Zacks Industry Outlook Highlights: Deere & Company, Caterpillar and CNH Global
CHICAGO, Sept. 23, 2013
CHICAGO, Sept. 23, 2013 /PRNewswire/ --Today, Zacks Equity Research discusses
the U.S. Oil & Gas, including Deere & Company's (NYSE:DE-Free Report),
Caterpillar Inc. (NYSe:CAT-Free Report) and CNH Global NV (NYSE:CNH-Free
The IMF expects the United States to grow 1.7% in 2013 as against 1.9%
predicted earlier and roughly 2.7% in 2014. High unemployment still seems to
be a disturbing factor, though there is a glimmer of hope emanating from
evidences of strengthening demands in the housing as well as durable goods
markets. Conditions in the credit markets are also improving slowly.
The Machinery industry is one of the most attractive industries in the United
States. Growth prospects for this industry can be deduced from the indicators
to the performances in the recent past. In the second quarter of 2013
(Apr-Jun), industrial production in the United States rose by an annual rate
of 0.6% while the same in the month of Aug rose by 2.7% as compared with the
year-ago period. Manufacturing output decreased 0.2% in the quarter.
According to the US Census Bureau report published in Aug 2013, machinery
shipments in the first half 2013 increased 4.1% year over year while new
machinery orders grew 4.5%. However, machinery order backlog at the end of the
first two quarters were down 10.0%. Shipments for construction and industrial
machinery rose by 27.2% and 10.4%, respectively, while that for mining
equipment and farm machinery dipped 6.5% and 7.3%, respectively.
Exports demand has been considered crucial for the future growth prospects of
the US machinery industry. According to a report published by the Association
of Equipment Manufacturers (AEM), the United States' construction equipment
exports fell 21% in the first half 2013 while agricultural equipment exports
registered a 9.5% decline.
Important Players of the Machinery Industry
Deere & Company's
(NYSE: DE -
) fiscal third quarter 2013 (ended Jul 31, 2013) results were impressive. For
the quarter, equipment sales rose roughly 4%, with price realization
contributing 3%. The agricultural and forestry equipment provider is expanding
globally to leverage benefits from the growing global farm industry.
Management anticipates equipment sales to decrease 5% year over year in the
fiscal fourth quarter but increase by the same magnitude in the fiscal 2013.
Net earnings for the year are projected to be approximately $3.45 billion, up
from $3.3 billion expected earlier.
(NYSe: CAT -
) posted a 17% decline in Machinery and Power Systems sales in the second
quarter of 2013. For the year 2013, the company expects revenue to range
within the $56-$58 billion range as against $57-$61 billion expected earlier
due primarily to the expectations of weak demand for mining equipment and
expected reduction in dealers inventory.
Italy-based CNH Global NV (NYSE:CNH-Free Report) posted a year-over-year
increase of 9% or 10% on a constant currency basis in its equipment sales in
the second quarter 2013. Equipment sales comprised of 83% agricultural sales
and 17% construction equipment sales. For 2013, management anticipates
agricultural equipment unit volume in the market to increase 5% but for
construction equipment unit volume to be flat to down 5%.
Earnings Trend of the Sector
Considering results of all the companies within the Industrial Products
sector, it can be seen that results for this Zacks sector in the second
quarter 2013 were disappointing on a year over year basis. Earnings fell 4.5%
while revenue managed just a 0.6% increase. Earnings and revenue beat ratios
(percentage of companies coming out with positive surprises) were 66.7% and
37.5%, respectively in the quarter.
However, results exhibited a positive trend when compared with the 8.9%
earnings fall and 0.5% revenue decline reported in the first quarter 2013.
In a view of all the Zacks sectors combined, second quarter 2013 results were
dominated by the finance sector which drove the overall earnings growth to
2.5% year over year. Excluding finance, earnings in the quarter registered a
2.9% fall. Sectors that dragged the results were Oil/Energy, Basic Materials,
Technology, Industrial Products, Conglomerates, Medical and Consumer Staples.
Going forward, the trend seems positive for the Industrial Products sector, as
the earnings decline is anticipated to further contract to 1% in the third
quarter 2013 while earnings growth of 15.8% is expected in the fourth quarter.
For 2013 and 2014, earnings growth of 1.6% and 10.8%, respectively are
Revenue growth is likely to remain same in the third quarter but to increase
slightly in the fourth quarter. For 2013 and 2014, revenue is anticipated to
grow 0.8% and 3.3%, respectively.
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