Earnings Preview: Boeing, Caterpillar, 3M, GE, and More

Honeywell (HON) kicked off industrials earnings season, beating Wall Street estimates. Although Honeywell’s revenues came in marginally below analyst estimates, its earnings per share beat estimates by 7 cents. Honeywell also upped its full-year EPS estimates while trimming its revenue guidance. Boeing couldn’t join the party, however. Regulatory troubles are plaguing the stock.

This week is a big one for industrials stocks. Lockheed Martin (LMT) and United Technologies (UTX) release earnings tomorrow. Next come Boeing (BA) and Caterpillar (CAT) on Wednesday. And 3M (MMM) will then release its earnings results on Thursday, while GE (GE) reports next week. Let’s see what Wall Street’s saying!

Lockheed Martin and United Technologies earnings on October 22

According to analysts surveyed by Reuters, Lockheed Martin’s revenues should have risen in Q3. However, Lockheed Martin’s net income and EPS are expected to fall—primarily on the higher tax rate. Of the 22 analysts surveyed by Reuters, 13 have a “buy” rating on Lockheed Martin. Meanwhile, nine say “hold.”

On the other hand, analysts expect United Technologies (UTX) to sizzle in Q3 with substantially higher revenues and EPS. Analysts expect United Technologies to post $19.3 billion in revenues in Q3, a 17% jump. Wall Street expects United Technologies’ EPS to jump 22% to $1.89. Fifteen out of 20 analysts surveyed by Reuters have a “buy” rating on UTX. The remaining five say “hold.” For more detail, see Market Realist’s earnings preview for United Technologies.

Boeing and Caterpillar report on October 23

Boeing, which had a forgettable third quarter, is releasing earnings results on Wednesday. Amid the 737 Max grounding, Boeing’s revenues are expected to fall 23%. Meanwhile, analysts expect Boeing’s EPS to see a bigger 41% fall—to $2.09.

Out of 25 analysts surveyed by Reuters, 12 say “buy,” eleven say “hold, and two say “strong sell” for Boeing stock. Today, UBS downgraded Boeing’s rating to “neutral” from “buy” and its reduced target price to $375 from $470. With the 373 Max saga dragging on and Boeing continuing to pay hefty penalties for grounding, bears are gearing up for an earnings miss from Boeing.

Caterpillar (CAT) is also releasing its earnings results on Wednesday. Its revenues are expected to fall marginally to $13.5 billion in Q3. However, the company is still expected to post higher EPS, at $2.89.

While Caterpillar’s construction business in Asia took a hit from the trade war in Q3, the energy sector may offer a bit of a breather. Analysts seem divided over Caterpillar. Of 28 surveyed analysts, 11 recommend a “buy. Meanwhile, 14 say “hold” and three say “sell.” The average target price of $139.25 for CAT means there’s only about a 5% expected upside in Caterpillar stock over the next 12 months.

3M earnings on October 24

Another industrials bellwether, 3M (MMM) is scheduled to release earnings on October 24. While Wall Street expects 3M’s revenues to grow marginally, rising costs could lead to a 3.5% fall in EPS, to $2.49.

Analysts are mostly bearish on 3M stock. Only two of the 18 surveyed analysts recommend a “buy.” And the one-year target price of $172 for MMM corresponds to only about a 4% upside.

GE earnings due next week

General Electric (GE) is slated to release its highly anticipated Q3 earnings on October 30. This earnings release will be GE’s first since the Markopolos troubles. Wall Street expects GE’s revenues to fall 22% to $22.9 billion and for EPS to follow suit to 11 cents.

The BHGE stake sale is expected to weigh on GE’s net income. A fair value adjustment could lead to billions in paper losses for GE in Q3. Any unexpected charge for long-term care reinsurance could cast a bearish spell on GE stock. Most analysts seem cautious about GE stock, with eight saying “buy,” nine saying “hold,” and three saying “sell.”

Industrials ETFs to watch

The iShares US Industrials ETF (IYJ) has Boeing, Honeywell, UTX, 3M, and GE in its key holdings. Boeing accounts for over 5% of the fund.

Then the Industrials Select Sector SPDR Fund (XLI) also heavily invests in these companies. Five of them account for 30% of the fund’s portfolio.

So this big industrials earnings week, as well as next week, are critical for investors in these ETFs. Brace for impact, and stay tuned for our analysis of the results!