美国机械与建筑业Q4展望：清算之日似乎还没到

1、COREU.S. Machinery & ConstructionINDUSTRY UPDATEEquityResearch23 January20194Q18 and Outlook: Day of Reckoning? Likely Not Yet U.S. Machinery & ConstructionThebiggestshiftsinQ4arelikelynotfromnumbersbutmanagementtone;though notontodaystrendsbutmorehowtheyrecommunicatingabouttomorrow.SlowerPOSITIVEUn

2、changedlongtermmacroassumptions,wider19guidanceranges,andalikelyfocusonthe sustainableearningspowerofthebusinessesshouldbecommonplace.Thecausein theshift,wedthinkismoreduetoheadlinereadingvs.significantdemandtrendsthat theyreseeingtoday.UseDeereasanexample;thecompanyhassixmonthsofvisibility initscon

3、structionbusinessvs.anormalthree,buttheyrelimitingnewordersto inventory.Signalsabouttoday,no?Butrecognitionthatperhapscosarenotseeing whateconomistsarepredictingandtheyllbelasttoknow.Bearswillinsistallbeatsin machineryshouldgetchalkedofftoa“pre-buy”,anditllbehardtoproveotherwise, whilemissesarepenal

4、izedascycleendvalidation.Afterbeingdown35%in18,and 6%+movesonEPSdayfor40%ofourcoverageinQ2&Q3,wereinclinedtothinkthat lotsofadversenewsispricedin.SWKs15.5%movearguesotherwise,buttobeseen.What should show in the numbers; European and Chinese growth appears tobe slowing,althoughtheslowdownofChinahasbe

5、encalledbefore.Q418wasthesixth straightquarterofdeceleratingbutstrongexcavatorsalesgrowth.Oil&Gas,U.S. residential,andNAagequipmentislikelymoreworseoffthantheywerethreemonths ago.BrazilAgisbetter,withimprovedtractorsalesraisingmarginexpectationsfor AGCO.IntheNAnon-resmarket,rentalrates/utilizationsh

6、ouldhaveheld-inok,butnot reacceleratedinthe1.5-2.0%range.Nov.andDec.truckorderswere-15%and-40% respectively,alongawaitedturnthatmaymaketruckstocksmoreinvestableby2H.InConstructionMaterials,VMC&MLMsharesareofftoaslowstartagainin2019, despiteanearningsstreamthatappearsfreefromdeceleration.Westillseepr

7、ice achievementasthecure-alltoinvestorfatigue,thebeginningofwhichwethinkshould beenbeginninginQ4lastingthrough2019.Whilepublic/infrastructurevolumesare poisedtoincreasethrough2019,iftheresidentialheadwindsaregreatenoughthat couldputallthreeofthesenamesbackinthepenaltybox,unjustifiablyso.Whatto watch

8、: New VMC management had a track record of conservatism / beat and raises at Ashtead; low to mid single digit price and volume guidance, if given, should be beatable.InE&C,JECislikelytoprovide2019onEPSday,toclearthedeckforlongtermtargets fortheirFeb19thinvestorday.Consensusislikelystill30-40ctooligh

9、tfor2019(ex. governmentshutdown).AnASRannouncementcouldbehelpfultoo.Despiteseveral eventssinceOct.(pre-announce,investorday,etc.),FLRs19guideisstillunknown (andhurdleislikelybelow$3street).ACMsrestructuringshoulddrivemargingains, buttheStreetisntcreditingtheminDCSinFYQ1(6.1%,flatq/q).ForMTZ,Rover$ m

10、ustbein-handbutthestateof5Groll-outshouldleadtothenextleginshares.What Has Our Attention Into The Reporting PeriodInventories (Ag, Construction Equipment),Brazil/NAAg.(AGCO,CNH,DE),NewCEOs(CNH,WBT),CashDistribution (ALL),GovernmentShutdown(JEC,ACM,VMC,MLM),PTCuts(ALL).See Page 2 for Company One-Line

11、rs Into Earnings SeasonCapitalInc.oneofdoesandseekstodoinitsresearchAsabeawarethatthe mayhaveaofthattheofconsiderthisasonlyafactorinmakingtheirANALYSTONPAGEForafulllistofourratings,pricetargetand earningschangesinthisreport,pleasesee tableonpage2.U.S. Machinery & Construction Adam Seiden, CFA+1 212

12、526 2212 HYPERLINK mailto:adam.seiden adam.seiden BCI, USAleksy Grewal+1 212 526 7519 HYPERLINK mailto:aleksy.grewal aleksy.grewal BCI, USTimothyNewton+12125268047 HYPERLINK mailto:tim.newton tim.newton BCI, USSummary of our Ratings, Price Targets and Earnings Changes in this Report (all changes are

13、 shown in bold)CompanyRatingOld NewPrice22-Jan-19OldPriceTargetNew%ChgOldEPS FY1(ENew)%ChgOldEPS FY2New)%ChgU.S. Machinery & ConstructionPosPos HYPERLINK /BC/composite/GER_COMPANY?ticker=ACM AECOM (ACM)UWUW29.6530.0030.00-2.902.9103.203.252 HYPERLINK /BC/composite/GER_COMPANY?ticker=AGCO AGCO Corp.

14、(AGCO)UWUW62.8563.0063.00-3.803.80-4.624.62- HYPERLINK /BC/composite/GER_COMPANY?ticker=CAT Caterpillar (CAT)EWEW132.24155.00155.00-11.7011.70-13.1013.10- HYPERLINK /BC/composite/GER_COMPANY?ticker=CNHI CNH Industrial (CNHI)OWOW10.0414.0013.00-70.730.73-0.870.87- HYPERLINK /BC/composite/GER_COMPANY?

15、ticker=CMI Cummins (CMI)EWEW146.18160.00160.00-13.5713.63014.6014.781 HYPERLINK /BC/composite/GER_COMPANY?ticker=DE Deere (DE)OWOW158.84180.00180.00-11.2511.26013.1513.15- HYPERLINK /BC/composite/GER_COMPANY?ticker=FLR Fluor Corp. (FLR)EWEW37.0055.0055.00-1.871.87-3.053.00-2 HYPERLINK /BC/composite/

16、GER_COMPANY?ticker=HRI Herc Rentals (HRI)OWOW34.4560.0060.00-1.831.83-2.512.51- HYPERLINK /BC/composite/GER_COMPANY?ticker=JEC Jacobs Engineering (JEC)OWOW61.7583.0083.00-5.305.30-6.006.00- HYPERLINK /BC/composite/GER_COMPANY?ticker=LECO Lincoln Electric (LECO)EWEW82.3790.0090.00-4.764.76-5.305.290

17、HYPERLINK /BC/composite/GER_COMPANY?ticker=MTW Manitowoc (MTW)OWOW15.6232.0032.00-0.420.40-51.401.35-4 HYPERLINK /BC/composite/GER_COMPANY?ticker=MLM Martin Marietta (MLM)EWEW180.24215.00215.00-8.308.11-210.009.78-2 HYPERLINK /BC/composite/GER_COMPANY?ticker=MTZ MasTec Inc. (MTZ)OWOW45.6457.0057.00-

18、3.763.7914.244.24- HYPERLINK /BC/composite/GER_COMPANY?ticker=SUM Summit Materials (SUM)EWEW14.6424.0018.00-250.510.51-1.281.01-21 HYPERLINK /BC/composite/GER_COMPANY?ticker=TEX Terex (TEX)EWEW29.6843.0037.00-143.503.33-5N/A3.73- HYPERLINK /BC/composite/GER_COMPANY?ticker=URI United Rentals (URI)EWE

19、W118.24130.00130.00-16.3316.33-19.4019.40- HYPERLINK /BC/composite/GER_COMPANY?ticker=VMC Vulcan Materials (VMC)OWOW101.84132.00132.00-4.004.00-5.255.20-1 HYPERLINK /BC/composite/GER_COMPANY?ticker=WBT Welbilt (WBT)OWOW13.2119.0019.00-0.760.76-0.970.91-6Source:BarclaysResearch.Sharepricesandtargetpr

20、icesareshownintheprimarylistingcurrencyandEPSestimatesareshowninthereportingcurrency. FY1(E):CurrentfiscalyearestimatesbyBarclaysResearch.FY2(E):NextfiscalyearestimatesbyBarclaysResearch.StockRating:OW:Overweight;EW:EqualWeight;UW:Underweight;RS:RatingSuspended IndustryView:Pos:Positive;Neu:Neutral;

21、Neg:NegativeWhatAreWeLookingForintheQuarter?(Companies)FIGURE 1Day Price(%)Day Price(%)(%)Beats Misses Avg. 1D EPSWhat Were Looking at on EPS Day?Price Implied Up /Target DownsideRatingCompanyAgriculture2) European CV Pricing = Positive ommentary; Tax EffectsAGCO CorpUW632) European CV Pricing = Pos

22、itive ommentary; Tax EffectsAGCO CorpUW630%1)ManagementPromisedConservative2)NorthAmericaSmallAgDemand-mCNH Industrial NVOW1329%1)InitialLookonCostReductions:80/203) High-Horsepower North America CDeere & COOW18013%1)C&FOrderTrends;IsWirtgenEnough88%13%-0.03%88%13%1.49%63%38%2.42%To Offset Material

23、Cost2) Demand trends post agriculture tariff retaliationConstructionEquipmentCaterpillarInc.EW155TerexCorpEW37UnitedRentalsEW130Buybacks - Similar Run Rate of Buybacks in2019?Manitowoc Co.OW32105%Order Growth & Backlog conversion - were above theManitowoc Co.OW32105%Order Growth & Backlog conversion

24、 - were above thestreetQ4 Margin Headwind 3) Refinancing SpinCo Debt Still On? $10mnFeb.100%0%0.33%63%38%0.69%88%13%1.15%38%63%0.26%100%0%0.42%2019 AWP Pricing - Impact on 2019 MarginGuidanceHERC RentalsOW6074%HERC RentalsOW6074%1) Direct Operating Expense; Fixed Cost Absorption leading to margin gr

25、owth 2)Rate growth - consensus more negative today (2%); Pos. Surprise?Anychangeintonere:acquiringcompaniesgivennewmanagementteam2) Rate growth - consensus more negative today (2%); Pos.Surprise?Trucks /Equipmentull back from 1,000bp margin journey 2) ftermarket detockCumminsEW1609%1)Commoditypriced

26、eclineimpact(ornull back from 1,000bp margin journey 2) ftermarket detockCumminsEW1609%1)Commoditypricedeclineimpact(ornconstrtaintsinon-highway3)acquistionWelbilt Inc.OW1944%1) New CEOs first call to talk strategy; P Update on Supplier issues, progress ofaLincoln ElectricEW909%1)ContinuedVolumemome

27、ntuminNor63%38%0.12%50%50%-6.18%88%13%-2.24%th America business 2) Air Liquide Integration,synergyupdate?3)Automotiveslowdown,impactonbusiness?EngineeringServicesMasTec Inc.OW5725%Fluor Corp.EW5549%Jacobs EngineeringOW8334%AECOMConstructionMaterialsUW301%Vulcan MaterialsOW13230%MasTec Inc.OW5725%Flu

28、or Corp.EW5549%Jacobs EngineeringOW8334%AECOMConstructionMaterialsUW301%Vulcan MaterialsOW13230%Summit MaterialsEW1823%Martin MariettaEW21519%own in Q3 didnt extend to Q43)More50%rojects 4) 19 EPS: 40HP,Combines,4WD)FIGURE 11Brazilian Tractor & Combine Sales - Recovering18,00016,00014,00012,00010,00

29、08,0006,0004,0002,0000# Units7,830#8,0007,0006,0005,0004,0003,0002,0001,00001,4194,13120112012201320142015201620172011 2012 2013 2014 2015 2016 2017 2018Source:BarclaysResearch,AEMSource:BarclaysResearch,ANFAVEAFIGURE 12U.S. Ag. Machinery Sales By Type of Equipment40%y/ychangeUtilityTractorsRowCrop&

30、4WDTractors20%40%0%-20%-40%-60%Source: Barclays Research, AEMLonger Term ViewThe most painful years in agriculture are probably over, but its no V shape. Were not callingforaV-shaperecovery,wejustdontthinkitsgoingtogetmuchworse,andthere areevensomesignsforittomarginallygetbetter.NorthAmericaagmachin

31、eshavebeen comingoffapeak,throughtodayslevels,onwhatweperceiveasa“newnormal”forthe next severalyears.MiningExposed Companies: CAT, Komatsu (Not Covered), FLR, JECReplacementpartssales(aftermarket)buoyedmultiplequartersofgrowth,butthereslikely tobemoreslowinginthehighdoubledigitgrowthratesinto2019.CA

32、Tdealersales reacceleratedgloballywiththeexceptionofEMEA,duringmid-yearandincludedAsia Pacific.Theminingrecoveryisrealandweproject2018asthefirstyearofupcapexsince peak.Weestimate80%oftheaftermarketrecoveryoccurredin2017,withtheremaining 20%likelyhavingbeenachievedin1H18.Theimpactonarestructuredasset

33、baseforOEMs likeCAThavebeensignificant(negativemarginstosolidlypositiveafeatfewthoughtwas possibleentering2017).Thelargeropportunityoverthenextseveralyearsisinmining OEM,wherecombinedwithaftermarketweseea5+yeartailonminingequipment, althoughrecoveryhasbeenquickerthanexpectedwithtruckshipments15-20%o

34、ffof 2008levels.Postthebookingofseverallargeminingprojectsinmid-2018,thereslesslarge projectsthatwehearareimminent,butminingbacklogsarestilllowandthedirection shouldbeupinto19.FIGURE 13Quarterly Truck Shipments 08 IndexedUnits200180160140120100806040200FIGURE 14Steel, Copper, Coal & Iron Ore Pricing

35、Index 1.00.2Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18Sep-18CopperSteelIronCoalSource: Barclays,ParkerBaySource: Barclays,BloombergAs demand for new

36、 equipment continues to decline, sales of parts have shown signs of rebounding (ex. FX)FIGURE 15Komatsu Parts Sales (Local Currency & USD)Parts y/y yenPartsPartsy/yUSD40%20%0%-20%Source: CompanyReportsLonger TermViewReplacementcyclealone,forgettingeconomicgrowthordecliningoregrades,shouldbea powerfu

37、ltailwindforthenext5+years.Mining,byourdatabase,hasalreadydoubledonits largestequipmentvs.2016lows.Evenso,werestill15-20%off2008,whatweconsidera normalyear.Aminingaftermarketreboundmostlyplayedout,anda7xtruckfleetwill somedayneedtobereplaced,insomeformevenifnotthefullinstalledbase.Global Constructio

38、n OEM & U.S. RentalsExposed Companies: CAT, URI, HRI, TEX, MTW, DE, LECONAConstructionisthesecondmostmarketinvestorsfearisgettingclosetopeak,after truck.Whenwelookatthereplacementcycle,fleetshavecaughtuptotheirreplacement needs.Publicinfrastructurespendmayjustbebeginningtorampandcoulddriveanother wa

39、veofgrowthbymunicipalitiesorcontractorssupportingtheminstateslikeCalifornia. Europehasreachedequilibriumin2018,whileAPACisthehardestmarkettoarguefor upside.Chinahasbeenwildlyunpredictable,thoughtotalChinaexposureisfairlylimitedin machinery.TheareaweremostconfidenttoseegrowthinisBrazil;thatremains20%

40、 belownormal.Lightequipmentproducers(aerials)havesoughtsteelsurchargesin2H18, fewwhichwebelievehavebeenmetbutcouldbepassedthroughbeginningin2019ata modestamount.Rentalequipmentutilizationin2018Eisbetween65-70%,thehigherend- moreaerialsbased,andrateexpectationsarerunninginthe1.5-2.0%rangeforthequarte

41、r.FIGURE 16Dodge Construction Starts Information (Residential & Non-Residential)40%30%20%10%0%-10%TotalNon-ResResSource: Barclays Research, Dodge AnalyticsFIGURE 17Caterpillar Construction Industries Dealer Sales Y/Y%80%60%40%20%0%(20%)(40%)(60%)Jan-14 Apr-14 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-1

42、5 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18Oct-18NorthAmericaLatinAmericaEAMEAsiaPacificSource: Barclays Research, Company ReportsLonger Term ViewOnConstructionEquipment:Wefavorheavyoverlightequipmentgloballydueto1)theold ageoftheequipmentbase,2)idlee

43、quipmenthavingbeenexported,and3)emissions standardsliftingpricesfornewequipment.Craneshadamarginallybetter2018,butatrue inflectionislargelycommoditydependentandrawmaterialsareastrongheadwindinwhat isstillinthemidstofoneofthedeepestcycleswecoverinmachinery. Infrastructure stimulus/publicconstructionc

44、ouldhelpextendtheconstructioncyclethroughtheendof thedecadeandayearortwofurtherthancurrentmarketthinking.Engineering & Construction MaterialsExposed Companies: ACM, FLR, MTZ, JEC, VMC, MLM, SUMIntheU.S.,Q4wasanotherquarterfilledwithinclementweather,butnotenoughthatwe seeearningsatriskforourcompanies

45、.Wecurrentlyforecastpricegrowthoflow-single digitsinaggregatesfor4Q18andincreasingmid-singledigitsin2019.Westillseean environmentwherehigherpricesshouldfollowvolumesinthenext1-2quarters,resulting insequentialgrowththroughout2019.Incement,TXvolumeshavebeenunderwhelming duringthequarter,andwithoutastr

46、ongDecember,webelieveMLMshouldcomeinatthe low-endorbelowofitsfullyear2018cementsalesguidance.An$8/tonincreaseisoutin the market with most producers having announced an increase of their own. Were currentlyfactoringina4%increasefor2019,whichwouldbethelargestincreasesince 2016,butseerisktothedownside.

47、LTMHoustonresidentialpermitshaveremainedpositive throughout2018andtheMSAlookspoisedforgrowthinQ4.InE&C,thegovernmentshutdownshouldaddaheadwindto2019earningsforJEC(most), andtoadegreeACMandFLR.Despiteminimalimpactin2018(shutdownstartedthelast weekofDecember)weseea1-2cimpactforJECin2019.FIGURE 18Houst

48、on Residential Permits and Employment To Key Industries Are StabilizingLTMPermitsLTMPermitsPersons(k)60,00040,00020,00019921994199619921994199619982000200220042006200820102012201420162018FIGURE 19ARTBA Contract Awards are Lumpy, $ sizesTTM Million$/AwardTTM Million$/AwardTTM Awards $2.0$1.5$1.0$0.52

49、00020022004200020022004200620082010201220142016201860,00050,00040,00030,00020,000PermitsHighwayAwardsTTM$/AwardHighwaysAwards$Source:BarclaysResearchSource: Barclays,BloombergConstruction confidence andFIGURE 20European Union: Confidence Leads Order Books & Rising%ChangeEvolutionofthecurrentoverallo

50、rderbooksorders in Europe have been rising form low levels and are positive for the first time since pre-recession.0200020012000200120022003200420052006200720082009201020112012201320142015201620172018Construction confidence indicatorSource: Barclays Research, EurostatLonger Term ViewWe think 2019 wi

51、ll see growing sales and earnings, for our construction materials companies.Weseearenewedpricingenvironmentformaterials,partiallytopassthrough inflation, partially on increased public construction demand. In E&C, we generally favor companiesthataresmallerandprofitableinafewindustriesandendmarkets(i.

52、e.pipeline, telecom,defense,government,road/highway)vs.largerandinvolvedinmanyindustries.CAT DealerSalesFIGURE 21CAT Dealer Sales Engines%30%20%10%0%(10%)(20%)(30%)(40%)Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18Oct-18Apr-11 Oct-11 Apr-12

53、Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18Oct-18FIGURE 22CAT Dealer Sales Machines%80%70%60%50%40%30%20%10%0%(10%)(20%)Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18Oct-18Apr-11 Oct-11 Apr-12 Oct-12 Ap

54、r-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Apr-18Oct-18Source: Barclays Research,CompanyReportsSource:BarclaysResearch,CompanyReportsFIGURE 23CAT Dealer Sales Resources%80%60%40%20%0%(20%)(40%)Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-1

55、7 Jan-18 May-18Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18Sep-18FIGURE 24CAT Dealer Sales Construction%60%50%40%30%20%10%0%(10%)Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18Jan-14 May-14 Sep-14

56、Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18Sep-18Source: Barclays Research,CompanyReportsSource:BarclaysResearch,CompanyReportsFIGURE 25CAT Top Line Growth vs. Retail SalesY/YY/YChange%50%0%-50%1Q043Q041Q043Q041Q053Q051Q063Q061Q073Q071Q083Q081Q093Q091Q103Q101Q113Q111

57、Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q18Nov-18RetailSalesT3MAverageCATTopLineGrowth,Y/Y%Source: Company Reports, Barclays ResearchPrice TargetChangesTEX Our$37PriceTargetisbasedona10.0 xforwardP/Emultipleonour2020EPS estimateof$3.73.Ourformer12-monthPriceTargetof$43wasbasedona12.5xfor

58、ward P/Emultipleonourprior2019EPSestimateof$3.50.Ourupdatedpricetargetadjustsfor marketmultiplesand2020estimates.CNHOur$13PriceTargetisbasedona12.5xforwardP/Emultipleonour2020EEPSof$1.05.Ourformer12-monthpricetargetof$14wasbasedona16.0 xforwardP/E multipleonourprior2019EEPSof$0.87.Ourupdatedpricetar

59、getadjustsformarket multiplesand2020estimates.SUMOur$18PriceTargetisbasedon7.4xforwardEV/EBITDAmultipleonour2020E EBITDAof$515mn.Ourprevious12-monthPriceTargetof$24wasbasedon 9x forwardEV/EBITDAmultipleonourprior2019EEBITDAof$470mn.Ourupdatedprice targetadjustsformarketmultiplesand2020estimates.U.S.

60、 Machinery & ConstructionIndustry View: POSITIVE HYPERLINK /go/BC/composite/GER_COMPANY?ticker=CAT Caterpillar (CAT)Stock Rating: EQUAL WEIGHTIncome statement ($mn)2017A2018E2019E2020ECAGRIncome statement ($mn)2017A2018E2019E2020ECAGRRevenue42,67652,52957,49861,32712.8%EBITDA (adj)7,56011,05111,6741