Zacks Rank #3.

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