Emerson Electric Co. EMR is slated to report second-quarter fiscal 2015 results on May 5, before the opening bell.
Last quarter, the company posted a positive surprise of 2.74%. Let's see how things are shaping up for this announcement.
Factors to Consider
Emerson has been suffering from low revenues over the last few quarters due to negative effect of currency fluctuations. In first quarter fiscal 2015, around 3% of Emerson’s revenues declined due to negative impact of currency translations. Also, strengthening of the U.S. dollar continues to be a major concern, which is projected to weigh on quarterly earnings in the coming quarters as well.
Moreover, Emerson continues to suffer from weaknesses in Europe, due to a slow recovery process after the last crisis. Also, other emerging markets continue to affect the company’s financials. Apart from this, Emerson’s business is being affected by the current volatility in the upstream oil and gas market, with oversupply continuing to pressure the prices and spending levels.
This has been negatively affecting the company’s order rates in power generating alternators. Although the effect of this is currently low on Emerson’s earnings, the company projects it to primarily weigh on the financials in the second half of fiscal 2015.
Earnings Whispers?
Our proven model does not conclusively show that Emerson will beat earnings this season. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.
Zacks ESP: Emerson currently has a negative Earnings ESP because the Most Accurate estimate stands at 75 cents, while the Zacks Consensus Estimate is pegged higher at 76 cents. This equates to a difference of -1.32%.
Zacks Rank: Emerson’s Zacks Rank #4 (Sell) when combined with negative Earnings ESP makes an earnings beat difficult. As it is, 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.
Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
American Eagle Outfitters AEO, Earnings ESP of +18.18% and Zacks Rank #1.
Atlas Air Worldwide Holdings, Inc. AAWW, Earnings ESP of +1.52% and Zacks Rank #2.
Tyson Foods, Inc. TSN, Earnings ESP of +1.37% and Zacks Rank #3.
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