Here's what to expect when our 6 industrial stocks report quarterly earnings

Published Wed, Oct 25 20233:26 PM EDT

Quarterly earnings reports for our industrial stocks begin this week amid an uncertain operating environment. China's recovery is still trying to gain some traction. U.S. government spending on infrastructure projects has yet to truly kick in. Excess post-pandemic inventory is still crimping demand for new orders. And on top of all that — and always looming in the background — is the Federal Reserve's battle with inflation and the threat of a recession. However, industrials have been a bright spot this earnings season and we're cautiously optimistic the trend continues for each of our companies during the September quarter. Here then are the factors the could impact the financial results for Caterpillar (CAT), Honeywell International (HON), Emerson Electric (EMR), Linde (LIN), DuPont De Nemours (DD) and Stanley Black & Decker (SWK) — along with our bull case for each name. HON YTD mountain Honeywell (HON) year-to-date performance Honeywell and Linde are the first two of the group to report — on Thursday before the bell. For the three months ended Sept. 30, Honeywell's revenue is expected to increase 3.1% year over year to $9.231 billion, according to analyst estimates compiled by LSEG, which was formerly called Refinitiv. Earnings-per-share (EPS) should come in at $2.23, LSEG data showed, roughly in line on an annual basis. When Honeywell announced its restructuring plans earlier this month, the company said it anticipates strong third-quarter results with sales in line and earnings within or above the previous guidance range. In a press release announcing the portfolio realignment, management said Honeywell would be prioritizing the "future of aviation" — among other things — in order to deliver accelerated organic sales growth. This was positive to see and it's reasonable to expect a clean quarter led by aerospace, Honeywell's largest business. Aerospace has boosted other industrial mega-cap names like General Electric (GE). On Tuesday, the company reported robust third-quarter earnings and raised its 2023 profit forecast for the third time since the start of the year on GE's aviation business. CNBC's Jim Cramer cheered the company's guidance affirmation. "This is a heavily shorted stock of late. People feel it's lost its way," Jim said during "Squawk on the Street" earlier this month. "I don't know why people feel that way. You've got a new CEO, [Vimal Kapur], and he's going to take action." Shares of Honeywell are down 16.85% this year. Another area to watch is Honeywell's safety and productivity solutions unit, which is coming off a quarter where organic sales fell 21%. Stabilization and the return to growth in this business remains key to getting the stack back on track. LIN YTD mountain Linde (LIN) year-to-date performance Linde's total revenue is expected to decline 1.89% on an annual basis, to $8.623 billion, according to LSEG. EPS should come in at $3.57, up 15.1% year over year. Linde has beat and raised for 18 consecutive quarters, and history is likely to repeat itself when the industrial gas company reports. Despite negative volumes last quarter, Linde continues to thrive at taking price but keeping costs in check, leading to operating margins to record levels. Given the company's great balance sheet, the Club wants to hear more about cash returns to shareholders following Monday's announcemen t of a new $15 billion share repurchase program. Additionally, Linde should be one of the major winners of the U.S. Inflation Reduction Act (IRA). Management said it expects to see $50 billion of clean energy opportunities over the next decade. Shares of Linde are up 13.97% since the start of the year. SWK YTD mountain Stanley Black & Decker (SWK) year-to-date performance Progress regarding Stanley Black & Decker's turnaround plan will be in focus when the toolmaker reports before the opening bell Friday. The third fiscal quarter should mark Stanley Black & Decker's return to profitability. The manufacturing giant has made strides to reduce costs and streamline its business, with inventory down significantly this year. During Stanley Black & Decker's latest earnings call in August, management said the company was on track for $1 billion in annualized cost saving by year end. Meanwhile, we expect more of the same when it comes to the home improvement industry, with demand from professional customers still strong but no pick up from do-it-yourself customers. Stanley Black & Decker's overall revenue is expected to fall 3.76% on an annual basis, to $3.965 billion, according to analyst estimates. EPS should come in at $0.83, LSEG data indicated, up 9.2% year over year. Shares of the company are up 1.69% this year. CAT YTD mountain Caterpillar (CAT) year-to-date performance We are focused on Caterpillar's backlog — orders received , but not yet completed and recorded — when the equipment maker reports earnings on Oct. 31 before the market opens. In addition, margins should be higher as the company captures a positive spread between higher prices and lower manufacturing costs. Management credited the influx of government stimulus, in part, to Caterpillar's stellar second quarter. The Bipartisan Infrastructure Act, which allocates $1 trillion for projects that improve roads, bridges and transit systems since enacted — utilizes Caterpillar's products and services. In an August earnings call, CEO Jack Umpleby said the company expects "continued growth in nonresidential construction in North America due to the positive impact of government-related infrastructure investments and a healthy pipeline of construction projects." It remains unclear, however, the timeline in order to obtain permits and complete these projects. We'll be looking for commentary on how the stimulus has impacted the operating environment and demand for Caterpillar's products. For the three months ended Sept. 30, Caterpillar's total revenue is expected to rise 10.6% year-over-year, to $16.594 billion, per analyst estimates compiled by LSEG. EPS should come in at $4.79, per LSEG data, climbing 21% on an annual basis. Shares of the company are up 2.85% this year. DD YTD mountain DuPont (DD) year-to-date performance After years of changing up its portfolio, it's time for DuPont to show the market what it has to offer as a multi-industry company that mostly plays into the electronics, shelter, and water and protection end markets. Electronics is DuPont's largest business, and where it is in the bottoming process is most important after a string of negative revisions in the past year. However, it's important to note that China's tepid economic recovery could impact its semiconductor segment. Still, management remarked in the company's second-quarter earnings call that the China market is set to rebound at some point, with the bottom of its semi-business already here. DuPont releases results on Nov. 1 before the opening bell. Although this narrative could make for an attractive growth story in 2024, we will look for updates from management on how the company's performing overseas. DuPont's revenue is estimated to decline 3.71% year to date to $3.153 billion, per LSEG data. EPS should come in at $0.84, up 2.43% on an annual basis. Shares of the company are up 4.17% this year. EMR YTD mountain Emerson Electric (EMR) year-to-date performance Emerson Electric is the last of our industrial names to report, on Nov. 7 before the opening bell. The firm has put together a couple of strong quarters in a row on improved operational execution, and we expect more of the same. Importantly, there may be upside to the company's guide now that the manufacturer has completed its $8.2 billion acquisition of National Instruments in a deal that was expected to be immediately accretive to its adjusted EPS. Similar to other Club holdings, Emerson can grab some of the IRA's funding for green energy. We will listen for management's comments regarding the influx of federal spending into the sector and how that may affect its business. For the three months ended Sept. 30, Emerson Electric's revenue is expected to decline 20.8% on an annual basis, to $4.193 billion, according to analyst estimates compiled by LSEG. Earnings-per-share should come in at $1.31, down 14.3% year over year. Shares of Emerson Electric are down 7.83% so far in 2023. (Jim Cramer's Charitable Trust is long LIN, DD, CAT, EMR, HON, SWK. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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A large number of vehicles wait to be loaded at the port of Lianyungang, East China's Jiangsu province, June 5, 2023.

Wang Chun | Future Publishing | Getty Images

Quarterly earnings reports for our industrial stocks begin this week amid an uncertain operating environment.

China's recovery is still trying to gain some traction. U.S. government spending on infrastructure projects has yet to truly kick in. Excess post-pandemic inventory is still crimping demand for new orders. And on top of all that — and always looming in the background — is the Federal Reserve's battle with inflation and the threat of a recession.

However, industrials have been a bright spot this earnings season and we're cautiously optimistic the trend continues for each of our companies during the September quarter.