Can Process Equipment Unit Aid Hillenbrand (HI) Q1 Earnings?

Hillenbrand, Inc. (NYSE:HI) is slated to release first-quarter fiscal 2018 results on Feb 1. The question lingering in investors’ minds is, whether this diversified industrial company will be able to deliver a positive earnings surprise in the quarter to be reported. Well, the company has been delivering positive earnings surprise for six straight quarters now. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The current Zacks Consensus Estimate for the quarter under review is pegged at 47 cents, which represents nearly 12% growth from the year-ago period. This estimate has remained stable over the last 30 days. Moreover, analysts polled by Zacks expect revenues of $405 million, which is in line with the year-ago period figure.

Factors at Play

Hillenbrand hasn’t witnessed a single year-over-year decline in top and bottom lines for more than a year now. Well, the company has mainly been gaining from strength at its Process Equipment segment, which has also helped the company’s shares rally 20.8% in a year, surpassing the industry’s 15.5% growth. Robust demand has been favoring the performance of this segment, wherein revenues jumped 7% to $304 million in the last quarter. Incidentally, results were fueled by solid demand for systems and equipment that are used for food and pharma projects and engineered plastics. Also, increased demand for screening and separating equipment fueled segment revenues.

Given these trends, the company has been focusing on capitalizing the opportunities provided by the process equipment market. In this regard, the acquisition of Coperion has also aided Hillenbrand’s pricing and productivity initiatives. Driven by such upsides, management expects Process Equipment unit to witness continued organic growth in fiscal 2018, supported by a robust backlog level.

However, persistent softness at the Batesville business segment remains a hurdle. This unit has long been struggling with lower burial volumes in North America, as consumers depict a radical shift toward cremation. In the last quarter, segment revenues declined 4% to $139 million due to reduced demand for burial caskets which stems from families rising preference for cremation. Moreover, the performance of this segment remains challenged with higher commodity and fuel costs. Management expects these hurdles to linger and hurt revenues and margins in fiscal 2018, which remains a concern for the upcoming quarter.

Nevertheless, we expect the flourishing process equipment business to tide over the aforementioned weakness and drive Hillenbrand this time around.

What the Zacks Model Unveils

Our proven model does not conclusively show that Hillenbrand is likely to beat bottom-line estimates this quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with ourEarnings ESP Filter.

Though Hillenbrand carries a Zacks Rank #3, its Earnings ESP of 0.00% makes surprise prediction difficult. Notably, the Most Accurate estimate falls in line with the Zacks Consensus Estimate of 47 cents.

Stocks With Favorable Combination

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:

Campbell Soup Company (NYSE:CPB) has an Earnings ESP of +0.82% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Coty Inc. (NYSE:COTY) has an Earnings ESP of +6.54% and carries a Zacks Rank #3.

The Coca-Cola Company (NYSE:KO) has an Earnings ESP of +1.45% and carries a Zacks Rank #3.

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