Will Ingersoll (IR) Miss Q4 Earnings on Currency Woes?

Industrial goods manufacturer Ingersoll-Rand Plc IR is scheduled to report fourth-quarter 2015 results before the opening bell on Feb 9. In the last reported quarter, earnings exceeded the Zacks Consensus Estimate by 5 cents. Ingersoll has a fairly decent earnings surprise history. In the last four trailing quarters, the company has managed to beat earnings thrice with a positive average earnings surprise of 9.44%. Let's see how things are shaping up for this announcement.

Growth Factors in the Past Quarter

Ingersoll has considerable operations outside the U.S. As the company establishes its operations internationally, it exposes itself significantly to risks from foreign exchange barriers and uncertainty from monetary devaluation. In particular, Ingersoll faces the risk of strengthening U.S. dollar, which is likely to adversely impact its financial results by affecting its revenues. Macroeconomic slowdown and geopolitical issues such as the economic fragility of the Eurozone, political instability in the Middle East and a striking slowdown in the Chinese economy remain additional headwinds.

Ingersoll continues to reposition its portfolio to focus on high-barrier markets. While such efforts are encouraging, they involve upfront costs and as a result can lead to earnings dilution in the near term. Consequently, the company is continually under stress to maintain profitability through stringent cost-cutting measures. Additionally, the company's international operations are subject to economic risks and results of operations may be adversely affected by changes in economic conditions and changes in local government regulation.

The company designs, manufactures and services products that incorporate advanced technologies, which entail various operating risks. The failure to develop new products and services that are readily accepted by the market could have an adverse impact on the company's results.

However, Ingersoll has a solid foundation of global brands and leading market share in all major product lines. The geographic and industry diversity coupled with a large installed product base provides ample growth opportunities within service, spare parts and replacement revenue streams. Additionally, the company's complementary portfolio of products and services is likely to assist it in strengthening the market position and achieving high productivity.

Earnings Whispers

Our proven model does not conclusively show that Ingersoll is likely to beat earnings this quarter as it lacks 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. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently at 0.00%.

Zacks Rank: Ingersoll's Zacks Rank #3 when combined with 0.00% ESP makes an earnings beat prediction uncertain. On the other hand, the Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

American Capital, Ltd. ACAS, earnings ESP of +12.50% and a Zacks Rank #2.

ABM Industries Incorporated ABM, earnings ESP of +38.46% and a Zacks Rank #3.

Frontline Ltd. FRO, earnings ESP of +25.00% and a Zacks Rank #2.

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