Milacron (MCRN) To Report Q4 Earnings: What's In Store?

Milacron Holdings Corp. (NYSE:MCRN) is scheduled to report fourth-quarter results before the market opens on Feb 21.

The company’s third-quarter adjusted earnings per share of 43 cents beat the Zacks Consensus Estimate of 41 cents. On a year-over-year basis, earnings declined 2%. Revenues fell 2% to $308 million from the year-ago quarter and missed the Zacks Consensus Estimate of $320 million.

Notably, Milacron’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 6.99%.

Over the past year, Milacron’s shares have declined 24.0% compared with industry’s loss of 10.6%.

Let’s see how things are shaping up prior to this announcement.

Key Factors to Consider

Demand for a diverse range of finished plastic products has been on the rise in many markets, including automotive, construction and consumer products. Demand is being fueled by global population growth, sustained urbanization, increased purchasing power and improved lifestyle in emerging markets. Given its strong global presence, Milacron is well positioned to capture a portion of this growth. The company has made significant investments in China and India, considering the growth rate of plastic business in these markets. Milacron plans to continue expanding manufacturing capabilities, while also ramping up its technical, marketing and sales efforts.

Revenue growth will come from underlying market growth in key segments, geographic expansion of certain product lines, continued penetration of hot runners, and incremental share gain from new products. However, the company has lately witnessed a slowdown in its order levels as tariffs impacted the buying behavior of customers in North America. This will weigh on fourth-quarter 2018 revenues. The Zacks Consensus Estimate for total sales of $307 million indicates a decline of 5.5% from the prior-year quarter.

Milacron is implementing organizational redesign and cost-reduction initiatives which are expected to yield approximately $35 million of annual run-rate cost savings in the fourth quarter. However, the company’s profits in the to-be-reported quarter will likely bear the brunt of tariffs on industry orders.

The Zacks Consensus Estimate for Milacron’s fourth-quarter earnings per share is pegged at 37 cents, showing a year-over-year decline of roughly 21.2%.

The company’s Fluids segment will grow on elevated demand for technology fluids, driven by environmental and health concerns, and increasing prevalence of exotic metals. The Zacks Consensus Estimate for Fluids segment revenues is pegged at $32.6 million, up around 5.2% year over year.

The Zacks Consensus Estimate calls for Milacron’s Melt Delivery and Control Systems segment sales of $105 million for the fourth quarter, slightly up year over year from $104 million. The segment will remain fairly stable sequentially, though the timing of results might be difficult to predict as the business is fairly short cycle, and customer deferrals are likely to increase if uncertainty regarding the business cycle rises.

However, imposition of tariffs on steel prices will impact Milacron’s margin principally in the Advanced Plastic Processing Technologies segment. The Zacks Consensus Estimate for the segment sales is pegged at $167 million for the fourth quarter, calling for a decline of 12% year over year.

Milacron Holdings Corp. Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show a beat for Milacron this earnings season 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 3 (Hold) for this to happen. This is not the case here as you will see below:

Earnings ESP: Earnings ESP for Milacron is 0.00%. The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 37 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Milacron currently carries a Zacks Rank #2.

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

Other Stocks to Consider

Here are a few companies that you may want to consider, as our model shows these have the right combination of elements to post an earnings beat this quarter:

Adamas Pharmaceuticals, Inc. (NASDAQ:ADMS) has an Earnings ESP of +10.29% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission Holdings, Inc. (NYSE:ALSN) has an Earnings ESP of +5.94% and a Zacks Rank #3.

AMC Entertainment Holdings, Inc. (NYSE:AMC) has an Earnings ESP of +3.88% and a Zacks Rank #3.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>