It stands to reason that companies with large backlogs of orders might be better positioned than others to ride out the recession without too much damage. We polled the S&P equity analysts for their best ideas on companies with big order books. Technology, industrial, and energy names dominate the list.
Most of the technology companies on the list are classified as large caps with significant software and/or service businesses. Generally, semiconductor and hardware businesses either don't provide such information or don't have enough notable data to be included, perhaps because of the challenging economic backdrop. This is why software- and service-oriented names often, but not always, tend to perform fundamentally better during challenging economic times. (Remember, past performance is no guarantee of future results.)
Companies in the tech sector that could be considered as having "big order books," with backlogs or deferred revenues of more than $1 billion, include:
Apple Inc. (AAPL): Largely reflecting the relatively new iPhone-related operations, where subscription accounting is employed to account for the 24-month sign-up periods and significant software elements, deferred revenues were $4.9 billion as of September 2008.
Accenture (ACN): This consulting and outsourcing-services firm had $1.8 billion in deferred revenues as of August 2008.
Applied Materials (AMAT): This large semiconductor equipment company had a $4.9 billion backlog as of October 2008. No other semiconductor equipment company S&P covers had bookings in the billions of dollars as of the third calendar-year quarter, reflecting the challenging economic backdrop.
CACI International (CAI): This government-focused services company had a funded backlog of $1.7 billion as of September 2008.
EMC (EMC): The world's largest provider of storage solutions had $3.1 billion in deferred revenues as of September 2008.
Hewlett-Packard (HPQ): This large hardware maker with significant software and services operations, especially following the August acquisition of EDS, had deferred revenues of $6.3 billion as of October 2008. The company hasn't provided a bookings number for the services operations following the EDS purchase.
International Business Machines (IBM): This large hardware, software, and services firm had deferred revenues of $9.6 billion as of September 2008. Considerably more notable was the backlog of $114 billion.
Oracle: (ORCL): The large enterprise software company had deferred revenues of $5 billion as of August 2008.
The industrial sector also has a smattering of names on the list:
Boeing (BA): Had a $275.9 billion commercial airplane backlog as of September, $349.4 billion total backlog, and $27.7 billion in estimated 2008 revenues.
Triumph Group (TGI): Had a $1.26 billion total backlog (as of September), and estimated $1.263 billion in revenues for fiscal 2009 (ending March).
And the energy sector has two stocks worth mentioning:
Transocean (RIG): Has 3,752 months of rigs under contract, or an average of about 26 months of backlog for every rig in the fleet. That translates to a dollar value of backlog of $41.1 billion, as of Nov. 3, 2008.
Noble (NE): Has 1,345 months of rigs under contract, or an average of about 21 months of backlog for every rig in the fleet. That translates to a dollar value of backlog of $12.1 billion as of Nov. 14, 2008.