5 NYSE Stocks Weathering The Downturn

 |  Includes: CAT, DE, FLR, TYC, UPS
by: Dutch Trader

I have screened for US stocks in the industrial sector that have buy recommendations and are keeping up quite well. The following five stocks appeared on my screen:

Company Share Price ($) YTD (%) P/E, Current Year

P/E Next Year


CATERPILLAR 85.45 -8,8 12,4 9,1 2,1
DEERE & CO 77.29 -6,9 11,7 10,3 1,8
FLUOR CORP 59.03 -10,9 16,9 14,3 0,9
TYCO INTERNATIONAL 41.34 -0,2 12,5 10,9 2,5
UNITED PARCEL SERVICE 66.16 -8,8 15,1 13,1 3,2
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Caterpillar (NYSE:CAT) delivered excellent Q2 results, although EPS missed ambitious expectations by just 2%. Perspectives remain favorable as short-term profit burden from Japan is behind us and costs remain in management’s focus.

Growth potential continues to be formidable, with high commodity prices driving investments in mining, continuing strong demand in most emerging countries and the construction sector still to recover in the US and some Western European markets. China raised some concerns about growth continuance and rising competition, but dealer deliveries were still growing faster than the overall industry in China in Q2.

Caterpillar raised its 2011 EPS guidance (excluding Bucyrus) by 50 cents to $6.75-$7.25, bracketing consensus of $7.01. Revenue expectation was raised by $2 billion to $54-$56 billion. The integration of the recently acquired Bucyrus will have a positive revenue effect of $2 billion and a negative impact on EPS of 50 cents. Guidance for 2012 will be delivered in Q3.

The company has clearly upside potential due to the following reasons:

  • Caterpillar has not seen a deterioration in demand
  • Dealers continue to complain about delivery restraints
  • Dealer inventories are still low
  • Replacement sales in the US are still below potential replacement demand
  • Large order backlog of $22 billion
  • Operational initiatives will boost margins

Deere & Company's (NYSE:DE) total sales in fiscal Q3 rose 22% yoy to $8.37 billion. EPS gained 17.4% to $1.69, two cents above expectations. Its core operations, agriculture & turf and construction & forestry, posted a sales gain of 24% to $7.72 billion, exceeding consensus estimates of $7.50 billion. However, EBIT margin of its core businesses declined 80 basis points to 13.5% on higher costs, and missed the Street’s view of 14.0%.

9-Month Figures: Core business sales +27% to $21.56 billion, group EPS surged 52% to $5.01, partly thanks to share buybacks.

FY Outlook: Sales growth guidance was raised to 25% from previously 21%-23% for the core businesses, which implies sales of $29.5 billion (consensus: $29.0 billion). Group net earnings were lifted to $2.70 billion from $2.65 billion, or $6.40 per share at current share count, marginally above the Street’s view of $6.39. The increase in sales should be driven by Europe and a better South America, while the earnings upgrade was mainly attributable to a lower-than-anticipated Japan catastrophe impact.

On a slight negative note, free cash flow was lowered to $1.6 billion as continued higher inventories and receivables in Q3 mean higher working capital.

Fluor Corp. (NYSE:FLR) delivered strong Q2 results ahead of expectations. Continuing solid order intake raised the backlog to a historical record of $40 billion, of which 80% was for projects outside the US. Marginally lifted guidance appears still conservative. With oil and gas margins rattling along the bottom probably into 2012, order intake is encouraging and mining has taken the lead as the growth driver of the company. Valuation is clearly below its long-term average. Outlook for 2011 was adjusted by narrowing the EPS range to $3.10-$3.40 (consensus $3.32) from prior $3.00-$3.40.

Tyco Int. (NYSE:TYC) delivered robust fiscal Q3 results that exceeded analyst expectation. Revenue and profit improvement was seen across all segments except flow control, where the large, high-margin Australian water project ended. Q4 EPS is expected to stay at the Q3 level.

The company raised its full-year EPS objective to $3.17, up 10-15 cents from the previous guidance range and compared to consensus estimate of $3.09. Q4 EPS target is 85 cents, on revenues of approximately $4.45-$4.50 billion, with organic growth of 4%-5%.

United Parcel Service (NYSE:UPS) delivered solid Q2 results a touch ahead of estimates. Volume was somewhat disappointing but reflected the hesitant recovery of the US economy. International volume growth was in line with expectations and pricing was satisfying in all segments, especially verifying the revenue management initiatives in supply chain and freight. The weak economy in the US remains a concern, but price increases are encouraging. International package is doing well, particularly related to China.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.