Zacks Industry Outlook Highlights: Illinois Tool Works, Avery Dennison, Zebra Technologies, Tennant And EnerSys

For Immediate Release

Chicago, IL – August 24, 2016 – Today, Zacks Equity Research discusses Industrial Machines, including Illinois Tool Works Inc (NYSE:ITW). (ITW), Avery Dennison Corporation (NYSE:AVY) (AVY), Zebra Technologies Corp. (ZBRA), Tennant Company ( TNC) and EnerSys (ENS).

Industry: Industrial Machines

Link: https://www.zacks.com/commentary/88899/industrial-machinery-stock-outlook---aug-2016

Zacks Industry Rank

According to the Zacks Industry classification, Machinery is broadly grouped under Industrial Products, one of the 16 broad Zacks sectors. The Zacks sectors comprise 265 industries that are ranked on the basis of the earnings outlook of constituent companies in each industry. To learn more visit: About Zacks Industry Rank

As a rule, the top 50% of all Zacks industries outperform the bottom half by a wide margin. Going by this, industries with Zacks Industry Rank of 132 and lower would fall in the top half, while those with Zacks Industry Rank of 133 and higher would be in the bottom half.

The machinery industry is sub-divided into nine industries at the expanded level: machine tools and related products, construction and mining, electrical utilities, electrical, farm, general industries, material handling, print trading and thermal processing.

Earnings Trend of the Sector

As of Aug 19, all of industrial products stocks (accounting for 2% of the S&P 500 index’s total market capitalization) in the S&P 500 Group reported results for the Apr-Jun 2016 quarter, recording a decline of 1.5% in earnings and 5.6% in revenue.

Moreover, results of all S&P 500 companies released till Aug 19 showed a 3.2% fall in earnings with a meager 0.1% rise in revenues. With conditions unlikely to improve, earnings for the S&P 500 companies are projected to fall 3.1% and revenues to decrease by 0.4%.

Conclusion

We believe the prevalent uncertainties in the global economy will be a drag on the industrial sector. However, the much-needed relief might come from governmental policies inducing better trade relations, increased infrastructural investments, job creation and high consumer-end demand.

Until such broader improvements materialize, stocks with high investment rankings might interest investors seeking exposure in the machinery industry. In the S&P 500 group, machinery company Illinois Tool Works Inc. (ITW ), with a market capitalization of $42.5 billion, has strong earnings growth potential of roughly 8.8% over the next five years. Another industrial company, Avery Dennison Corporation (AVY) -- with $6.9 billion market capitalization -- offers roughly 10% earnings growth potential. Both these stocks currently carry a Zacks Rank #2 (Buy).

Among the non-S&P 500 billion-dollar stocks in the machinery industry, Zebra Technologies Corp. ( ZBRA) sports a Zacks Rank #1 (Strong Buy) and offers 9% earnings growth potential over the next five years while Tennant Company (TNC) , with a Zacks Rank #1, is expected to post earnings growth of 11%. EnerSys ( ENS), with a Zacks Rank #2, is anticipated to have earnings growth of 13% over the next five years.

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