Roper Industries Inc. (ROP) is set to report fourth-quarter 2014 results on Jan 26. Last quarter, it posted a 1.31% positive earnings surprise. The company has posted an average positive earnings surprise of 4.15% over the past four quarters. Let’s see how things are shaping up for this announcement.
Factors at Play
Roper holds a dominant position in most of the markets where it operates. The company has an optimum mix of highly engineered, niche-oriented products, which help it to gain market share. Though it operates in a cyclical business environment, diversified revenue stream has helped it to counter the headwinds. We believe that Roper’s innovative product pipeline will be a major growth catalyst over the long term.
However, macroeconomic concerns, integration issues due to acquisitions and competition from Danaher Corp., Dover Corp. (DOV) and Ingersoll-Rand Plc are the possible headwinds. Further, a high debt level is a major concern.
Earnings Whispers?
Our proven model does not conclusively show that Roper 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.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.79 per share. Hence, the difference is of 0.00%.
Zacks Rank: Roper’s Zacks Rank #3 (Hold) when combined with 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are a couple of companies which, according to our model, have the right combination of elements to post an earnings beat this quarter:
Facebook Inc. (FB) with an Earnings ESP of +9.09% and a Zacks Rank #3.
Apple Inc. (AAPL) with an Earnings ESP of +0.78% and a Zacks Rank #2 (Buy).
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