Time New York: Tue 22 May 09:58 am  |  Save 15% on H&R Block Online


Conglomerate Stocks’ Q1 Earnings to Watch on Apr 21: GE, HON


The Q1 earnings are off to a good start with earnings and revenue growth looking pretty decent compared to the last few reported quarters.

Per the latest Earnings Outlook, 57 S&P 500 companies reported earnings till Apr 19, accounting for 16.2% of the index’s total market capitalization, with 75.4% topping EPS (earnings per share) estimates and 54.4% coming in ahead of top-line expectations.

Earnings of all the S&P 500 companies combined are expected to rise 8.7% from the year-ago period on revenue growth of 6.2%.

Five out of 16 Zacks sectors are expected to witness a decline in earnings in the first quarter, with Conglomerates, Autos and Transportation being the biggest drag.

The Business Services sector is looking reasonably good once again. For the sector, earnings are expected to grow 2.2% while sales are touted to rise 2.8% from the last year.

Let’s have a sneak peek at two major conglomerate stocks set to release their first-quarter 2017 results tomorrow.

General Electric Company GE is scheduled to report its results before the opening bell. In the last reported quarter, the company’s operating earnings matched the Zacks Consensus Estimate. Over the trailing four quarters, General Electric reported an average positive earnings surprise of 3.5%, beating estimates twice and matching them in two.

During the quarter, General Electric completed the last major asset sale transaction of GE Capital exit plan in order to retrace its engineering roots. The company sold GE Money Bank – its French consumer finance business – and its operations in the French Overseas Territories to an affiliate of Cerberus Capital Management L.P., for an undisclosed amount. With the restructuring initiatives, General Electric expects operating earnings from the industrial businesses to comprise over 90% of its total operating earnings by 2018, up from 58% in 2014.

At the same time, the company is selectively acquiring assets to boost its Industrial Internet vision and improve the top line. General Electric is also focusing on the commercialization of the Predix software to augment its revenues.

Our proven model does not conclusively show that General Electric is likely to beat earnings this quarter as it does not possess the key components. 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. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Electric’s a Zacks Rank #3 when combined with an ESP of – 5.88% makes surprise prediction difficult. (Read More: Will GE Pull a Surprise for its Investors in Q1 Earnings?)

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Honeywell International Inc.HON is scheduled to report its results before the opening bell. In the last reported quarter, the company’s adjusted earnings were in line with the Zacks Consensus Estimate of $1.74. Over the trailing four quarters, the company reported an average positive earnings surprise of 1.9%, beating estimates on three occasions.

During the quarter, the company was selected for the Largest Petrochemicals Project in China to provide a range of process technology from Honeywell UOP. Per the deal, Honeywell UOP will offer a wide range of technologies in the form of license, design, key equipment, and state-of-the-art catalysts and adsorbents while its Process Solutions will provide the process controls and automation systems. This deal is likely to have an impact on the company’s revenues in the to-be-reported quarter. However, in order to fend off competition, Honeywell has to continually develop and maintain competitive products by adding innovative features that differentiate its products and prevent commoditization. These increase R&D expenditure and have often resulted in margin contraction and reduced bottom-line growth.

Honeywell’s Zacks Rank #4 (Sell) when combined with an ESP of +0.62% makes surprise prediction difficult. (Read More: Honeywell Q1 Earnings: What's in Store for the Stock? )

5 Trades Could Profit "Big-League" from Trump Policies

If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.

Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

To read this article on Zacks.com click here.

Zacks Investment Research
<-- You can share this post with your network,
or give us your opinion and leave a comment.
Be sure to check our RSS feeds for updates.