Analyst s Handbook: Industrials April, Dr. Edward Yardeni 16-972-7683 eyardeni@ Mali Quintana 48-664-1333 aquintana@ Please visit our sites at www. blog. thinking outside the box
Table Of Contents Table Of Contents S&P Industrials 1 S&P : Industrials 2 S&P : Industrials (cont) 3-4 S&P /4/6 Industrials YTD -6 Earnings 7 Revenues & Margins 8 Earnings Growth & Valuation 9 April, / Analyst s Handbook: Industrials www.
7 9 Figure 1. S&P INDUSTRIALS STOCK PRICE INDEX* S&P Industrials 4/ 7 9 47 47 34 34 2 2 9 199 1996 1997 1998 1999 1 2 3 4 6 7 8 9 11 12 13 14 16 17 19 9 -day moving average. * Ratio scale. Source: Standard & Poor s and Haver Analytics..3 Figure 2..3.. 4/13. S&P INDUSTRIALS (as a ratio of S&P ).. 48 2 4 6 8 6 62 64 66 68 7 72 74 76 78 8 82 84 86 88 9 92 94 96 98 2 4 6 8 12 14 16 18 22 24. Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Monthly through December 199, then weekly. Source: Standard & Poor s Corporation. Page 1 / April, / Analyst s Handbook: Industrials www.
S&P : Industrials 7 6 Figure 3. S&P INDUSTRIALS 4/ S&P CONSTRUCTION & ENGINEERING (FLR JEC PWR) 4 4 3 4/ 3 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 13 1 9 7 S&P AEROSPACE & DEFENSE (ARNC BA COL GD LLL LMT NOC RTN TDG TXT UTX) 4/ S&P CONSTRUCTION MACHINERY & HEAVY TRUCKS (CAT CMI PCAR) 4/ 1 9 7 3 3 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 47 4 3 S&P BUILDING PRODUCTS (ALLE AOS FBHS JCI MAS) 4/ S&P ELECTRICAL COMPONENTS & EQUIPMENT (AME AYI EMR ETN ROK) 4/ 8 7 17 4 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 -day moving average S&P COMMERCIAL PRINTING Source: Standard & Poor s Corporation. (RRD) 12/11 6 7 8 9 11 12 13 14 16 17 18 19 -day moving average Source: Standard and Poor s Corporation. Page 2 / April, / Analyst s Handbook: Industrials www.
S&P : Industrials (cont) Figure 4. S&P ENVIRONMENTAL & FACILITIES SERVICES (RSG SRCL WM) 4/ S&P INDUSTRIAL MACHINERY (DOV FLS FTV IR ITW PH PNR SNA SWK XYL) 4/ 13 1 9 7 3 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 2 S&P HUMAN RESOURCE & EMPLOYMENT SERVICES (RHI) S&P OFFICE SERVICES & SUPPLIES (PBI) 3 3 17 4/ 1 7 2/28 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 4 S&P INDUSTRIAL CONGLOMERATES (GE HON MMM ROP) S&P TRADING COMPANIES & DISTRIBUTORS (FAST GWW URI) 4/ 6 3 4/ 4 3 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 -day moving average Source: Standard & Poor s Corporation. Page 3 / April, / Analyst s Handbook: Industrials www.
S&P : Industrials (cont) 8 7 7 Figure. S&P TRANSPORTATION INDEX 4/ S&P AIRLINES (AAL ALK DAL LUV UAL) 4 4 6 6 4/ 3 3 4 4 3 3 6 7 8 9 11 12 13 14 16 17 18 19 6 7 8 9 11 12 13 14 16 17 18 19 9 8 8 7 7 6 6 4 4 3 3 S&P AIR FREIGHT & LOGISTICS (CHRW EXPD FDX UPS) 4/ 6 7 8 9 11 12 13 14 16 17 18 19 S&P RAILROADS (CSX KSU NSC UNP) 4/ 6 7 8 9 11 12 13 14 16 17 18 19 18 17 16 14 13 1 9 8 7 6 4 3 -day moving average Source: Standard & Poor s Corporation. Page 4 / April, / Analyst s Handbook: Industrials www.
S&P /4/6 Industrials YTD All Sectors Industrials Sector Aerospace & Defense Air Freight & Logistics Airlines 4 3 - - 4 3 - - - 6 4 3 - - - 4 3 - - 8 6 4 - -4 7 Figure. S&P LargeCap -.1 -.4.4-4.4-7. 4 3 - - 4 3 - - - 6 4 3 - - - 8 6 4 - -4 S&P 4 MidCap. -1.9 6.3-11.1 4 3 - - 4 3 - - - 6 4 3 - - - 4 3 - - -3 8 6 4 - -4 7 S&P 6 SmallCap 2.7 1.9 4.3-1.. Building Products 3 - -7. 3 - -8.7 Commercial Printing Commercial Printing -3 - - -3-4 4 14 6 - -6-4 -2.3-3 14 6 - -6-6 -. Construction & Engineering - -2.7 - -7.4 4 - -7.9-4 -4-4 Construction Machinery & Heavy Trucks 3 - -3-3.1 3 - -3-7.7 3 - -3 -.4 - - 7-7 Diversified Support Services 3-11.1 3 -.4 3-2.9 Electrical Components & Equipment -3 4 3 - - - -3. -3 4 3 - - - -6.4-3 4 3 - - - -3.6 Source: Standard & Poor s. Page / April, / Analyst s Handbook: Industrials www.
S&P /4/6 Industrials YTD Figure 6. S&P LargeCap 6 S&P 4 MidCap 6 S&P 6 SmallCap Environmental & Facilities Services 3 - -3-4.8 4 3.2 4 -.4 Human Resource & Employment Services Industrial Conglomerates Industrial Machinery Office Services & Office Supplies Services & Supplies Railroads Trading Companies & Distributors - 14 1 8 6 4 - -4 4 3 - - 4 3 - - 1 8 6 4 - -4 4 3 - - -3-4 4 3 - - -3.4-8.2-4.6 Jul Aug Sep 17 2. 1.7-14 1 8 6 4 - -4 4 3 - - 4 3 - - -3 1 8 6 4 - -4 4 3 - - -3-19. -9.9 -.6-3.7 3.9-14 1 8 6 4 - -4 6 4-4 3 - - 1 8 6 4 - -4 4 3 - - -3 14.7 11.4 1.8 1.3.1 Source: Standard & Poor s. Page 6 / April, / Analyst s Handbook: Industrials www.
Earnings 43 36 Figure 8. S&P INDUSTRIALS OPERATING EARNINGS PER SHARE (analysts average forecasts, ratio scale) 17 18 19 4/12 43 36 29 29 22 22 Consensus Forecasts Annual estimates Forward earnings* 8 199 1996 1997 1998 1999 1 2 3 4 6 7 8 9 11 12 13 14 16 17 19 8 * Time-weighted average of consensus estimates for current year and next year. Monthly through December, then weekly. Source: Thomson Reuters I/B/E/S. 4 Figure 9. S&P INDUSTRIALS NET EARNINGS REVISIONS* 4 3 Mar 3 - - - - -3-4 - NERI Jan 17.3 Feb 27.8 Mar 29.7 199 1996 1997 1998 1999 1 2 3 4 6 7 8 9 11 12 13 14 16 17 19-3 -4 - * Three-month moving average of the number of forward earnings estimates up less number of estimates down, expressed as a percentage of the total number of forward earnings estimates. Source: Thomson Reuters I/B/E/S. Page 7 / April, / Analyst s Handbook: Industrials www.
4 Figure. S&P INDUSTRIALS REVENUES PER SHARE (analysts average forecasts, ratio scale) Revenues & Margins 4 37 3 Consensus Forecasts Annual estimates Forward revenues* 17 18 19 4/12 37 3 27 27 2 2 17 4 6 7 8 9 11 12 13 14 16 17 19 17 * Time-weighted average of consensus estimates for current year and next year. Monthly through December, then weekly. Source: Thomson Reuters I/B/E/S. 11 Figure 11. S&P INDUSTRIALS PROJECTED PROFIT MARGIN (using analysts average earnings and revenues forecasts) 17 11 18 19 4/12 9 9 8 8 7 Consensus Forecasts Annual estimates Forward profit margin* (.1) 7 6 4 6 7 8 9 11 12 13 14 16 17 19 6 * Time-weighted average of the consensus estimates for current year and next year. Monthly through December, weekly thereafter. Source: Thomson Reuters I/B/E/S. Page 8 / April, / Analyst s Handbook: Industrials www.
Figure 12. S&P INDUSTRIALS LTEG VS STEG (percent) Earnings Growth & Valuation 4/12 LTEG* (14.6) STEG* (16.1) - - - - - - 199 1996 1997 1998 1999 1 2 3 4 6 7 8 9 11 12 13 14 16 17 19 - - * STEG: 12- month (2-week) forward consensus expected earnings growth. LTEG: -year forward consensus expected earnings growth. Monthly data through, then weekly. Source: Thomson Reuters I/B/E/S. Figure 13. S&P INDUSTRIALS VALUATION 4/12 Forward P/E* (16.) 2. 2. 1.7 1. 1. Relative P/E** (1.) PEG Ratio*** (1.1) 2. 2. 1.7 1. 1. 1..7. 199 1996 1997 1998 1999 1 2 3 4 6 7 8 9 11 12 13 14 16 17 19 4/12 1..7. * Price divided by 12-month forward consensus expected operating earnings per share. ** Sector or industry forward P/E relative to S&P forward P/E. *** Sector or industry forward P/E relative to sector or industry consensus -year LTEG forecast. Source: Thomson Reuters I/B/E/S. Page 9 / April, / Analyst s Handbook: Industrials www.
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