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Industrial Stocks' Q3 Earnings Due on Oct 23: AIMC, B & ITW

Per the Earnings Trends dated Oct 21, third-quarter 2020 earnings for the Industrial Products sector are expected to decline 23%, and revenues and margins are projected to fall 6.6% and 2.1%, respectively, on a year-over-year basis. The persistent weak demand environment, owing to the coronavirus outbreak-led market downturn, along with soft industrial production, particularly in August and September, is likely to have affected the sector’s performance in the to-be-reported quarter. In fact, 14 of the 16 Zacks sectors expected to record declines this earnings season.

Key Factors for Industrial Stocks

Per the latest report published by the Federal Reserve on Oct 16, the U.S. industrial production moved up 4.2% and 0.4% (on a month-over-month basis) in July and August, respectively, while it declined 0.6% in September. Notably, total industrial production in September was down 7.3% from the year-ago level.

Notably, the gains across manufacturing, mining and utilities sectors have slowed down over the past couple of months. The output in the manufacturing sector recorded a decline of 0.3% in September (on a month-over-month basis), after registering growth of 4.2% and 1.2% in July and August, respectively. Also, the utilities output declined 5.6% in September compared with the decline of 1% in the previous month. However, outputs in mining sector recorded growth of 1.7% in September in contrast to a decline of 2.4% in August.  

A low demand environment caused by the pandemic, production in suboptimal scale and supply-chain disruptions are expected to have affected the Industrial Products sector in the third quarter. In addition, the uncertain demand environment created by difficult Sino-U.S. trade relations and highly leveraged balance sheets might have hurt the competencies of several industrial companies in the quarter.

Moreover, high costs and operating expenses, and unfavorable movements in foreign currencies are likely to get reflected in the results of many industrial companies in the third quarter.

However, with the gradual reopening of major global economies, the industrial sector is expected to have benefited from gradual improvement in domestic and international orders for industrial products apart from the growing e-commerce business. Also, companies which are engaged in producing robotic cleaners as well as  other players from the sector that  specialize in packaging for medicine and producing materials for personal protective equipment are expected to have gained from the surge in demand. In addition, several cost-control measures adopted by companies are anticipated to have helped maintain a healthy margin performance amid the crisis.

It will be interesting to see how some of the industrial companies fare in their quarterly results scheduled on Oct 23.

Altra Industrial Motion Corp. AIMC will release third-quarter 2020 results, before market open. In the past four quarters, the company recorded better-than-expected results thrice and missed once. Earnings surprise was a positive 31.43%, on average.

Our proven model provides some idea about stocks that are about to release earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. 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.

Presently, the company has an Earnings ESP of +2.04%, as the Most Accurate Estimate is pegged at 50 cents, higher than the Zacks Consensus Estimate of 49 cents. Also, it has a Zacks Rank #2, which when combined with a positive ESP, makes us confident of an earnings beat.

The company is likely to have benefited from its solid product portfolio, diversified businesses, pricing actions, cross-selling programs and supply-chain initiatives. Further, its technological expertise, e-commerce capabilities and working capital improvement program are expected to have aided.

Over the past 60 days, the Zacks Consensus Estimate for its third-quarter earnings has been raised from 46 cents to 49 cents.

Barnes Group, Inc. B will report results for the third quarter, before market open. The company delivered better-than-expected results in each of the trailing four quarters. Earnings surprise was a positive 22.01%, on average.

Currently, the company has a Zacks Rank #3 and an Earnings ESP of 0.00%, as both the Most Accurate Estimate and the Zacks Consensus Estimate is pegged at 27 cents.

Barnes Group, Inc. Price and EPS Surprise

Barnes Group, Inc. price-eps-surprise | Barnes Group, Inc. Quote

The company is likely to have benefited from acquisitions, focus on lowering its debt level and solid product offerings. However, its performance is expected to have been affected by softness in automotive, industrial and aerospace end markets on account of low order intakes mostly due to the coronavirus outbreak-related issues.

Over the past 60 days, the Zacks Consensus Estimate for third-quarter earnings has remained stable at 27 cents.

Illinois Tool Works Inc. ITW will release third-quarter results, before market open. The company delivered better-than-expected results in each of the last four quarters, with the positive earnings surprise being 16.5%, on average.

Currently, the company has an Earnings ESP of +4.14% as the Most Accurate Estimate is pegged at $1.51, higher than the Zacks Consensus Estimate of $1.45. It has a Zacks Rank #3, which when combined with a positive ESP, makes us confident of an earnings beat.

Illinois Tool Works Inc. Price and EPS Surprise

Illinois Tool Works Inc. price-eps-surprise | Illinois Tool Works Inc. Quote

It is expected to have benefited from strength in its consumer packaging businesses including Zip-Pak products, on the back of surge in demand for consumables. Moreover, the company has been gaining from strategic sales excellence and investments related to innovation programs, which is likely to have supported its performance in the third quarter. (Read more: Illinois Tool to Post Q3 Earnings: Beat in the Cards?)

Over the past 60 days, the Zacks Consensus Estimate for third-quarter earnings has been raised from $1.41 to $1.45.

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Illinois Tool Works Inc. (ITW): Free Stock Analysis Report
 
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