UBS on Electrical Equipment & Multi-Industry Update: Reducing Estimates to Reflect Slower Growth

UBS on Electrical Equipment & Multi-Industry Update

UBS analys, Jason Feldman, said, "Construction related end markets show signs of further weakeness - Since we last updated earnings estimates, the macro outlook has become incrementally weaker: 1) UBS economists reduced their 2012 global GDP growth estimates, 2) preannouncements from Ingersoll-Rand (NYSE: IR) and Cooper Industries (NYSE: CBE) suggest weaker expected conditions (particularly for residential and non-residential construction related end markets), and 3) commentary from other companies has become increasingly cautious. While selected end markets appear to show signs of continued strength (Process, O&G), overall, the medium-term outlook has deteriorated, and the continued overhang from the European sovereign debt situation poses additional risk."

"Expect cautious initial 2012 outlooks during the upcoming earnings season - We expect ‘12 outlooks from several companies this earnings season, including the Sept. fiscal year-end stocks (Tyco (NYSE: TYC), Emerson (NYSE: EMR), Rockwell Automation (NYSE: ROK)), with the potential for preliminary outlooks for some of the Dec. FY stocks (possibly including 3M (NYSE: MMM) and CBE). Given the high level of uncertainty in the current environment, we believe management teams are likely to be conservative with ’12 guidance, and we believe that certain headwinds are not fully incorporated in consensus estimates (notably pension and currency related headwinds). These headwinds could be partially offset by lower commodity costs, continued restructuring, and share repurchases."

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