Boosted largely by much stronger economic trends in emerging markets, and moderate gains in the U.S.
"Operating results were also greatly assisted by aggressive streamlining programs implemented by companies over the course of the severe economic downturn that started in late 2007," said Michael Jaffe, Industrials Group Head at S&P Equity Research. "We expect these trends to continue in 2011, for the most part."
The projections by S&P's Industrials equity analysts for 2011 are as follows:
1. We expect increased global industrial activity to drive higher shipping demand at Logistics companies, with the most robust performances likely in air and ocean freight. We also see this improved demand allowing rate increases to be more fully absorbed than they have been in recent years. We believe that FedEx (NYSE: FDX 93 *****) is well positioned to benefit from these expected trends.
2. We see a favorable demand outlook causing airlines to become more aggressive in increasing capacity. We believe that will drive significant production increases at Boeing (NYSE: BA 69 ****) and Airbus, but are concerned that too many seats might become available. We view AMR Corp. (NYSE: AMR 8 ***) as an airline that could be hurt considerably if excess capacity were to occur.
3. We do not expect any other majorU.S.
4. We expect aftermarket growth (about 5% to 7%) to return in commercial aerospace markets in 2011, following essentially flat results in 2010, as we see more profitable airlines beginning to spend more freely on maintenance, repair and overhaul. A company that we see greatly benefiting from any upturn in aftermarket spending is Precision Castparts (NYSE: PCP 143 *****).
5. We forecast ongoing rises in capacity utilization across the trucking industry, as volumes have started to increase modestly, and a number of financially weak carriers (mostly small private carriers) have shut down. With the North American Class 8 heavy truck fleet at its oldest average age (6.7 years) in the 31 years of data available through ACT Research, an independent commercial vehicle research organization, we expect the recent upturn in truck sales (off of a very low base) to strengthen further in 2011. We believe that engine maker Cummins (NYSE: CMI 110 *****) will be greatly boosted by this expected rebound in heavy trucks markets.
6. We think Industrials companies will further expand their footprints in emerging markets. We think the most aggressive expansion will take place in areas such as Construction Equipment, Industrial Machinery, and Engineering & Construction, which will likely continue to be boosted by infrastructure development and improvement in emerging markets, and the industrialization of economies. One company that has been putting significant focus on its emerging market footprint is Caterpillar (NYSE: CAT 94 ****).
7. We expect business to revive further at Human Resources and Employment Services companies. Although we believe that the level of new hires will remain modest in coming periods in U.S. markets, we still think that relatively stripped down businesses will need to add to their staffs as demand for products and services starts to improve somewhat. With businesses likely to maintain cautious operating stances, we think they will continue to focus on hiring temporary workers, an area dominated by placement companies. We also think that labor trends in emerging markets will remain much stronger than those in Western economies. We think that Kelly Services (NNM: KELYA 20 *****) will be boosted by its concentration on non-professional temporary placements, and its presence in foreign markets.
8. We believe that Agricultural Equipment companies will continue to post sales and profit gains, as the big rise seen in crop prices in the summer of 2010 should cause farmers to lift their business spending. In line with this forecast, we believe that Deere (NYSE: DE 84 ****) will experience solid demand for its farm equipment. However, we also believe that investors should keep in mind that part of the rise in crop prices was transient in nature, as droughts and fires inRussia
9. Following a dearth of acquisitions in 2009 and a pickup in 2010, we believe that Industrial Machinery companies will increase the pace of acquisitions in 2011. We think that a rising stock market and greater availability of debt financing will make funds more readily available to fund the potential takeovers. We also note that a number of companies, such as Illinois Tool Works and Dover Corp have indicated that the pipeline of potential deals has been increasing.
10. We expect trends to soften in Defense markets, as the President's current review ofAfghanistan may lead to a July 2011 start date for troop withdrawal, and the U.S. continues to withdraw troops from Iraq U.S.
Tuesday, January 11, 2011
"Operating results were also greatly assisted by aggressive streamlining programs implemented by companies over the course of the severe economic downturn that started in late 2007," said Michael Jaffe, Industrials Group Head at S&P Equity Research. "We expect these trends to continue in 2011, for the most part."
The projections by S&P's Industrials equity analysts for 2011 are as follows:
1. We expect increased global industrial activity to drive higher shipping demand at Logistics companies, with the most robust performances likely in air and ocean freight. We also see this improved demand allowing rate increases to be more fully absorbed than they have been in recent years. We believe that FedEx (NYSE: FDX 93 *****) is well positioned to benefit from these expected trends.
2. We see a favorable demand outlook causing airlines to become more aggressive in increasing capacity. We believe that will drive significant production increases at Boeing (NYSE: BA 69 ****) and Airbus, but are concerned that too many seats might become available. We view AMR Corp. (NYSE: AMR 8 ***) as an airline that could be hurt considerably if excess capacity were to occur.
3. We do not expect any other major
4. We expect aftermarket growth (about 5% to 7%) to return in commercial aerospace markets in 2011, following essentially flat results in 2010, as we see more profitable airlines beginning to spend more freely on maintenance, repair and overhaul. A company that we see greatly benefiting from any upturn in aftermarket spending is Precision Castparts (NYSE: PCP 143 *****).
5. We forecast ongoing rises in capacity utilization across the trucking industry, as volumes have started to increase modestly, and a number of financially weak carriers (mostly small private carriers) have shut down. With the North American Class 8 heavy truck fleet at its oldest average age (6.7 years) in the 31 years of data available through ACT Research, an independent commercial vehicle research organization, we expect the recent upturn in truck sales (off of a very low base) to strengthen further in 2011. We believe that engine maker Cummins (NYSE: CMI 110 *****) will be greatly boosted by this expected rebound in heavy trucks markets.
6. We think Industrials companies will further expand their footprints in emerging markets. We think the most aggressive expansion will take place in areas such as Construction Equipment, Industrial Machinery, and Engineering & Construction, which will likely continue to be boosted by infrastructure development and improvement in emerging markets, and the industrialization of economies. One company that has been putting significant focus on its emerging market footprint is Caterpillar (NYSE: CAT 94 ****).
7. We expect business to revive further at Human Resources and Employment Services companies. Although we believe that the level of new hires will remain modest in coming periods in U.S. markets, we still think that relatively stripped down businesses will need to add to their staffs as demand for products and services starts to improve somewhat. With businesses likely to maintain cautious operating stances, we think they will continue to focus on hiring temporary workers, an area dominated by placement companies. We also think that labor trends in emerging markets will remain much stronger than those in Western economies. We think that Kelly Services (NNM: KELYA 20 *****) will be boosted by its concentration on non-professional temporary placements, and its presence in foreign markets.
8. We believe that Agricultural Equipment companies will continue to post sales and profit gains, as the big rise seen in crop prices in the summer of 2010 should cause farmers to lift their business spending. In line with this forecast, we believe that Deere (NYSE: DE 84 ****) will experience solid demand for its farm equipment. However, we also believe that investors should keep in mind that part of the rise in crop prices was transient in nature, as droughts and fires in
9. Following a dearth of acquisitions in 2009 and a pickup in 2010, we believe that Industrial Machinery companies will increase the pace of acquisitions in 2011. We think that a rising stock market and greater availability of debt financing will make funds more readily available to fund the potential takeovers. We also note that a number of companies, such as Illinois Tool Works and Dover Corp have indicated that the pipeline of potential deals has been increasing.
10. We expect trends to soften in Defense markets, as the President's current review of
Tuesday, January 11, 2011
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