The Zacks Analyst Blog Highlights: Caterpillar, Union Pacific, Industrial Select Sector SPDR, Vanguard Industrials ETF and iShares U.S. Industrials ETF
CHICAGO, Oct. 28, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Caterpillar Inc. (NYSE:CAT-Free Report), Union Pacific Corporation (NYSE:UNP-Free Report), Industrial Select Sector SPDR (AMEX:XLI-Free Report), Vanguard Industrials ETF (AMEX:VIS-Free Report) and iShares U.S. Industrials ETF (AMEX:IYJ-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
Strong Industrials Put These Stocks in Focus
U.S. stocks staged a strong rally led by a number of upbeat earnings reports from major industrial companies. In particular, Caterpillar Inc. (NYSE:CAT-Free Report) posted higher-than-expected third-quarter earnings numbers and also lifted its profit outlook for the year.
Moreover, Union Pacific Corporation (NYSE:UNP-Free Report), among others, managed to beat the earnings estimates, leading the Dow Jones industrial average to come close to having its best day of 2014. The blue-chip benchmark ended up 1.3% higher to close at 16,677.90.
Industrials Earnings in Focus
Caterpillar
Mining and heavy-equipment behemoth Caterpillar saw its earnings per share (EPS) increase 15% year over year to $1.72 per share, easily crushing the Zacks Consensus Estimate of $1.33 per share. The blow-out numbers came despite a tough mining environment. Continued cost management and operational execution were the keys for the positive surprise.
Revenues nudged up 1% year over year to $13.5 billion in the quarter, surpassing the Zacks Consensus Estimate of $13.4 billion. Sales in Energy & Transportation and Financial Products segments managed to clock year-over-year growth, but weaker results from the Resource Industries segment continued to be a deterring factor.
Caterpillar's construction equipment business is getting a boost from the U.S. housing recovery, but its mining business has been held back by slowing demand from Latin America and the Asia-Pacific regions (read: Buy These Low Volatility ETFs for Choppy Markets).
Caterpillar now expects 2014 revenues of $55 billion, at the midpoint of the previous guidance range of $54 billion to $56 billion. The company has, however, raised its earnings outlook for the year, reflecting its disciplined cost control and operational execution.
Union Pacific Corporation
The rail transportation operator, Union Pacific, followed in Caterpillar's footsteps and managed to beat both Q3 earnings and revenue estimates. Earnings per share rose 23% year over year to $1.53, beating the Zacks Consensus Estimate of $1.51, while revenues increased 11% year over year to $6.2 billion, ahead of the Zacks Consensus Estimate of $6.1 billion.
Market Impact
The slew of market beating earnings results pushed all the three industrial stocks higher following their respective earnings releases. Caterpillar surged roughly 5% to close at $99.27 making it the top performer in the Dow, while 3M surged 4.4% higher after its results. Union Pacific also staged a nice rally closing 5% higher.
Solid earnings results from these industrial stocks also fuelled a rally in Industrial ETFs having sizeable exposure to the above three companies. Most of these products gained roughly 2%.
Below we have highlighted three Industrial ETFs which investors should keep in their radar to enjoy the positive momentum in the space:
Industrial Select Sector SPDR (AMEX:XLI-Free Report)
XLI is the most popular fund in the space with an asset base of $8.7 billion and an average trading volume of more than 12 million shares. The fund provides exposure to a basket of 66 stocks charging 16 basis points as fees.
Union Pacific, 3M and Caterpillar have a combined exposure of roughly 14.5% in the fund. XLI gained 2.2% on Thursday and currently has a Zacks ETF Rank #3 or Hold rating.
Vanguard Industrials ETF (AMEX:VIS-Free Report)
VIS is the second most popular fund in the space with an asset base of $1.7 billion and trades with moderate volumes. VIS tracks the MSCI US Investable Market Industrials 25/50 Index to provide exposure to 355 industrial stocks.
The three stocks have a combined exposure of roughly 10%. VIS surged 2% in the key session and currently has a Zacks ETF Rank #3 or Hold rating (see all Industrials ETFs here).
iShares U.S. Industrials ETF (AMEX:IYJ-Free Report)
IYJ tracks the Dow Jones U.S. Industrials Index to provide exposure to U.S. companies that produce goods used in construction and manufacturing. Union Pacific, 3M and Caterpillar are among the top three holdings with a combined exposure of roughly 10%.
The fund manages an asset base of $1.2 million and is slightly expensive with 43 basis points as fees. IYF gained 2.1% on Thursday and currently has a Zacks ETF Rank #3 or Hold rating.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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