What to Expect From Industrial Conglomerates This Earnings Season
It's that time of the year again. Every Fool's favorite quarterly celebration -- earnings season -- has arrived. This series will give you a heads-up on reporting dates, analyst expectations, and past earnings performance for a variety of Industrials stocks. Today we take a look at industrial conglomerates.
Why is this important? Because even though we don't believe that moving in and out of the market in the short term is the best strategy, we still like to arm ourselves with regular information. Each earnings report gives you the opportunity to learn much more about a company's recent performance. Whether you're checking in on a stock you already own or looking for the next company to add to your portfolio, we'll show you what to expect during earnings season.
Source: Standard & Poor's.
For the industrials sector as a whole, there's some good news and some reason for pause. First, the good news. Year-over-year, earnings are expected to increase 10% compared with 2010's third quarter. However, the expected earnings trend for the industry this quarter is slightly worrisome. The 2011 second-quarter earnings rise is not expected to continue into the third quarter, as analysts believe overall earnings will decrease by 3.6%.
Part of this decrease could simply be seasonality. Since 2009, industrials companies have tended to show earnings decreases in Q1 and Q3, while they tend to grow their earnings in Q2 and Q4. This could help explain some of the drop that we're expected to see.
Now that you have the big picture for industrials, let's zero in on industrial conglomerates and show you what to expect over the next few weeks.
Estimated Report Date
Earnings Estimate 90 Days Ago
Earnings Reported Last Quarter
|Textron (NYS: TXT)||Oct. 19||$0.31||$0.29||$0.13||$0.29|
|Dover (NYS: DOV)||Oct. 21||$1.10||$1.23||$0.98||$1.31|
|General Electric (NYS: GE)||Oct. 21||$0.31||$0.32||$0.28||$0.34|
|3M (NYS: MMM)||Oct. 25||$1.61||$1.69||$1.53||$1.60|
|Siemens AG (NYS: SI)||Oct. 26||$1.77||$2.21||N/A||N/A|
|Berkshire Hathaway (NYS: BRK.B)||Oct. 31 to Nov. 3||$1.17||$1.25||$1.24||$1.09|
|Tyco (NYS: TYC)||Nov. 16||$0.86||$0.89||$0.74||$0.85|
Sources: Yahoo! Finance and Earnings.com.
Overall, it's expected to be a strong quarter for industrial conglomerates. Dover, GE, 3M, Textron, and Tyco are all expected to post higher earnings than in 2010's third quarter. The biggest winner is expected to be Textron, with analysts anticipating that earnings will be 138% higher than last year's Q3. Considering Textron's expected big quarter, it will be interesting to see whether it has plans to increase dividends anytime soon after drastically cutting them in 2009.
We'll also be keeping an eye on GE's dividends. It has increased dividends three out of the past four quarters, and we're eager to see whether that trend will continue. Of course, after paying $3.3 billion back to Warren Buffett's Berkshire Hathaway on Monday, GE could decide to take a pass on a dividend increase to help replenish its coffers this quarter. The company is expected to show an $800 million reduction in retained earnings this quarter because of the Berkshire payment.
Critical for all of these companies is how they're preparing for the year ahead. Investors will be interested in hearing about how companies are dealing with global economic uncertainty and the possibility that the European debt crisis could get even worse. For these multinational corporations, the health of the global economy is crucial for their continued success.
These industrial conglomerates are all large and complicated companies. That's why it's important to delve into their latest reports to really get a better understanding of them. Luckily for us finance geeks, we can do just that very soon.
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At the time this article was published Fool contributor Brendan Byrnes owns no shares of any of the companies mentioned in this article. The Motley Fool owns shares of Berkshire Hathaway and Textron. Motley Fool newsletter services have recommended buying shares of 3M and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.