Pentair plc (PNR) is set to report third-quarter 2014 results before the opening bell on Oct 21. Last quarter, this diversified industrial manufacturing company posted an earnings surprise of 0.00%. Let’s see how things are shaping up prior to the announcement.
Factors to Consider
Pentair projects third-quarter 2014 adjusted EPS in the range of 93 cents to 95 cents, up around 15% from the prior-year quarter. Third-quarter revenues are expected to be approximately $1.76 billion, up 3% year over year.
Following the second-quarter results, Pentair lowered its adjusted earnings per share (EPS) guidance to the range of $3.65–3.70 from the previous range of $3.85–$4.00 for full-year 2014. This also reflects the exit of the Water Transport Business. The guidance represents a surge of around 220% over the 2013 adjusted EPS of $3.05. The company expects sales to be around $7.15 billion, up 2% over the 2013 sales.
Pentair also updated its 2015 earnings per share target to $4.50 from $5.00. This reflects the exit of the Water Transport business, ongoing Energy Capital expenditure deferrals and current economic headwinds.
Pentair will benefit from improvement in the North American residential market as well as global food and beverage market, stabilization across Europe, cost synergies from last year’s merger with Tyco Flow and consistent share repurchases. However, a weak Australian economy and fluctuations in exchange rates remain as concerns.
Earnings Whispers?
Our proven model does not conclusively show that Pentair is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Negative Zacks ESP: The Expected Surprise Prediction or ESP for Pentair is -1.06% as the Most Accurate Estimate of 93 cents is below the Zacks Consensus Estimate of 94 cents per share.
Zacks Rank #4 (Sell): We caution against stocks with Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks worth considering in the industrial products sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Alamo Group, Inc. (ALG), with an Earnings ESP of +4.44% and a Zacks Rank #2 (Buy).
Nordson Corporation (NDSN) with an Earnings ESP of +0.88% and a Zacks Rank #2.
Gorman-Rupp Co. (GRC), with an Earnings ESP of +5.26% and a Zacks Rank #3 (Hold).
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