Hillenbrand Inc. HI is set to report first-quarter fiscal 2016 results on Feb 3. Last quarter, this global diversified industrial company posted a negative earnings surprise of 8.33%. Let’s see how things are shaping up prior to this announcement.
Factors to Consider
Hillenbrand’s focus on acquisitions, global presence and margin expansion through operational improvement has been driving its earnings since the past few quarters.
In November, the company completed the acquisition of Germany-based ABEL Pumps in order to enter into the flow control market and expand ABEL's global footprint. Then, on Dec 22, Hillenbrand announced its decision to acquire Red Valve Company, a global leader in highly-engineered valves. The acquisition will complement the acquisition of ABEL acquisition and will increase the company’s ability to expand into new end markets. We expect these acquisitions to boost its growth in the to-be-reported quarter.
However, the company also has been facing challenges in the past year, including currency, deficit environment for capital investments and slowdowns in some key markets, especially China. Slower economic growth has been particularly difficult for industries such as mining, plastics, and for equipment used in the production of potash, frac sand and other commodities.
Though the company has taken a number of actions to reduce its costs and boost its profitability, many of the customers will continue to face uncertainty, without any clear signs of improvement in the near term.
Earnings Whispers?
Our proven model does not conclusively show that Hillenbrand is likely to beat earnings this quarter. This 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: ESP for Hillenbrand is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 44 cents per share.
Zacks Rank: Hillenbrand holds a 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.
Stocks to Consider
Stocks in the industrial sector that have both a positive earnings ESP and a favorable Zacks Rank are:
Codexis, Inc. CDXS, with an Earnings ESP of +20.0% and a Zacks Rank #1 (Strong Buy).
Brady Corp. BRC, with an Earnings ESP of +13.64% and a Zacks Rank #3 (Hold).
Pentair plc PNR, with an Earnings ESP of +0.96% and a Zacks Rank #3.
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