Leading manufacturer of motion & control technologies and systems Parker-Hannifin Corporation PH is slated to report fourth-quarter fiscal 2015 results on Aug 4, before the opening bell.
Last quarter, the company posted a positive surprise of 2.5%. Also, the stock has an average positive surprise of 8.7% for the trailing four quarters.
Let's see how things are shaping up for this announcement.
Factors to Consider
Parker-Hannifin’s “Win Strategy,” which aims to measure excellence of customer service through efficient business and cash management schemes, continues to be one of its major strengths. It is expected to drive growth in the to-be reported quarter. Results are also expected to benefit from the positive effects of restructuring initiatives the company has undertaken over the last few years.
Parker-Hannifin’s Aerospace Systems segment has been performing well over the past few quarters driven by major contract-wins. The segment is also expected to report a robust fourth quarter.
Moreover, during the quarter ended on Jun 30, the company has launched a number of products like O-ring materials, antimicrobial polymers and compressed air dryers. These will likely boost the top-line performance of its Diversified Industrial segment.
Despite these positives, unfavorable currency exchange rates and continuous strengthening of the U.S. dollar continue to threaten the company’s financial performance.
Moreover, sluggishness in Parker Hannifin’s key industrial end-markets, namely, oil & gas, construction and agriculture may prove to be a drag on revenues and order levels, thereby hurting sales in the fourth quarter.
Earnings Whispers
Our proven model does not conclusively show that Parker-Hannifin 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: Parker-Hannifin currently has a negative Earnings ESP, because while the Most Accurate estimate stands at $1.80, the Zacks Consensus Estimate is pegged higher at $1.85. This equates to a difference of -2.7%.
Zacks Rank: Parker-Hannifin’s Zacks Rank #3, when combined with a negative ESP, lowers the predictive power of ESP and makes an earnings beat unlikely.
Notably, we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
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:
Ashford Hospitality Trust, Inc. AHT has an Earnings ESP of +4.35% and a Zacks Rank #1.
American Capital, Ltd. ACAS has an Earnings ESP of +17.39% and a Zacks Rank #2.
HCA Holdings, Inc. HCA has an Earnings ESP of +2.24% and a Zacks Rank #2.
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