1、WHATS COOKININ MACHINERY AND ENGINEERING & CONSTRUCTIONJUST CHILLCATALYST WATCH2/4NA Truck Orders2/6EIA Petroleum Status Report2/5AGCO Q418 (Q4: $1.22; FY19: $4.63)2/6CMI Q418 (Q4: $3.81; FY19: $15.39)2/5ACM Q119 (Q1: $0.51; FY19: $2.77)2/6JEC Q119 (Q1: $1.05; FY19: $5.23)2/6Brazil Truck Data2/7MTW

2、Q418 (Q4: $0.02; FY19: $1.18)2/6Brazil Tractor Data2/8Baker Hughes Rig CountWHATS HOT AND WHATS NOTMachinery: This was the first heavy week of earnings for Machinery with divergent performance among the group with CAT and ITW underperforming and OSK and PCAR leading the way. Still, CAT ended the wee

3、k down 4% despite a 9% miss on Q4 tied to higher costs in construction (freight, mat, production inefficiencies) and one time write offs in the FinCo, and guiding FY19 4% below the street. We believe the midpoint of the guide is prudent given uncertain macro, with potential upside with resolution of

4、 US / China trade relations, and reflects some level of conservatism with the new CFO. For ITW, the underperformance was mostly a function of weaker than expected organic growth both in Q4 and in FY19 (lowered guide from 2-4% to 1-3% on weaker auto and semi forecasts). Still, ITW maintained FY EPS e

5、stimates giving rise to market concerns about the level of conservatism in the guide. PHs stock traded off marginally after beating Q2 and raising FY19 guidance by 2%, reflecting improved margins and help from repurchases. While we were pleased with PHs operational performance, the market was more s

6、keptical reflecting the more muted topline and decelerating order trends. We believe organic growth could re-accelerate assuming the macro uncertainty is resolved but this is more likely in PHs FY20. OSK was up 7% for the week with the company crushing Q1 estimates and new guidance implying 14% y/y

7、EPS growth. Visibility in total for OSK is above average and orders in Access Equipment reached near record levels, up 8% y/y on tough comps. Strength was noted as broad based across North America and overseas. Lead times on telehandlers are now 5-6 months. PCAR beat Q4 estimates on a better top lin

8、e and earnings from the FinCo and raised its NA retail sales outlook. While gross margins continue to be unimpressive, supplier constraints are easing and PCARs visibility into 2019 is also very solid with backlogs extending to year end for North America and out two to three months for Europe which

9、is viewed as normal. Also on the truck front, China heavy duty truck sales released today and were down 12% in January (our CS China team expects a 20% drop inQ1).Engineering & Construction: MDR outperformed both the group and the broader market for the week on the back of todays strong performance

10、which in our view was most likely tied to Golden Pass LNG news. Reuters reported that Qatar Petroleum and Exxon Mobil are expected to announce plans next week to proceed with the $10B project that will expand an LNG export facility in the Gulf Coast. On todays call Exxon noted that its working very

11、closely with QP to advance that investment and announce something in the “very near term.” We believe that MDR-Chiyoda is seen as the likely winner of the award with CBI- Chiyoda having been on the FEED and contract value is estimated in the $5B range. PWR was under pressure today following an updat

12、e from Dominion on the Atlantic Coast pipeline about the project being further delayed. Dominion now expects that construction could recommence on the full route in Q319 with partial in-service in late 2020 and full in-service in early 2021 which is an incremental delay. The total project cost was a

13、lso revised up to be between $7.0-$7.5B, a $500M increase relative to the update that was provided in November. Overall, Dominion remains highly confident in successful and timely resolution of all outstanding permit issues. This has implications in terms of visibility for PWR given this is a projec

14、t already in backlog (we estimate total project value of $500M over a few years) which we think the market was expecting to support earnings in 2019 (PWR has talked to a $1B of large pipe work in 2019). Still, we would note that 85% of PWRs business is comprised of a recurring base and there is also

15、 $3B of other pursuits as of Q3 for PWR, much of which could start in 2019 to backfill additional pipeline work while ACP is still expected to contribute even under the new schedule. Finally, several E&Ps/Majors reported this week, largely maintaining 2019 capex budgets while ExxonMobils was higher

16、than expected (+26% YoY excluding 2018 acquisitions).Jamie Cook, CFAResearch AnalystThemis DavrisResearch AnalystKevin WilsonResearch AnalystAlexanderKhanResearchAnalyst212-538-6098+44 207 888 1060212-325-5079212-325-7714 HYPERLINK mailto:jamie.cook jamie.co HYPERLINK mailto:ok ok HYPERLINK mailto:t

17、hemis.davris themis.da HYPERLINK mailto:vris vris HYPERLINK mailto:kevin.wilson kevin.wilson HYPERLINK mailto:alexander.khan alexander.khanDISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGALENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.

18、US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single fac

19、tor in making their investment decision.MACHINERY / MULTI-INDUSTRYMACHINERY / MULTI-INDUSTRYCAT Q418 Look What the CAT Dragged Down: Thoughts Post Call: CATs stock closeddown nearly 9% after missing Q418 EPS and guiding 4% below the street for FY2019. The Q418 miss was related to higher costs in con

20、struction (freight, mat, production inefficiencies and the absence of incentives in Brazil) and one time write offs in the FinCo. We believe investor concerns are centered on the lack of execution in Q418 in Construction and the fact that price/cost in total is expected to be neutral when it was exp

21、ected as a tailwind. In particular, this is with price increases announced in 2H18 and January 1st coupled with material costs down considerably. We believe the midpoint of the guide is prudent given uncertain macro, with potential upside with resolution of US / China trade relations, and reflects s

22、ome level of conservatism with the new CFO. Executing in Q119 will be key given Q418 hiccup reminds investors of legacy CAT. Additionally, the analyst day in May should provide another catalyst as it addresses long term capital allocation plan and return targets, as well as a potential update on the

23、 macro environment and what that implies for 2019 guidance. We tweak our FY19 EPS to $12.25, maintain 2020, and introduce 2021 EPS of $14.55. Risks: macro, commodity prices. Details on Guide: For FY2019, CAT expects EPS of $11.75-$12.75 or $12.25 at the midpoint which assumes modest sales increases

24、across all segments. Tailwinds include incentive comp (+$600M), the absence of one-time write offs in FinCo (+$150M) and share repo (not quantified except $750M expected in Q119 and benefit from y/y S/O decline). Price/cost in total is expected neutral which appears conservative in our view and incl

25、udes $240M in tariff. Higher tax rate is a headwind of $0.30. Restructuring cost is a headwind now that its included in GAAP albeit modest and the absence of dealer inventory build a negative estimated at$0.75 per share. Volume growth is expected to be the biggest driver of EPS growth which the mark

26、et is skeptical on given modest backlog decline in Q418 and uncertain macro. Implied FCF is robust with cap ex forecast flat, CAT inventory flat and lack of pension contribution a tailwind by$1B. ( HYPERLINK /s/V7gCO84AF-ZGHf Link to Note)OSK Q119 Too Hot to (Tele)handle: Thoughts Post Print: OSKs s

27、tock closed up nearly 3% after beating Q119 and raising FY19 revenues and EPS on a better AE outlook which now implies 14% y/y EPS growth. Orders in AE reached near record levels at $1.56B with backlog sitting at$1.7B up 8% y/y. Furthermore, the AE guide appears conservative, with revenues in the re

28、maining 9 months assumed flattish and margins down modestly tied to more negative mix from telehandlers and the assumption of neutral price/cost. Strength was noted as broad based across North America and overseas. Lead times on telehandlers are now 5-6 months out whereas booms are 30-45 days. Visib

29、ility in total for OSK is above average with total backlog of $6.26B up 30.6% y/y. F&E, Defense and Commercial outlooks are unchanged, although operational execution in the quarter was impressive. FCF is forecast unchanged at $450M and share repo is still forecast at $350M. We increase our FY2019-21

30、 estimates to $7.50, $7.15 and $6.05 and our TP to $81 reflecting better than average visibility and the assumption OSK continues to use excess cash to buy back stock. Key risks include an Access downturn, material cost headwinds and the loss of defense contracts. Details on Guide: OSK raised its FY

31、19 adjusted EPS guide to $7.00-7.50, tied to the improved outlook in AE. Sales are now expected at $8.05-8.25B. Adjusted operating income is expected at$685-735M. By segment, FY19 expectations are for AE sales of $3.8-4.0B with margins of 10.75- 11.25% , Defense sales and margins are maintained at $

32、2B and 9.5-9.75% respectively, along with F&E sales of $1.2B and margins of 13.25-13.5% and Commercial sales of $1.05B and margins of 7-7.25%. Capex is guided to $165M, adjusted tax rate at 20-21% and FCF at $450M while OSK assumes a share count of 71.5M (assumes $350M of repurchases in FY19). For Q

33、2, OSK expects modestly higher sales y/y and EPS flat to slightly higher y/y, given favorable items last year and chassis availability in Commercial. ( HYPERLINK /s/V7gEt54AF-e Link toNote)PH Q219 Hope Springs Eventually: Thoughts Post Call: PH stock traded off marginally after beating its Q219 EPS

34、guidance by 6% and raising FY19 adjusted EPS by 2%, reflecting improved margins and help from the $500M in share repurchase. For FY19, Parker raised its adjusted margin forecast across all three segments with total adjusted margins up 30bps from the prior guide to 17.2% at the MP. Despite top line c

35、hallenges, margin performance is forecasted better vs. expectations as PH is benefiting from savings associated with prior restructurings, phase two of the Win Strategy (simplification efforts and lower SG&A) as well as productivity and supply chain improvements. Still, PHs top line forecast remains

36、 more muted compared to several forecasts from multi-industrial peers, which have averaged in the mid-single digit range. For the full year, organic growth is now forecast up 2-4% or up 3% at the MP, down from up 3.9% in the prior guide which implies organic growth in 2H19 of less than 1%. Also, loo

37、king to the next two quarters,PH expects Industrial orders to mirror organic revenue growth which is forecast slightly higher than 1% in NA and off about 0.5% overseas. With regards to the macro, PH sees recent trends as more of a pause in demand tied to uncertainty associated with Trade War, Brexit

38、, etc.; organic growth could re-accelerate once resolved but this is more likely in PHs FY20. Additionally as we look to FY20, PH has several levers it can use to support EPS including additional benefits from restructuring and the CLC integration as well as repo and M&A given strong balance sheet.

39、We tweak our FY2019-2021 EPS to $11.50, $12.00, and $12.60 and TP to $190 and reiterate our OP. Risks: macro, mat costs, M&A integration. Details on FY2019 Guide: PH raised its adj. EPS guide to $11.35-11.85, or $11.60 at the MP. The $0.20 raise is driven by higher overall adj. op. margins and a low

40、er expected share count , with $0.11 from segment op. income, $0.03 from tax, and $0.20 from share count, offset by $(0.11) in G&A/other and $(0.03) in interest. Total sales for FY19 are expected up 2-4% organically (prev. up 2.5-5.3%) and (0.4)%-2.0% in total. Sales growth expectations by segment a

41、re DI NA 1.4-3.9%, DI Intl (4.9)-(2.5)%, and Aero 4.5-6.6%. Adj. op. margin is now expected at 17.0-17.4%. By segment, expectations are DI NA at 17.0-17.5%, DI Intl at 16.1-16.5%, and Aero at 19.0-19.3%. Q119 adjusted EPS is forecast $2.99 which excludes$0.05 in realignment costs and $0.01 in CLC co

42、sts to achieve. ( HYPERLINK /s/V7gG8U4AF-ZGHf Link to Note)ITW Q418 Earnings First Blush: ITW Beat Marginally: ITW reported Q418 GAAP EPS of$1.83, which compares favorably to the consensus estimate of $1.82 and at the midpoint of ITWs guidance of $1.78-$1.88. Results included a $0.02 headwind associ

43、ated with higher tax rate offset by $0.02 benefit from other income. Total sales were $3.58B, vs. the street at $3.61B. Q418 organic sales increased 1% which was at the low end of ITWs guide of 1-2% tied to weakness in overseas markets. Specifically, NA grew 4% however overseas declined 2%. PLS was

44、also a headwind of 90bps. By segment, organic growth declined in Auto off 4%, Specialty down 2% and Construction decreased 1%. ITW saw positive organic growth in Welding up 8%, Food increased 5%, Polymer and Fluids up 4%, and TM&E was about flat. Total operating income was $860M which was $8M lower

45、vs the street. ITWs operating margins improved 70bps y/y to 24.0% with EI contributing 110bps, volume positive by 20bps, offset by 40bps of price/cost headwind and 20 bps of other. FCF was $727M and ITW repurchased $500M in stock. EPS Maintained: ITW reiterated its 2019 EPS guide introduced at the a

46、nalyst day in December, with EPS of $7.90-8.20 ($8.05 at the midpoint), vs. consensus estimates of $8.02, while revenue is now seen at $14.8-15.0B ($14.9- 15.1B previously), roughly flat year-over-year and vs. consensus of $14.97B. The guidance also now assumes organic growth of 1-3% (from 2-4% prev

47、iously), based on current run rates, with PLS detracting 80bps. The year-over-year targeted EPS growth is driven by $0.20-0.30 from organic growth (1-3% with 35% incrementals), $0.25-0.35 from enterprise initiatives, and $0.25 from a lower share count, offset by $0.20 of FX and $0.10-0.20 from tax r

48、ate, restructuring, and interest. By segment, organic growth for 2019 is seen at (4)-0% for Auto OEM, 3-5% for Food Equipment, 1- 3% for T&ME, 3-6% for Welding, 1-3% for Polymers & Fluids, 1-4% for Construction Products, and 1-3% for Specialty Products. ITW still expects operating margin to improve

49、by 100bps, driven by enterprise initiatives, and after-tax ROIC of 200bps. Further, FCF is still seen at 100%+ of net income, and share repurchase is still expected at $1.5B. For Q1, ITW sees EPS of $1.73-1.83 ($1.78 at the midpoint), below consensus estimates of $1.94, but impacted by higher restru

50、cturing expense ($0.07), FX ($0.07), and a 24.5-25.5% tax rate ($0.05). Excluding these impacts implies a clean Q119 EPS of $1.97, above consensus estimates. Additionally, organic revenue is seen as approximately flat for the quarter at current run rates. Finally, given the lower organic growth assu

51、mption, we expect the market to show some concern in terms of ITW maintaining its previous EPS guidance. ( HYPERLINK /s/V7gHMD4AF-ZGHf Link toNote)Hitachi Construction Machinery 3Q FY3/19 results: Solid demand backdrop and earnings structure reform take effect; full-year guidance raised: CS analyst

52、Shinji Kuroda published the following in a note: Impression: Slightly positive. New guidance is upbeat: Hitachi Construction Machinery (HCM) announced 3Q (OctDec) results at 3:00 p.m. on 30 January. Adjusted OP rose by 1% YoY to 31.8bn (vs. our 32.8bn estimate), a record high. The company maintained

53、 its conservative 4Q forex assumptions (100/$, 120/, 16.2/RMB) and raised full-year OP guidance from 91.0bn to 100bn (+7% YoY; estimated P/E 9.7x), adding only the 3Q guidance beat portion. For the remaining balance of 4Q OP, HCM is guiding for a 47% reduction to 14.9bn. Although demand in China and

54、 India is weaker than HCM envisaged in some areas, overall demand conditions are solid, and we expect full-year OP to exceed the I/B/E/S consensus of 107.5bn, coming in around 115.0bn, in line with our estimate. In a telephone conference, the companysaid:with structural reforms having taken effect,

55、HCM has succeeded in building a structure for stable profit generation and is aiming for stable growth in FY3/20 as well; (2) mining machinery continuesto see a solid order climate, with the B/B ratio accelerating again; and (3) conditions remain challenging in China, with operation times again lowe

56、r in December. However, the sales structure remains focused on debt recovery. HCM has apparently seen no shift in demand from Caterpillar to Japanese manufacturers. ( HYPERLINK /s/V7gDQs4AF-ZGHf Link to Note)ETN Q418 Are Winds of Sentiment Change Blowing?: CS analyst John Walsh published the followi

57、ng in a note: Does Q4 Mark a Turn in Sentiment?: ETN delivered better than expected organic sales growth (+7%), double digit ESS orders (+12%), and 2019 EPS guidance ahead of investor expectations. ETN is guiding to adjusted EPS of $5.70-$6.00 versus consensus of $5.82 (negative revisions of 10% YTD

58、). This led to outperformance of 3.8% on the day versus the S&P500. On the back of a strong earnings report and a credible guide we think the stock can continue to re-rate higher. Order Spotlight on ESS and Hydraulics: ESS (+12%) and Hydraulic (-4%) orders are under investors microscopes. We view th

59、e strong ESS orders as more than a rebound off the weaker than expected Q318 print and continue to see data centers as a growth vertical. We expect ETNs electrical DC orders to diverge from IT suppliers (e.g. servers, chips) as the latter face mix headwinds. Hydraulic orders decelerated q/q versus t

60、he +4% in Q318. However, we attribute this to difficult year ago comparisons as growth-on growth metrics remain above 20%. Electrical and Aerospace on Firm Ground: We see HSD and low DD profit growth for Electrical (e.g. EP and ESS) and Aerospace segments, respectively. While EPs organic sales growt