Category: News

Machinery stocks may outperform the market through the end of the year as new orders rebound, helping to defy concerns about another U.S. recession.

American manufacturers booked $32.6 billion in new orders for machinery equipment in September, the most since July 2008, according to data from the Census Bureau released Oct. 26. The Standard & Poor’s Supercomposite Machinery Index, which includes Caterpillar Inc. (CAT) and Deere & Co. (DE), has gained 26 percent since Oct. 3, while the S&P 500 has risen 13 percent. The machinery index lagged behind between July 7 and Oct. 3, when it fell 35 percent, compared with a 19 percent decline for the S&P index.

“There’s skepticism about the industrial economy and machinery stocks, but robust activity suggests the risk of a double-dip recession is less likely,” said Stephen Volkmann, a New York-based analyst at Jefferies & Co. The sector may continue to rally through December, as it has tended to outperform from November through year-end during the past decade, he added.

There’s “no evidence” of a collapse in North American manufacturing as shipments still are growing, said Ann Duignan, a New York-based analyst at JPMorgan Chase & Co. The total for September was $31.1 billion worth of machinery equipment, up 13 percent from a year ago, Census Bureau data show.

“Companies are still reporting modest growth with no wholesale change in demand,” Duignan said.

Rising Outlook

Parker Hannifin Corp. (PH), based in Cleveland, increased its fiscal 2012 outlook for industrial North American-segment revenue growth to about 8.3 percent from about 6.2 percent, as orders “re-accelerated” during the period ended Sept. 30, said Duignan, who maintains a “neutral” rating on the stock. The motion- and control-technology maker’s orders from the region grew 16 percent compared with a year ago, following an 11 percent rise the previous quarter, the company said Oct. 18.

“There’s a lot of activity,” and “order trends here in North America are still very positive,” President and Chief Executive Officer Donald Washkewicz said on an Oct. 18 conference call.

Caterpillar, based in Peoria, Illinois, reported third- quarter revenue of $15.7 billion, compared with $11.1 billion a year ago, the company said Oct. 24. The construction and agricultural-equipment maker’s order backlog was $24.4 billion, up 40 percent.

“Although there is a good deal of economic and political uncertainty in the world, we are not seeing it much in our business at this point,” Chairman and Chief Executive Officer Doug Oberhelman said in a statement. “This was the best quarter for sales in our history, and our order backlog is at an all- time high.”

Strong Demand

The industry is attracting investors because it supplies “key end-markets,” such as agriculture and energy, where demand remains strong, said Zahid Siddique, associate portfolio manager at Rye, New York-based GAMCO Investors, with holdings in machinery-index members Flowserve Corp. (FLS), Kennametal Inc. (KMT) and Crane Co. (CR)

Machinery companies are a “proxy for global capital expenditures” because almost half their sales come from foreign customers, said Volkmann, who upgraded six of the businesses to “buy” from “hold” last month, including Eaton Corp. (ETN), Cummins Inc. (CMI) and Parker Hannifin.

The recovery in capital spending worldwide is “riding on” the U.S.,China and emerging markets, said David Hensley, director of global economic coordination at JPMorgan in New York. There’s “strong momentum” in these expenditures, which include machinery equipment, even with the European sovereign- debt crisis and this summer’s protracted negotiations between President Barack Obama and Congress over the budget deficit.

‘Continued Expansion’

JPMorgan lowered its growth estimates for Western Europe, reflecting a mild-to-moderate recession that already may be under way; “still, we think growth will continue outside of Europe, supporting continued expansion in capital spending,” Hensley said.

Illinois Tool Works Inc. (ITW), which makes fasteners for transportation and construction products, may be a “sign of things to come” in the region, said Duignan, who rates the stock “neutral.” Its European revenue grew 3.8 percent during the quarter ended Sept. 30, and it predicts “modestly lower” revenue there in the fourth quarter, the Glenview, Illinois- based manufacturer said Oct. 25.

Durable-goods production in Germany fell for the second consecutive month, as a Bundesbank index dropped to 98.7 in September from 99.6 in August. This was “a little weaker than expected, and made me wonder if Europe may be headed in a different direction” from the U.S., Volkmann said.

Unfolding Crisis

The unfolding debt crisis in Europe, possible slowing growth in Asia and any prolonged weakness in the U.S. housing market may threaten outperformance in this industry, said Siddique, whose firm oversees $34 billion in net assets. Even so, companies continue to show resilience as “these risks remain potentially manageable,” he said.

Kennametal — a supplier of cutting tools to Caterpillar and other manufacturers — remained “very bullish” on its outlook as of the quarter ended Sept. 30, Duignan said.

The Latrobe, Pennsylvania-based company “continued to experience growth in customer demand,” President and Chief Executive Officer Carlos Cardoso said on a Oct. 27 conference call. “This supports our continued expectations of a manufacturing-led recovery, at least in the United States.”

To contact the reporter on this story: Anna-Louise Jackson in New York at ajackson36@bloomberg.net

To contact the editor responsible for this story: Anthony Feld at afeld2@bloomberg.net

We are very excited about exhibiting at Fabtech 2011 in Chicago, November 14-17, 2011 and hope that you will stop by at our booth #2763 to learn more about us and our products.

Come talk to our knowledgeable and friendly sales personnel. Ask questions. Pick up brochures. Get ideas.

This year we have a MH 4-roll plate bending machine on the floor. Come and take a look.

All our plate rolls are built in Fossano, Italy, by MG s.r.l. MG gives customers real advantages on every large and small industrial application of boilers and heat exchangers; tanks and containers for food industry, agriculture and buildings; tank-trucks for oils and foods, road and heavy transportation; turbines and reactors; off-shore and land windmill towers; light and heavy steel structural works, excavator buckets and any other application in the field of automotive, naval, railway and aero-spatial. Every one of these sectors is carefully studied by our staff in order to give our clients the best machine, system or service.

Our machines are built to follow each customer’s specific bending requirements, expressly studied and projected for the task the customer needs to perform. We do not mass-produce and we don’t send out quotations just to get rid of stock.  We want to know what the customer’s activity is, what he produces, and listen to what he would like to have in the future and then offer the best machine that can fit his demands.

In addition to showing you the plate roll we would like to inform you about the rest of our extensive product line from brakes, shears and rebar equipment to laser cutting and plasma burning machines.

Double Pinch Hydraulic 4 Roll Plate Bending Machine Model MH314C. Click below for information on the roll.

Click HERE for information on the MH314C

Manufacturing technology orders up 103.9% from June 2010

June U.S. manufacturing technology orders totaled $459.39 million according to AMT – The Association For Manufacturing Technology and AMTDA, the American Machine Tool Distributors’ Association. This total, as reported by companies participating in the USMTO program, was up 15.3% from May and up 91.7% when compared with the total of $239.68 million reported for June 2010. With a year-to-date total of $2,453.78 million, 2011 is up 103.9% compared with 2010.

These numbers and all data in this report are based on the totals of actual data reported by companies participating in the USMTO program.

“At this pace, the industry would post orders equal to all of 2010 by the end of August,” said Douglas K. Woods, President of AMT. “Still, industry leaders view the rest of 2011 with cautious optimism given the weakness in parts of the economy illustrated by the Dow’s plunge at the beginning of August. We expect a bump in orders related to customers taking advantage of the current Bonus Depreciation rate before it is reduced in 2012.”

The United States Manufacturing Technology Orders (USMTO) report, jointly compiled by the two trade associations representing the production and distribution of manufacturing technology, provides regional and national U.S. orders data of domestic and imported machine tools and related equipment. Analysis of manufacturing technology orders provides a reliable leading economic indicator as manufacturing industries invest in capital metalworking equipment to increase capacity and improve productivity.

U.S. manufacturing technology orders are also reported on a regional basis for five geographic breakdowns of the United States.

Click HERE for complete Newsletter

FRB Dallas: Texas Factory Activity Rebounded In July.

The Dallas Morning News (7/26) reports, “Texas factory activity rebounded in July as the manufacturing sector gained strength, data from the Federal Reserve Bank of Dallas showed Monday.” The Dallas Fed said the production index “rose from 5.6 in June to 10.8 this month. The Fed’s Manufacturing Outlook Survey also found growing activity in other measures of current manufacturing conditions: The shipments and new orders indexes rose from June to July. The shipments index rose to 7.8 after coming in at zero last month. The new orders index rose sharply from 6.4 in June to 16 in July.”

In an article on job increases in Texas, USA Today (7/26, Davidson) notes that one of “reasons for the state’s robust job growth” is an increase in exports. “Overseas shipments by Texas’ strong computer, electronics, petrochemical and other industries rose 21% last year, compared with 15% for the nation, according to the Dallas Federal Reserve Bank. The state also benefits from its proximity to Latin American countries that are big importers of US goods,” according to Moody’s economist Ed Friedman. “The surge creates jobs for Texas manufacturers and ports.”

Portland, Oregon Adds Manufacturing Jobs In June. The Portland Business Journal (7/25, Giegerich) reported, “The Portland-area’s June unemployment rate was unchanged month-to-month but decidedly lower than it was a year ago.” However, “the manufacturing sector added 1,400 jobs” last month. “Some 900 of those were in the durable goods category. Since the beginning of the year, the manufacturing sector has added 2,600 jobs, a 2.4 percent increase over 2010.”