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GE Vs. HON: Which Stock is Poised for Better Q1 Earnings?

The earnings season is picking up pace, with about 52 S&P 500 companies having reported results as on Apr 18. We believe that the strong momentum of the preceding earnings season has continued in this reporting cycle. Total earnings for these companies are up 27.9% year over year on 10.7% higher revenues, with 84.6% beating earnings estimates and 78.8% surpassing top-line expectations. Clearly, the first quarter of 2018 is projected to register better earnings growth and revenue momentum than what we have witnessed in the previous quarters.

Per the latest Earnings Trends, overall earnings for all the S&P 500 are expected to be up 17.8% on 7.6% growth in revenues — the highest quarterly earnings growth pace in the last seven years. This represents an improved growth projection from the previous quarter driven by a corporate tax overhaul and relatively healthy job data. This in turn, boosted corporate earnings and stoked investments. Experts believe that earnings growth is likely to improve steadily in 2018 and beyond.

In fact, we expect double-digit year-over-year earnings growth for 11 of the 16 Zacks sectors. Only two sectors (Autos & Conglomerates) are likely to register earnings declines.

For the Conglomerates space, earnings are expected to fall 9.4% year over year while sales are touted to rise 2.6%, thanks to disappointing performance by one of the leading players in the industry. Ongoing tariff issues, which are likely to impact major U.S. industrials, are weighing on the companies.

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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.

General Electric Company GE is scheduled to report results before the opening bell. The company is likely to report lower industrial segment profit in the quarter, due to higher operating costs and accounting charges. Flannery had earlier disclosed his plans to focus on just three core segments — power, aviation and health-care equipment — and gradually exit all other businesses to offset the downtrend. However, of late, he has hinted at the possibility of the company’s disintegration into separately traded businesses. (Read more: Weak Power & Transportation Margins to Hurt GE's Q1 Earnings)

In the first quarter, the company’s earnings are expected to fall 47.6% year over year on 0.8% higher revenues. For the impending quarter, the company has an Earnings ESP of +5.26%, with a Zacks Rank #5 (Strong Sell), making an earnings surprise prediction uncertain. 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.

General Electric Company Price, Consensus and EPS Surprise

 

General Electric Company Price, Consensus and EPS Surprise | General Electric Company Quote

Honeywell International Inc. HON is scheduled to report results before the opening bell as well. The company is expected to deliver 4.7% higher revenues in the impending quarterly results, owing to a favorable macroeconomic environment. Honeywell is well-positioned to gain from long-term expansion in markets like aerospace, facility automation and automotive turbochargers backed by its strong market share and product line-up. Its balanced mix of long and short-cycle businesses along with a decent organic growth in new products and expansion in high-growth regions augurs well for the company. These factors bode well for the company’s upcoming performance.

Our quantitative model hints an earnings beat for this Zacks Rank #3 company in first-quarter 2018. This is because it has an Earnings ESP of +0.46% (the Most Accurate estimate of $1.90 being higher than the Zacks Consensus Estimate of $1.89) along with a favorable Zacks Rank. (For more details, read: Can Aerospace Strength Drive Honeywell 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. Price, Consensus and EPS Surprise

 

Honeywell International Inc. Price, Consensus and EPS Surprise | Honeywell International Inc. Quote

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