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  • Sep. 3, 2015, 3:12 PM
    • How bad a year has it been for multi-industry stocks? Year-to-date underperformance relative to the S&P 500 is among the poorest in a decade and has gotten worse in recent weeks, say Goldman analyst Joe Ritchie and team. The negative news is no secret: Broad industrial de-stock, softening oil capex, the strong dollar, and the troubles in China. Because of this, the team remains Neutral on the beaten-up sector, but does have a few names investors should steer clear of:
    • With de-stock keeping U.S. industrial growth in a "headlock," the implications are particularly negative for Sell-rated Emerson Electric (NYSE:EMR), WW Grainger (NYSE:GWW), and Neutral-rated Parker-Hannifin (NYSE:PH) and Rockwell Automation (NYSE:ROK).
    • With oil capex going from bad to worse, and oil lower for longer, the Street is underestimating the impact of price declines for Dover (NYSE:DOV), Emerson, and Flowserve (NYSE:FLS). On the flip side, lower input costs should be a boon to Buy-rated Illinois Tool Works (NYSE:ITW) and Neutral-rated 3M (NYSE:MMM).
    • The weaker China backdrop is most negative for Emerson, and Neutral-rated Eaton (NYSE:ETN) and Colfax (NYSE:CFX). Though Buy-rated Honeywell (NYSE:HON) and ITT Corp (NYSE:ITT) have exposure, growth is more insulated due to their market share gains.
    • Source: Barron's Ben Levinsohn
    | Sep. 3, 2015, 3:12 PM | 11 Comments
  • Apr. 7, 2014, 9:10 AM
    • Twitter's down 32% this year, Facebook's off 20% in a month, and biotech nearly that much, but money is returning to the industrial sector. While the Nasdaq 100 posted its worst one-day drop since 2011 on Friday and last week fell for the 3rd week in 4, the Industrial Select SPDR (XLI) gained 1.6%.
    • In the year's first quarter, the XLI had lost 1.4%, putting it in 9th place among 10 S&P 500 groups.
    • "You’re seeing the beginning of investors shifting money ahead of a wave of spending,” says Drew Nordlicht of HighTower Advisors. “The expectation is, as the economy begins to kick into a higher gear, corporate America will utilize the amount of cash to spend on capital expenditures."
    • GE comprises more than 10% of the XLI, and UTX, Union Pacific, Boeing, and 3M round out the top 5, each with holdings in the 5% range.
    | Apr. 7, 2014, 9:10 AM
  • Jul. 24, 2013, 3:49 PM
    What sequester? Handily beating the S&P 500 this year are two aerospace and defense ETFs, ITA and PPA. Both have added to gains the last few sessions as top holdings Boeing (BA), Lockheed Martin (LMT), Northrop Grumman (NOC), and General Dynamics (GD) all posted earnings beats even as defense spending has been slashed. International and commercial orders are helping, but so are long-term contracts. "We are not out of the woods at all," says Boeing CEO Jim McNerney on the earnings call (transcript). "We are entering the woods."
    | Jul. 24, 2013, 3:49 PM | 4 Comments
  • Feb. 22, 2013, 3:57 AM

    Frank Kendall, the Under Secretary of Defense for Acquisition, has authorized the Pentagon's purchasers and program managers to start talking to suppliers about the plans for implementing $46B of automatic cost reductions, which are due to take effect next Friday. The impact of the cuts will be exacerbated by the DOD not receiving an appropriation for this year, with much of its money in the wrong accounts.

    | Feb. 22, 2013, 3:57 AM | 1 Comment
  • Jul. 10, 2012, 1:06 PM

    Dire predictions that defense firms will be legally required to send dismissal warnings to tens of thousands of employees if Congress doesn't stop the looming automatic cuts is just a lobbying tactic, says employment lawyer Margaret Keane. "Are we really talking about complying with the WARN Act, or are we talking about political pressure being applied?" Keane asks.

    | Jul. 10, 2012, 1:06 PM | 11 Comments
  • Jun. 19, 2012, 7:57 AM
    You don't wait for the hurricane to arrive before boarding up the windows, says BofA's Mike Hanson, already seeing evidence of corporate spending caution ahead of the so-called 2013 fiscal cliff. Defense contractors are most fearful as that part of the budget would be an easy target for massive cuts.
    | Jun. 19, 2012, 7:57 AM | 1 Comment
  • Jun. 14, 2012, 1:08 PM

    Consolidation in the global defense industry is "inevitable," says Gordon Lane of British trade group ADS while at a major arms show in Paris, especially because of steep cuts among Nato countries. However, analysts believe massive mergers are unlikely; rather the majors could buy the second-tier firms.

    | Jun. 14, 2012, 1:08 PM
  • Feb. 6, 2012, 7:10 AM

    Lazard Capital Markets' Michael Lewis issues a warning shot over defense industry stocks, as he notes that the strategy of firms such as Northrop Grumman (NOC) and Booz Allen Hamilton (BZH) of growing profits by cutting costs could catch up to them this year. "All the low-hanging fruit has already been picked. There’s not much fat in the infrastructure."

    | Feb. 6, 2012, 7:10 AM | 1 Comment
  • Jan. 30, 2012, 9:03 AM

    South Korea plans to spend up to $7.4B on fighter jets over the next 9 years to help keep up its military presence in the region. Invited to the bidding party: Boeing (BA), Lockheed Martin (LMT), and EADS (EADSY.PK).

    | Jan. 30, 2012, 9:03 AM
  • Jan. 19, 2012, 10:08 AM

    Shares of Rockwell Collins (COL +4.1%) perk up after the firm records a mild earnings beat and reaffirms its guidance for 2012. Just holding serve may be good enough for investors with all the worries about decreased military spending swirling around.

    | Jan. 19, 2012, 10:08 AM | 1 Comment
  • Jan. 5, 2012, 11:49 AM

    President Obama unveils his administration's defense strategy (.pdf), which will lead to more than $450B in cuts over the next 10 years. In addition to mentioning Iran and terrorism, the review highlights the intention to counter any threats from China given that it has the potential to affect the U.S.'s economy and security.

    | Jan. 5, 2012, 11:49 AM | 1 Comment
  • Jan. 4, 2012, 10:36 AM
    According to reports, U.S. Defense Secretary Leon Panetta will unleash the department's eight-month review of possible spending cuts on Thursday. Defense industry-related ETFs ITA and PPA have both gained over the last month, but could be tested if the report comes down harsher than expected.
    | Jan. 4, 2012, 10:36 AM
  • Dec. 27, 2011, 3:28 PM

    Hawker Beechcraft won't take no for an answer after getting dropped from the bidding list for a $1B Air Force light attack aircraft contract. The firm - partially owned by Goldman Sachs - filed suit in a federal court claiming that the exclusion was made "without basis in process or fact."

    | Dec. 27, 2011, 3:28 PM
  • Dec. 21, 2011, 1:50 PM

    Kaman (KAMN -0.7%) settles a dispute with the DOJ over allegations it violated the False Claims Act. Under the terms of the agreement, one of its subsidiaries will make a payment of $4.75M to the government. The firm also says it will write off $1.45M in inventory, taking a total Q4 charge of $6.2M to reflect both actions.

    | Dec. 21, 2011, 1:50 PM
  • Dec. 20, 2011, 8:55 AM

    More on Lockheed's (LMT) F-35 contract (previous): Though the order for 42 F-35s from Japan wasn't influenced by Kim Jong II's death, instability in the region could keep momentum building for the embattled Joint Strike Fighter program as Asian nations eye increasing their military presence. Analyst James Hardy calls it a "big boost" for the program politically, adding that winning an "external competition" will help take the pressure off.

    | Dec. 20, 2011, 8:55 AM
  • Dec. 16, 2011, 3:39 PM
    Aviation Week notes that a deal by Japan to buy F-35s from Lockheed Martin (LMT +0.1%) could spark a F-35 buying binge from South Korea's defense ministry in order to keep pace with its neighbor. The action would be good news for LMT...but potentially bad news for Boeing (BA +0.3%) and multinational Eurofighter - with analysts seeing Seoul politicians wanting to go with the most "modern" fighter jet to keep its nationalistic pride in place.
    | Dec. 16, 2011, 3:39 PM | 1 Comment
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