Conglomerates Stock Q1 Earnings Due on Apr 24: MMM & UTX
Around 87 S&P 500 companies have reported first-quarter 2018 results as of Apr 20, reflecting a continuation of the strong momentum seen in the preceding earnings season. Total earnings for these companies are up 25% year over year on 10.7% higher revenues, with 82.8% beating earnings estimates and 67.8% surpassing top-line expectations. Based on the hitherto observed pattern, the first quarter of 2018 is anticipated to register robust growth in earnings and revenues.
Per our latest Earnings Preview, overall earnings for S&P 500 companies are expected to rise 18.3% on 7.7% revenue growth. This represents better growth projections compared with the previous quarter — courtesy of a corporate tax overhaul and relatively healthy job data. Experts believe that earnings growth is likely to improve steadily in 2018 and beyond.
Notably, earnings growth is expected to be in double-digits on a year-over-year basis for 11 of the 16 Zacks sectors. Only two sectors (Autos & Conglomerates) are expected to show earnings declines in the to-be-reported quarter.
For the Conglomerates sector, earnings are expected to decline 9.4% year over year while sales are anticipated to rise 2.6% (as on Apr 18). Meanwhile, ongoing Ongoing tariff issues, which are likely to impact major U.S. industrials, are weighing on the companies margins in the sector.
Let’s take a sneak peek at two major Conglomerate stocks scheduled to report first-quarter 2018 earnings tomorrow and see how things are shaping up for the upcoming results.
3M Company MMM is scheduled to report results before the opening bell. The company is likely to report higher industrial segment profit in the quarter backed by strong automotive and aerospace solutions, industrial adhesives and tapes abrasives as well as its automotive aftermarket businesses. The Zacks Consensus Estimate for first-quarter revenues from 3M’s Industrial segment is pegged at $2,866 million, higher than $2,718 million in the previous quarter.
However, of late, the company is facing steep pension expenses and remains susceptible to commodity price risks. Additionally, it remains concerned about adverse currency translations, which may be a drag on its profitability. (Read more: What’s in the Offing for 3M Company in Q1 Earnings?)
For the first quarter, the company’s earnings are expected to improve 15.7% year over year on 5.1% higher revenues. 3M has an Earnings ESP of +0.40% and a Zacks Rank #4 (Sell), which makes an earnings surprise prediction difficult. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Technologies Corporation UTX is also scheduled to report results before the opening bell. In the impending quarter, the company’s earnings are expected to rise 2% year over year on 5.2% higher revenues. However, United Technologies’ financial performance depends on the conditions of the construction and aerospace industries. Also, it strongly relies on suppliers, including third-party contract manufacturing and commodity markets, to secure raw materials, parts, components and sub-systems, and that that exposes the company to market price volatility and availability risks.
The Zacks Consensus Estimate for its UTC Aerospace Systems segment’s revenues is pegged at $3,642 million, significantly down from $3,803 million in the prior quarter. Further, Pratt & Whitney segment’s revenues are likely to come in at $4,280 million compared with $4,461 million in the previous quarter.
Our proven model does not show that United Technologies is likely to beat earnings this quarter as it does not possess the key components. Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is -0.75%, with the former pegged at $1.50 and the latter at $1.51. Moreover, United Technologies has a Zacks Rank #4 (Sell). (Read More: What to Expect from United Technologies’ Q1 Earnings?).
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
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