Nomura Securities on U.S. Industrials: 3Q Wrap-Up: Not Dying, Just Getting Older; North America a Notable Bright Spot
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Up: 11 | Down: 35 | New: 23
Rating Summary:
11 Buy, 6 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 35 | New: 23
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Nomura Securities on U.S. Industrials: 3Q Wrap-Up: Not Dying, Just Getting Older; North America a Notable Bright Spot
Nomura analyst, Shannon O'Callaghan, said, "The 3Q earnings season rally for the EE-MI sector (sector +5.6% vs. S&P500 +0.9%, 10/18-11/16) felt kind of the like the bittersweet relief you might feel when the doctor tells you that you’re not dying, you’re just getting older. Heading into 3Q earnings season, we got more positive on the sector based on valuations that were implying that the cycle was dying. 3Q results basically told us that the cycle is not dying, it’s just getting older. On average, organic growth is slowing and operating margins are down y/y, but there is still growth. Regionally, the U.S. looked the best and even showed some acceleration in 3Q. We still like the positions of our top Buy picks: Dover (NYSE: DOV), Honeywell (NYSE: HON), and Danaher (NYSE: DHR)."
"Between a ROK and a 3M-abrasive place: The spectrum of results in 3Q ranged from Rockwell (NYSE: ROK) at the high end to 3M (NYSE: MMM) at the low end, which broadly speaking, meant that North American auto and oil & gas were a lot better than consumer electronics, Europe and Asia. Rockwell actually saw organic growth accelerate (best in sector) and improving incremental margins, as strong U.S. offset slower Europe and China. In contrast, 3M saw the worst organic growth in the sector, a large margin decline, and almost no incremental margin. U.S. organic growth improved for both companies but more so for ROK, as only 35% of 3M’s sales are in the US vs. around 50% for ROK."
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Nomura analyst, Shannon O'Callaghan, said, "The 3Q earnings season rally for the EE-MI sector (sector +5.6% vs. S&P500 +0.9%, 10/18-11/16) felt kind of the like the bittersweet relief you might feel when the doctor tells you that you’re not dying, you’re just getting older. Heading into 3Q earnings season, we got more positive on the sector based on valuations that were implying that the cycle was dying. 3Q results basically told us that the cycle is not dying, it’s just getting older. On average, organic growth is slowing and operating margins are down y/y, but there is still growth. Regionally, the U.S. looked the best and even showed some acceleration in 3Q. We still like the positions of our top Buy picks: Dover (NYSE: DOV), Honeywell (NYSE: HON), and Danaher (NYSE: DHR)."
"Between a ROK and a 3M-abrasive place: The spectrum of results in 3Q ranged from Rockwell (NYSE: ROK) at the high end to 3M (NYSE: MMM) at the low end, which broadly speaking, meant that North American auto and oil & gas were a lot better than consumer electronics, Europe and Asia. Rockwell actually saw organic growth accelerate (best in sector) and improving incremental margins, as strong U.S. offset slower Europe and China. In contrast, 3M saw the worst organic growth in the sector, a large margin decline, and almost no incremental margin. U.S. organic growth improved for both companies but more so for ROK, as only 35% of 3M’s sales are in the US vs. around 50% for ROK."
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