What's In The Offing For Emerson (EMR) In Q1 Earnings?

Emerson Electric Co. (NYSE:EMR) is scheduled to report first-quarter 2018 results before the opening bell on Feb 6. Last quarter, the company reported earnings of 83 cents per share, reflecting a beat of 3.8%.

We expect Emerson to score an earnings beat in the to-be-reported quarter.

Why a Likely Positive Surprise?

Our proven model shows that Emerson has the right combination of the 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) for this to happen. This is perfectly the case here as you will see below:

Zacks ESP: Earnings ESP for Emerson is +1.39% as the Most Accurate estimate of 55 cents is pegged higher than the Zacks Consensus Estimate of 54 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

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

Reasons Driving Better-than-Expected Results

Emerson is well positioned to benefit from global infrastructure growth, as its core businesses hold dominant positions in markets tied to energy efficiency and infrastructure spending. Going forward, Emerson believes telecommunications infrastructure demand will continue to be one of the strongest growth drivers. Further, its restructuring efforts, undertaken over the past few quarters, are likely to prove conductive to upcoming results.

Currently, the company’s Automation Solutions segment has been experiencing favorable trends in power and life sciences along with improving MRO spending by oil and gas customers, which is expected to boost growth. For the Commercial & Residential business, the company’s focus on domains like human comfort, connected home, food quality, advancing energy efficiency at home and work, is likely to prove conductive for its operations. Going forward, we believe selected investment opportunities along with positive trends in certain business areas offer modest growth opportunities.

The company’s accretive acquisitions are also anticipatedto be conducive to its top line, in the to-be reported quarter. The company’s acquisition of Blending & Transfer Systems business of FMC Technologies (NYSE:FTI) will fortify presence in advanced flow measurement and control technologies. The company also acquired Pentair Valves & Controls, Locus Traxx and PakSense which are likely to drive sales.

Despite these positives, prolonged softness in the oil and gas markets is likely to affect both capital spending and operational expenditure of clients, which in turn may hurt Emerson’s operations. This apart, currency fluctuations haveremained a headwind over the past few quarters, and mightimpact earnings and revenues in the upcoming release as well.

Other Stocks to Consider

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

Huntington Ingalls Industries, Inc. (NYSE:HII) has an Earnings ESP of +3.43% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company (NYSE:DE) has an Earnings ESP of +3.29% and a Zacks Rank #2.

Acco Brands Corp. (NYSE:ACCO) has an Earnings ESP of +0.76% and a Zacks Rank #2.

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