| Industrials Buy List | ||||
|---|---|---|---|---|
| Company | BBI Rank | BBI BT | BBI 2010 PT | Coverage |
| ABB (ABB) | 2 | $20 | $22 | DS |
| Danaher (DHR) | 2 | $64 | $70 | DS |
| General Elec (GE) | 2 | NAV | NAV | DB |
| Philips Elec (PHG) | 1 | $31 | $36 | DS |
| Valmont Indus (VMI) | 3 | $75 | $86 | DS |
| Itron (ITRI) | 1 | $60 | $73 | DS |
| Novozymes (NVZMF) |
Materials Buy List | ||||
|---|---|---|---|---|
| Company | BBI Rank | BBI BT | BBI 2010 PT | Coverage |
| Barrick Gold (ABX) | 2 | NAV | NAV | CDR |
| Goldcorp (GG) | 2 | NAV | NAV | CDR |
| Kinross Gold (KGC) | 2 | NAV | NAV | CDR |
| Pan Am. Silver (PAAS) | 1 | $36 | NAV | CDR |
| Praxair (PX) | 3 | $80 | $90 | DS |
Materials ETF Buy List | |||
|---|---|---|---|
| Company | BBI Rank | BBI BT | BBI PT |
| iShares Silver Trust (SLV) | 1 | $17.25 | $22 |
| iShares Gold Trust | 3 | $120 | $250 |
Gold review from CdeR presentation
ReplyDeleteIn portfolios: Initiate positions now, when there is a pull back, add on
Holdings:
GLD: Buy
SLV: Buy--primed to go nuts
GDX: buy
GDXJ: this will add "spice" to a porfolio, cautious portfolio placement
Risks to our gold outlook:
If governments begin to show fiscal discipline, it is a sell sign.
Taxation (example: Australia) is a huge risk as governments seek funds
Portfolio:
Chris recommends up to 10% in the precious metals/miners in a portfolio. August-September is a target timeline to get positons in accounts as the October-December period is a historically strong season for these stocks.
Chris said, that pretty well sums it up...GDX can be bought in increments starting now for the next 4 months or so.
ReplyDeleteItron analyst day notes by DB
ReplyDeletehttp://db.tt/0ktY2U
ST.N, Sensata Technologies Holding N.V. ($16.79) /Euro Fears Overheated, Improving End Markets Overlooked
ReplyDeleteRobert.Wertheimer@morganstanley.com, Mark.Lipacis, Joseph.O'Dea
The recent sell-off in ST overestimates the negative impact of a stronger USD and slowing European auto market, we think. Simple math on currency exposure leads to the wrong conclusion, as Sensata has some local costs, and currency related price adjustments built into contracts. We estimate about a $0.02 earnings impact based on current EUR/USD level vs. bears who suggest 15 cents. Simple revenue-based estimates of euro exposure suggest a $25-30 mn headwind; we believe the impact is more like $3-4 mn, with a rule of thumb that a $0.05 movement in EUR/USD has $1.5 mn earnings impact.
http://dl.dropbox.com/u/7092909/Industrials/ST_Sensata/ST%20stock%20recII.doc
ReplyDeleteST.N, Sensata Technologies Holding N.V. ($16.60) /Execution, Leverage, Healthy End Markets Key to 2Q’10
ReplyDeleteRobert.Wertheimer@morganstanley.com, Mark.Lipacis, Joseph.O'Dea, Alexander.Vecchio
We are raising 2010e revenuess and EPS following strong 2Q results and positive outlook on the remainder of the year. 2010e revenues go to $1.53 bn from $1.46 bn; EPS estimate increased to $1.72 from $1.62. 2Q’10 reveunue of $392 mn were 3% higher than our estimates. Controls segment drove the beat on end-market strength in appliance, HVAC, industrial, data/telecom – China contributed strongest geographic growth. Adjusted EPS of $0.44 was 1 cent higher than our estimate and at the high end of previous guidance.
RSG – 2Q10 earnings release; CC 5PM ET; 210-234-0084, pw: Republic Services
ReplyDelete· EPS $0.43 vs st. $0.42 for 2Q
· Rev $2.07B vs st. $2.056B for 2Q
· FY10 guided to $1.69-1.71 from $1.63-1.67 (st. $1.71)
· The company also raised its qtrly div by 5% to 20c a share from 19c a share
· "I am very pleased with the Company's progress through the first half of 2010," said James E. O'Connor, Chairman and Chief Executive Officer of Republic Services, Inc. "We have successfully integrated two large companies and have secured substantial synergy savings. The Company is well positioned to take advantage of an improving economy and return cash to our stockholders.”
Schneider reported very strong H1 results. Q2 like for like sales growth was 10.2% vs. our estimate of 4.4%. The H1 adj. EBIT margin came in at 15.2% vs. JPM at 13.7% which was in-line with consensus. This resulted in an operating beat of 16%. Schneider guides to full year sales growth of around the level of H1 (6.5%) vs. low single digit before and upgrades the EBITA margin targeted to 15.5% (pre Areva) from 14% before. This results in about a 16% upgrade vs. previous guidance on EBITA. These results and upgrade in guidance are very strong, even when taking into account the positive results we have already seen during a very strong earnings season for their peers. We expect a positive stock price reaction. We see about a 10% upgrade to operating profit vs. our old estimates. Willi https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-450312-0
ReplyDeletePX 2Q10 - JPMorgan Note.
ReplyDeletehttp://dl.dropbox.com/u/7092909/Industrials/PX/JPM_PX_7-30-10_2Q10_JPMorgan.pdf
PX 2Q10
ReplyDeleteDS notes: solid across the board and increased guidance. Trading 19x. high end $4.70 EPS 2010 guidance at $88. Assume that given current estimates, and GDP growth etc, think can talk at 18x 2011 of $5.40. (that’s $97) If the company’s aspirations of increasing EBIT margin by 30-40% are accurate, will be a $6+ figure, esp. considering they will have 295mm shares nxt yr v. 311 this year. I am assuming 7% top line growth in 2011 which is 28% above where they were in 2006. (street at 8% and another 7% growth in 2012) Expensive name in uncertain macro environment – but best of breed and defensive so deserves high multiple for high ROI/ROE. Also positive in the areas where macro less uncertain i.e. Brazil and India. Hold, but see limited upside near term as no longer poorly valued by the street...
Rayonier (RYN) – Downgrading to UW following strong YTD performance - We are downgrading Rayonier (RYN) to Underweight from Neutral. We continue to have a favorable view of the paper and forest products sector and think that RYN is a high-quality, well-managed company; however, given the stock’s strong YTD performance, valuation now looks stretched, in our opinion. With this in mind, and given an expected slowing in pulp markets and weak housing markets that continue to curb a recovery in timber volumes, we think an Underweight rating now makes sense. We view the assumptions embedded in our sum-of-the-parts model for Rayonier as appropriately – but not egregiously – conservative (see Table 1), valuing the company’s Eastern timberland (mostly located in the Southeast) for ~$1,200/acre, its Western lands (mostly in the Northwest) for $2,000/acre, and giving no “additional” value at this point for land that may have “higher and better use” (HBU) potential. While timberland sale activity has been limited over the last 18 months, the transactions that we have seen take place generally lend support to our valuation methodology. We believe land sale activity will remain relatively “quiet” over the next six months and think land prices will remain around current levels. While we think timber and performance fibers (high-end, specialty pulp) are attractive markets for the longer term, in the near term we think there is more positive momentum in paperboard and printing paper markets, where demand is showing some cyclical recovery and prices are increasing. Timber volumes continue to trend at low levels, and we believe that without a more meaningful pickup in new construction and housing starts, log volumes will show only a modest recovery in 2011. Moreover, we believe the export log market, which is ~20% of the company’s Western volumes, is becoming increasingly competitive. Elsewhere, we think that price declines in market pulp will put some downward pressure on RYN's fluff pulp business. Hueston https://mm.jpmorgan.com/servlet/UserDocsHelperServlet?action=openpdf&docId=GPS-453639-0
ReplyDeleteCanadian Nat’l Railway (CNI) – Modest upside 3Q, solid margin expansion, raising ests/PT - On Tuesday afternoon, CNI reported 3Q:10 EPS of C$1.19 vs. our forecast of C$1.16 and Consensus of C$1.13. CNI realized meaningful margin expansion of nearly 200 bp y/y in 3Q as it handled significant volume growth with modestly higher costs. Although we are tweaking up our 2010 EPS forecast to reflect the upside 3Q earnings report, we are maintaining our 2011 EPS forecast of $4.75. We are also establishing our December 2011 price target of $75 and continue to rate CNI Neutral. During 3Q:10, CNI reported margin expansion of 200 bp to 60.7%. As volumes grew 17.8%, operating expenses ex-fuel increased 7.8% and train starts grew 4%. We believe CNI’s supply chain and customer service initiatives (service level agreements with terminal operators, first / last mile service offerings) to improve service will likely drive further operational improvement over time and facilitate incremental volume growth. We expect CNI to offset attrition by hiring and training new employees, which may begin to occur as early as 4Q. We tweaked our assumptions to reflect the resiliency of CNI’s volume growth trend in 4Q and more modest growth forecasts for 2011. Our revised 2010 EPS forecast of C$4.21 (US$4.10) is somewhat above the point estimate implied by management’s guidance of 25% EPS growth off 2009 continuing EPS of C$3.24. We suspect that the earnings guidance is somewhat conservative and we believe that our forecast is reasonable. Wadewitz https://mm.jpmorgan.com/PubServlet?action=open&doc=GPS-493581-0.pdf
ReplyDeletePraxair: Q3:10 EPS Above Consensus: Raised 2010 Guidance - ALERT
ReplyDeletePraxair reported Q3:10 EPS of $1.21 versus $1.02 in the prior year and our expectation of $1.21. The Street consensus estimate was $1.20. Reported operating income of $551M was above our forecast of $544M (or +$0.02/sh) due to higher-than-expected profit in North America ($314M vs. our forecast of $285M). Higher-than-expected tax rate of 28% vs. our projection of 26.7% affected EPS by (-$0.02/sh). Reported revenues of $2.538B increased 11% yoy and were above our forecast of $2.489B, reflecting 9% higher volumes, flat prices, and 2% natural gas pass-through. Sales volumes improved 7-10% yoy in all regions except Asia, which reported 17% volume growth. Volumes were flat to up sequentially across geographies. Price/mix was flat both yoy and sequentially in North America; flat yoy and down (1%) in Europe, and (1-2%) negative yoy and sequentially in Asia.
Praxair increased its 2010 pro-forma EPS guidance by $0.05/sh to a range of $4.67 to $4.72 (mid-point $4.70) from a range of $4.60 to $4.70 (mid-point $4.65), excluding $0.08/sh negative effect from Venezuela currency devaluation. The Street consensus is currently at $4.69, and we are at $4.70. PX guidance for Q4:10 is a range $1.18 to $1.23, compared with the current consensus estimate of $1.22.
Itron (ITRI.OQ),USD62.96 Buy Price Target USD73.00 - Carter B Shoop: EPS $4.10 to $4.20. The robust bookings in its legacy NA biz (1.7x B2B; +ive B2B the last 6 Q’s) is helping bridge the gap between AMI sales in NA (slowing in 2011 and 2012) and EU (ramping in 2012). While we remain concerned about declining earnings in 2012 (which is becoming well understood by investors), 3Q sales, margins and bookings trends give us some comfort that it won't be as steep of a decline as originally expected. We are reiterating our Buy rating on valuation (14x CY11E EPS) and our belief that NT catalysts have a more positive vs negative bias. - We are raising our 2010 EPS estimate by $0.10 to $4.20 (+98% Y/Y). Key changes to our estimates are +2% to sales (NA AMI accelerations, strength in core NA and FX tailwind in Int’l biz), +70bps to operating margin (leverage and cost controls), +$5.9mln to ‘other expense’ (FX charges) and +290bps to tax rate (now 25.9%). For 2011, we are increasing our EPS estimate $0.20 to $4.50. We are now forecasting AMI revenue to trend from $102mln in 2009 to $570mln in 2010 and $456mln in 2011. -- Deutche Bank
ReplyDeleteEnerNOC (ENOC.OQ) Morgan Stanley,USD30.56 Hold Price Target USD29 Near-term trends getting choppy; too early to own for 2013 PJM rebound . With the peak selling season (3Q) behind EnerNOC, look for investors to increasingly focus on 2011 earnings and the implications from a sharp price decline in PJM (-37% Y/Y)- EnerNOC’s largest market (>50% of sales). Reiterate Hold; we think EnerNOC is well positioned to gain share in the DR and EE markets, but remain concerned about 1) margin pressure in PJM, 2) slower than anticipated adoption of DR in non-PJM markets, 3) slower than expected cross selling synergies b/n DR and EE and 4) valuation (51x CY11 EPS).
ReplyDeleteEmerging Technology - Carter Shoop (Deutche Bank): Key takeaways from our study of over 90 utilities (representing $63B in annual capex) include: 1) the overall capex outlook for 2011 has improved (+5% Y/Y vs +1% last quarter), 2) the outlook for transmission spending remains largely unchanged (despite some high-profile push-outs) and 3) smart grid momentum has slowed. With solid visibility and limited downside risk to the valuation multiple, ESCO (Buy, $37.33) and Elster (Buy, $16) should outperform peers in 2011. We like PWR for longer-term oriented investors, but are cautious that estimates are still too high - 2011 utility capex outlook improves. Roughly 80% of the utility holding co's in our study provided an update on 2010 capex plans when they reported 3Q results or provided updates at the EEI conference (72% also updated their 2011 capex plans). Capex is expected to increase 4% Y/Y in 2010 (unchanged from our 2Q study) and 5% Y/Y in 2011 (vs 1% last Q). FPL, AEP and D each increased their 2011 capex outlook by at least 17% vs their previous forecast (FPL increased its T&D capex by 13% while AEP increased its transmission and distribution capex by 51% and 20%, respectively).
ReplyDeleteLynas Corporation – Upgrade to OW, risks priced in with clear valuation upside - We upgrade our recommendation on LYC to Overweight with a new Dec11 price target of $2.17. This follows a comprehensive review of our forecasts including incorporating the likely impact of a formal agreement with Sojitz (due before Mar11) for offtake, distribution and financing arrangements for the expansion of LYC’s Integrated Rare Earths Project. Earlier this month, we visited Lynas’ Advanced Materials Plant (LAMP) in Kuantan, Malaysia. We view the successful construction and commissioning of the LAMP as a key share price driver over the next 12mths. In this note we provide an overview of the current status of the project and outline what still needs to be done to bring it on line. Engineering design is largely complete and peak construction activity is expected in Feb-Mar 2011. For us, equipment delivery, contractor and subcontractor performance and procurement of critical items are the key risks to the successful construction and commissioning of the LAMP. Mgmt reiterates its "confidence in cost at completion", but given we can't rule out unexpected problems through to commissioning we continue to apply a 15% WACC in our $2.17 NPV to account for these risks. But, most importantly, we believe investors are being adequately compensated for these risks at the current share price. Reid https://mm.jpmorgan.com/PubServlet?action=email&doc=GPS-512571-0.pdf
ReplyDeleteSmart Grid – Unlocked – Weekly digest - The JPSMARTG basket declined 0.6% in the week ending 11/30 versus a 0% increase in the S&P 500 Index. The basket is down 2.7% year to date (S&P500 up 5.9%). We believe the JPSMARTG basket provides investors with exposure to a variety of companies that are focused on the Smart Grid. Itron (ITRI/OW) was awarded a contract to provide ItalGas with 30,000 C&I electronic gas volume converters and a 2-way GPRS-based (Vodafone) AMI communications solution. We view this as a mild positive, contributing about $5 million of revenue visibility. It also positions ITRI for additional opportunities at ItalGas, which manages about 5.8 million gas meters in total; though we believe Elster (ELT/OW) is competing for this larger contract and probably has a better market position. Most importantly, we believe this is the first of a large number of European contracts that will be awarded over the next two years; contracts that will benefit both meter companies. About 125 million gas meters are likely to be upgraded in Europe by 2020, and about 225 million electric meters. Ireland has mandated nationwide water metering by 2014 as part of its austerity plans. Ireland’s water services have been historically funded through taxation. Under the new initiative, the government will invest €550mm to introduce water metering and billing. Annual savings are expected to be €500mm through charging for water as well as reducing demand to more economically efficient levels. The initiative is part of the National Recovery Plan associated with the recent €85 billion bailout from the EU and IMF. Coster https://mm.jpmorgan.com/PubServlet?action=email&doc=GPS-512940-0.pdf
ReplyDeletePhilips – Consumer CMD, EM growth and innovation as drivers, CE remains a headwind - Summary. We attended Philips Consumer Lifestyle CMD in Amsterdam on Wednesday, Dec 1st and came away with a favorable view of Philips' plan to drive growth in strategic businesses especially in emerging markets by decentralizing decision making and adopting a “granular approach”' (focusing investments at a category /country level). We were particularly impressed by the consumer insight driven product innovations that were exhibited by the company, though our enthusiasm is slightly tempered by our belief that Philips needs to keep running to stay at the same place in many consumer electronic product categories (because local and global competitors are also innovating similarly). Increasing focus on Emerging Markets. Management underscored the increasing importance of emerging markets to the Consumer Lifestyle division when it said that it expects adj. EBITA margin in 2010 to be slightly higher in emerging markets than in Western Europe & North America. Philips sees its strong brand in emerging markets as a key strength. Notably, Philips scored higher on brand equity in India, China and Brazil relative to the global average in 2010. The company is moving the global headquarters for domestic appliances to Shanghai and has appointed an Indian executive to lead the business. It is also building local innovation hubs in Asia that will report to management in Shanghai. The emphasis will be on designing local products for local needs. Management also said that M&A in the future is also likely to be increasingly focused on emerging markets. Willi https://mm.jpmorgan.com/PubServlet?action=email&doc=GPS-513823-0.pdf
ReplyDeleteDanaher (DHR) – Positive into 2011 guidance, raising ests - We are positive on DHR into initial 2011 guidance, which we think can come in ahead of consensus while still leaving investors comfortable with the degree of conservatism in the forecast. M&A remains a catalyst but is not needed for earnings upside next year and is not banked into valuation. With shares having lagged more cyclical peers, we are raising numbers and see an attractive entry point into the meeting. Analyst day and 2011 guidance on 12/15. Danaher will host their annual investor day and provide their initial 2011 guidance. See our separate preview piece out today, where we provide details on our expectations for those giving December guidance, including DHR. Expect solid 4Q trends. We look for an upbeat tone on fundamentals, with limited slowdown in short cycle order books like Motion or TEK. Despite investments/restructuring meant to cap 4Q upside and position for 2011, we think the quarter will beat and a mid-December preannouncement is possible. 2011 Street numbers a low bar. We see a comfortable path to mid-SD organic growth next year, with peers (DOV, A, SIRO) guiding to better performance in related businesses. We think initial 2011 guide can come in modestly ahead of Street estimates, still leaving investors comfortable with the degree of conservatism in the forecast. Tusa https://mm.jpmorgan.com/PubServlet?action=email&doc=GPS-515101-0.pdf
ReplyDelete