We expect aerospace company Precision Castparts Inc. (PCP) to report second-quarter fiscal 2015 results on Oct 23, before the opening bell. Last quarter, the company reported a negative surprise of 9.9%. Let us see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that Precision Castparts is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. The company’s ESP stands at +1.22 as the Most Accurate estimate is pegged at $3.33, while the Zacks Consensus Estimate stands at $3.29.
Zacks Rank: Precision Castparts’ Zacks Rank #3 (Hold) increases the predictive power of ESP. Note that stocks with Zacks Ranks of #1, 2 or at least 3 have a significantly higher chance of beating earnings. However, Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of Precision Castparts’ Zacks Rank #3 and 1.22% ESP makes us confident of an earnings beat on Oct 23.
What is Driving the Better-Than-Expected Earnings?
Increased demand for the commercial aerospace and oil & gas businesses has been a continuous growth driver for the company. The aerospace division is particularly performing well it supports the ramp up of the 787 production which is expected to increase in the upcoming quarters. Further, the company’s industrial gas turbine division is expected to do well driven by an increase in order rate, especially for spares.
Additionally, a robust financial position places the company in a good spot to pursue strategic acquisitions and drive growth. In the recent past, Precision Castparts completed many strategic acquisitions which bode well for the company in terms of synergies, moving forward.
Other Stocks to Consider
Precision Castparts is not the only firm looking up this earnings season. We also see likely earnings beats coming from these 3 industry peers:
Century Aluminum Co. (CENX) with an earnings ESP of +11.77% and Zacks #1 Rank (Strong Buy).
Nordson Corp. (NDSN) with an earnings ESP of +0.88% and a Zacks Rank #2 (Buy).
Caterpillar Inc. (CAT) with an earnings ESP of +2.26% and a Zacks Rank #3.
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