Hubbell Inc. (HUB.B) is set to report fourth-quarter fiscal 2015 results on Jan 29. Last quarter, it posted in line results. Let’s see how things are shaping up for this announcement.
Factors to Consider
Hubbell posted decent third quarter results with the bottom line matching the Zacks Consensus Estimate and the top line beating the same. However, earnings declined 6.7% on a year-over-year basis, primarily impacted by weaker margins.
Revenues were up 4.6% sequentially and 7.1% on a year-over-year basis. The year-over-year increase was attributed to acquisitions, which contributed 3 percentage points of the total revenue increase and organic volume, which contributed the remaining 4%.
But Hubbell’s gross margin for the quarter was 33.1%, down 176 basis points (bps) from the year-ago quarter due to higher warranty costs. But costs related to freight, obsolete inventory charges and wage inflation were also factors.
For the upcoming quarter, margins are expected to benefit from pricing programs and material cost management undertaken by the company. Also its aggressive acquisition strategy will help growth and profitability going forward.
Earnings Whispers?
Our proven model does not conclusively show that Hubbell will beat estimates 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: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.26. Hence, the difference is 0.00%.
Zacks Rank: Hubbell’s Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult.
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.
Other Stocks to Consider
Here are some other companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Ellie Mae, Inc. (ELLI) with Earnings ESP of +40.00% and a Zacks Rank #1 (Strong Buy)
Expedia Inc. (EXPE) with Earnings ESP of +3.49% and a Zacks Rank #1
Cree, Inc. (CREE) with Earnings ESP of +8.33% and a Zacks Rank #1
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