Hillenbrand (HI) to Report Q2 Earnings: What's in Store?

Hillenbrand Inc. HI, the holding company for Batesville Casket Company, a leader in the North American death care industry, is set to report second quarter fiscal 2016 results next week. Last quarter, this global diversified industrial company posted a negative earnings surprise of 6.82%.

Let's see how things are shaping up prior to this announcement.

Factors to Consider

Hillenbrand's focus on acquisitions, global presence and margin expansion through operational improvement has been driving its earnings since the past few quarters.

In Feb 2016, Hillenbrand completed its acquisition of Red Valve Company, a global leader in highly-engineered valves. The acquisition will complement the acquisition of ABEL acquisition (in November) and will expand its presence in the flow control market and increase the company's ability to expand into new end markets. We expect these acquisitions to boost its growth in the to-be-reported quarter.

However, the company also has been facing challenges over the past year, including currency, deficit environment for capital investments and slowdowns in some key markets, especially China. Slower economic growth has been particularly difficult for industries such as mining, plastics, and for equipment used in the production of potash, frac sand and other commodities.

Though the company has taken a number of actions to reduce its costs and boost its profitability, many of the customers will continue to face uncertainty, without any clear signs of improvement in the near term. Additionally, the company forecasts lower volume in the burial market this year due to a lighter-than-expected flu season and an increase in cremation rate. 

Earnings Whispers?

Our proven model does not conclusively show that Hillenbrand is likely to beat earnings this quarter. This 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: ESP for Hillenbrand is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 57 cents per share.

Zacks Rank: Hillenbrand has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 and #5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Stocks in the industrial sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Parker-Hannifin Corporation PH, with an Earnings ESP of +1.16% and a Zacks Rank #2 (Buy).

Emerson Electric Co. EMR, with an Earnings ESP of +3.18% and a Zacks Rank #2.

SPX FLOW, Inc. FLOW, with an Earnings ESP of +50.00% and a Zacks Rank #2.

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 >>