Industrial tool maker, Stanley Black & Decker, Inc. (SWK) is scheduled to report fourth-quarter results on Jan 29 before the market opens. The Zacks Consensus Estimate for the quarter is pegged at $1.53 per share.
The company’s performance over the last trailing four quarters fared above expectations, with an average earnings surprise of +5.97%. Last quarter, the company reported earnings of $1.55 per share, which surpassed the Zacks Consensus Estimate of $1.44 by 7.6%. Let us see whether Stanley Black & Decker can keep the earnings streak alive in the fourth quarter.
Factors to Affect Q4 Results
Stanley Black & Decker’s segmental performances as well as its overall profitability are largely influenced by economic activities in the U.S. as well the foreign countries it serves. In fourth-quarter 2014, the global economy was adversely impacted by plunging crude oil prices as well as decelerating economic activities in Japan and China. Eurozone also faced political uncertainties. Further, industrial activities in the U.S. were flat in October, and declined 0.1% in December. A 1.3% monthly gain in November came as the only breather.
Economic uncertainties will hamper the product demand of machinery companies like Stanley Black & Decker, both domestically and internationally. The company anticipates organic revenue and operating margin of its Security business to suffer a modest year over year decline in 2014.
In addition, risks associated with negative foreign currency translations and stiff competition in all businesses might hurt Stanley Black & Decker’s growth. Over the last 7 days, the Zacks Consensus Estimate for the fourth quarter has decreased by 0.6% to $1.53.
Earnings Whispers?
Our proven model conclusively shows that Stanley Black & Decker is likely to miss earnings 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: ESP for the stock is currently -1.31%. This is because the Most Accurate estimate of $1.51 stands below the Zacks Consensus Estimate of $1.53.
Zacks Rank: Stanley Black & Decker carries a Zacks Rank #4 (Sell).
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.
Stocks to Consider
Here are some companies you may want to consider in the machinery industry as our model shows they have the right combination of elements to post an earnings beat this quarter:
Pentair plc (PNR), with an Earnings ESP of +0.97% and a Zacks Rank #3 (Hold).
Zebra Technologies Corp. (ZBRA), with an Earnings ESP of +65.63% and a Zacks Rank #3.
ABB Ltd. (ABB), with an Earnings ESP of +14.29% and a Zacks Rank #3.
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