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
- ETFs: XHB, ITB, XLI, PHO, IYT, ITA, VIS, PPA, XTN, XAR, FIDU, PKB, IYJ, FXR, UXI, PRN, RGI, SIJ, PSCI, AIRR
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.
- Related ETFs: XLI, PHO, CGW, PIO, VIS, ITA, FIW, PPA, IGF, CARZ, IYJ, XAR, IPN, EMIF, FIDU, PRN, UXI, FXR, PXR, EXI, GII, EVX, FLM, RGI, SIJ, PSCI, NFRA, TOLZ, AXID
Jul. 24, 2013, 3:49 PMWhat 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 AMYou 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
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 AMAccording 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
Sep. 16, 2011, 4:53 PMMorningstar believes that while investor concerns about looming defense budget cuts are justified, the sell-off that they've spawned in defense contractors has gone too far. It recommends investors worried about a particular contractor proving especially hard-hit take a look at aerosppce & defense ETFs ITA and PPA. | Sep. 16, 2011, 4:53 PM | 1 Comment
Sep. 14, 2011, 5:06 PM"American leadership in aerospace and defense is being threatened by forces in Congress and the administration," says a coalition of manufacturers attempting to sink their teeth into the supercommittee. Defense spending- not including multiple wars - has doubled to more than $500B annually in the 10 years since 9/11. | Sep. 14, 2011, 5:06 PM | 5 Comments
Aug. 2, 2011, 2:03 PM
Shares of Northrop Grumman (NOC -2.2%) move lower with other defense stocks, but look for a lift if the Air Force replaces U-2 spy planes with the $12B Global Hawk unmanned drone program. Despite cost overruns and reliability issues, the final push could be if ground commanders become more comfortable with the technology.| Aug. 2, 2011, 2:03 PM
Jul. 20, 2011, 2:38 PM
The Pentagon estimates the first few production runs for F-35s are exceeding cost projections by close to $1B, of which the government will have to pay an extra $635M. The defense contractors on the job, Lockheed Martin (LMT -0.9%) and Pratt & Whitney (UTX -1.9%), will have to pick up the remaining part of the tab.| Jul. 20, 2011, 2:38 PM | 2 Comments
Jul. 12, 2011, 3:03 PM
Boeing's (BA -2.1%) $30B tanker deal snatched away from EADS (EADSY.PK) faces cost overruns that ultimately the government may have to share to the tune of $600M under the terms of the deal. The good news for taxpayers is costs above-and-beyond, cut into Boeing's profits, and are not shared.| Jul. 12, 2011, 3:03 PM | 1 Comment
Jul. 8, 2011, 10:51 AM
Florida's economy prepares for the loss of jobs after the final shuttle flight, scheduled for later this morning, adding to 3,200 already slashed. NASA Administrator Charles Bolden expects spaceflight firms to take up the slack, as the agency awards $269M to Sierra Nevada, SpaceX, Blue Origins and Boeing (BA -1.4%) to promote space travel.| Jul. 8, 2011, 10:51 AM | 7 Comments
Jun. 29, 2011, 3:41 PM
Boeing (BA) faces accusation it overcharged the U.S. Army $13M for helicopter parts, according to an internal Pentagon report released by the Project on Government Oversight. The company 'voluntarily' paid back the funds, but the report also found $200M of future Boeing orders that can be filled from Army inventory.| Jun. 29, 2011, 3:41 PM