Ametek Inc. (AME) is set to report fourth-quarter 2014 results on Jan 28. Last quarter, it posted a 1.6% positive surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Ametek reported better-than-expected third quarter results with both the top and bottom lines surpassing the Zacks Consensus Estimate. Moreover, both revenues and earnings increased year over year.
Sales of $1.03 billion were up 4.1% sequentially and 15.9% on a year-over-year basis, primarily driven by solid execution of its four growth strategies. Additionally, positive synergies from recent acquisitions helped the company deliver strong results.
But gross margin for the quarter was 34.3%, down 203 basis points (bps) from 36.3% in the preceding quarter and 140 bps from the year-ago quarter’s 35.7%, which partly offset the earnings.
The company believes that strong execution of its four core growth strategies of operational excellence, global market expansion, new product development, and strategic acquisitions will continue to play an important role in driving its growth. This in combination with its excellent backlog and strong portfolio of businesses will help the company post better results in the upcoming quarter.
For the fourth quarter, management expects revenues to be up in high single digits on a percentage basis from the year-ago quarter. Earnings per share are expected to be approximately 60 cents to 62 cents. This earnings guidance represents an increase of 9% to 13% on a year over year basis.
Earnings Whispers?
Our proven model does not conclusively show that Ametek will beat estimates 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 62 cents. Hence, the difference is 0.00%.
Zacks Rank: Ametek currently carries a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.
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.
Other Stocks to Consider
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
- Ellie Mae, Inc. (ELLI) with Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy)
- Expedia Inc. (EXPE) with Earnings ESP of +3.49% and a Zacks Rank #1
- Apple Inc. (AAPL) with Earnings ESP of +2.33% and a Zacks Rank #1
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