analyst's handbook: industrials - yardeni research · analyst’s handbook: industrials...

Analyst’s Handbook:Industrials

Yardeni Research, Inc.

June 27, 2018

Dr. Edward Yardeni516-972-7683

[email protected]

Mali Quintana480-664-1333

[email protected]

Please visit our sites atwww.yardeni.comblog.yardeni.com

thinking outside the box

Table Of Contents Table Of ContentsTable Of Contents

June 27, 2018 / Analyst’s Handbook: Industrials www.yardeni.com


S&P 500 Industrials 1S&P 500: Industrials 2S&P 500: Industrials (cont) 3-4S&P 500/400/600 Industrials YTD 5-6Earnings 7Revenues & Margins 8Earnings Growth & Valuation 9

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201995

220

345

470

595

720

95

220

345

470

595

720

6/27

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200-day moving average.* Ratio scale.

Source: Standard & Poor’s and Haver Analytics.

S&P 500 INDUSTRIALS STOCK PRICE INDEX*

Figure 1.

48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24.15

.20

.25

.30

.15

.20

.25

.30

S&P 500 INDUSTRIALS(as a ratio of S&P 500)

6/22

Note: Shaded areas denote recessions according to the National Bureau of Economic Research. Monthly through December 1990, then weekly.Source: Standard & Poor’s Corporation.

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Figure 2.

S&P 500 Industrials

Page 1 / June 27, 2018 / Analyst’s Handbook: Industrials www.yardeni.com


Figure 3.

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20100

200

300

400

500

600

700

6/27

S&P 500 INDUSTRIALS

06 07 08 09 10 11 12 13 14 15 16 17 18 19 2050

150

250

350

450

550

6/27

S&P 500 CONSTRUCTION & ENGINEERING(FLR JEC PWR)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20150

350

550

750

950

1150

1350

6/27S&P 500 AEROSPACE & DEFENSE(ARNC BA COL GD LLL LMT NOC RTNTDG TXT UTX)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20100

300

500

700

900

1100

6/27

S&P 500 CONSTRUCTION MACHINERY & HEAVY TRUCKS(CAT CMI PCAR)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 2025

100

175

250

325

400

475

6/27

S&P 500 BUILDING PRODUCTS(ALLE AOS FBHS JCI MAS)

200-day moving averageSource: Standard & Poor’s Corporation.

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20100

250

400

550

700

850

1000

6/27

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S&P 500 ELECTRICAL COMPONENTS &EQUIPMENT(AME AYI EMR ETN ROK)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 200

50

100

150

200

12/11

S&P 500 COMMERCIAL PRINTING(RRD)

200-day moving averageSource: Standard and Poor’s Corporation.

S&P 500: Industrials



Figure 4.

06 07 08 09 10 11 12 13 14 15 16 17 18 19 2050

100

150

200

250

6/27

S&P 500 ENVIRONMENTAL &FACILITIES SERVICES(RSG SRCL WM)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20150

350

550

750

950

1150

1350

6/27

S&P 500 INDUSTRIAL MACHINERY(DOV FLS FTV IR ITW PH PNR SNA SWK XYL)

***** Chart Not Available *****

Task: GMBINDHR

Invalid calculation element [S5202AD]

06-27-2018 - 00:29:00

06 07 08 09 10 11 12 13 14 15 16 17 18 19 2050

100

150

200

250

300

350

2/28

S&P 500 OFFICE SERVICES & SUPPLIES(PBI)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 2050

150

250

350

450

550

6/27

S&P 500 INDUSTRIAL CONGLOMERATES(GE HON MMM ROP)

200-day moving average

Source: Standard & Poor’s Corporation.

06 07 08 09 10 11 12 13 14 15 16 17 18 19 2050

150

250

350

450

550

650

6/27

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S&P 500 TRADING COMPANIES &DISTRIBUTORS(FAST GWW URI)

S&P 500: Industrials (cont)



Figure 5.

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20100

150

200

250

300

350

400

450

500

550

600

650

700

750

800

6/27

S&P 500 TRANSPORTATION INDEX

06 07 08 09 10 11 12 13 14 15 16 17 18 19 200

50

100

150

200

250

300

350

400

450

6/27

S&P 500 AIRLINES(AAL ALK DAL LUV UAL)

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20150

200

250

300

350

400

450

500

550

600

650

700

750

800

850

900

6/27

S&P 500 AIR FREIGHT & LOGISTICS(CHRW EXPD FDX UPS)

200-day moving average

Source: Standard & Poor’s Corporation.

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20100200300400500600700800900100011001200130014001500160017001800

6/27

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S&P 500 RAILROADS(CSX KSU NSC UNP)

S&P 500: Industrials (cont)



Jan Feb Mar Apr May Jun Jul Aug Sep2018

-15

-5

5

15

25

35

45

1.0

Figure 5.S&P 500 LargeCap

All Sectors


-15

-5

5

15

25

35

45

2.2

S&P 400 MidCap


-15

-5

5

15

25

35

45

8.7

S&P 600 SmallCap


-25-15

-55

15253545

-5.9

IndustrialsSector


-25-15

-55

15253545

-4.3


-25-15

-55

15253545

4.4


-25-15

-55

152535455565

1.1

Aerospace &Defense


-25-15

-55

152535455565

-.2


-25-15

-55

152535455565

7.0


-20-10

01020304050

-7.0

Air Freight &Logistics


-30-20-10

010203040

6.2


-40-20

020406080

100

-16.0

Airlines


-40-20

020406080

100

-15.3


-40-20

020406080

100

-7.2


-30

-10

10

30

50

70

-12.0

BuildingProducts

CommercialPrinting


-30

-10

10

30

50

70

-1.7


-40

-30

-20

-10

0

10

CommercialPrinting


-100

-60

-20

20

60

100

140

-13.4


-100

-60

-20

20

60

100

140

-7.3


-40

-20

0

20

40

-7.6

Construction &Engineering


-40

-20

0

20

40

-10.1


-40

-20

0

20

40

60

2.9


-50

-30

-10

10

30

50

-16.3

ConstructionMachinery &Heavy Trucks


-50

-30

-10

10

30

50

-5.9


-50

-30

-10

10

30

50

-5.1


-30

-10

10

30

50

18.3DiversifiedSupportServices


-30

-10

10

30

50

70

13.7


-30

-10

10

30

50

70

11.7


-25-15

-55

1525354555

-7.1

ElectricalComponents& Equipment

Source: Standard & Poor’s.


-25-15

-55

1525354555

-7.1


-35-25-15

-55

1525354555

10.1

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S&P 500/400/600 Industrials YTD




-50

-30

-10

10

30

50

-4.9

Figure 6.S&P 500 LargeCap

Environmental& FacilitiesServices


-20

0

20

40

60

6.7

S&P 400 MidCap


-20

0

20

40

60

7.4

S&P 600 SmallCap


-40-20

020406080

100120140

24.1

Human Resource& EmploymentServices


-40-20

020406080

100120140

-26.8Jan Feb Mar Apr May Jun Jul Aug Sep

2018

-40-20

020406080

100120140

22.2


-20

-10

0

10

20

30

40

-14.0

IndustrialConglomerates


-20

-10

0

10

20

30

40

-5.5


-20

0

20

40

60

12.8


-20-10

01020304050

-11.1

IndustrialMachinery

Office Services& Supplies


-30-20-10

01020304050

-5.7


-20-10

01020304050

-1.4


-40-20

020406080

100120

Office Services& Supplies


-40-20

020406080

100120

-3.8


-40-20

020406080

100120

1.3


-40-30-20-10

01020304050

6.6Railroads


-30-20-10

010203040

-.7

TradingCompanies &Distributors

Source: Standard & Poor’s.


-30-20-10

010203040

1.4


-30-20-10

010203040

13.7

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S&P 500/400/600 Industrials YTD



1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20198

15

22

29

36

43

8

15

22

29

36

43

17 18

19 6/21

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* Time-weighted average of consensus estimates for current year and next year. Monthly through December 2005, then weekly.Source: Thomson Reuters I/B/E/S.

S&P 500 INDUSTRIALS OPERATING EARNINGS PER SHARE(analysts’ average forecasts, ratio scale)

Consensus ForecastsAnnual estimates

Forward earnings*

Figure 8.

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-50

-40

-30

-20

-10

0

10

20

30

40

-50

-40

-30

-20

-10

0

10

20

30

40

NERI Apr 17.8 May 12.1 Jun 9.7

Jun

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* Three-month moving average of the number of forward earnings estimates up less number of estimates down, expressed as a percentageof the total number of forward earnings estimates.Source: Thomson Reuters I/B/E/S.

S&P 500 INDUSTRIALS NET EARNINGS REVISIONS*

Figure 9.

Earnings



2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019175

225

275

325

375

425

175

225

275

325

375

425

17

18

196/21

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* Time-weighted average of consensus estimates for current year and next year. Monthly through December 2005, then weekly.Source: Thomson Reuters I/B/E/S.

S&P 500 INDUSTRIALS REVENUES PER SHARE(analysts’ average forecasts, ratio scale)


Forward revenues*

Figure 10.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20196

7

8

9

10

11

6

7

8

9

10

11

17

1819

6/21

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(using analysts’ average earnings and revenues forecasts)

* Time-weighted average of the consensus estimates for current year and next year. Monthly through December 2005, weekly thereafter.Source: Thomson Reuters I/B/E/S.

S&P 500 INDUSTRIALS PROJECTED PROFIT MARGIN


Forward profit margin* (10.1)

Figure 11.

Revenues & Margins



1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-20

-15

-10

-5

0

5

10

15

20

25

-20

-15

-10

-5

0

5

10

15

20

25

6/21

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* STEG: 12- month (52-week) forward consensus expected earnings growth. LTEG: 5-year forward consensus expected earnings growth. Monthly datathrough 2005, then weekly.Source: Thomson Reuters I/B/E/S.

S&P 500 INDUSTRIALS LTEG VS STEG(percent)

LTEG* (15.3)

STEG* (15.4)

Figure 12.

5

10

15

20

25

5

10

15

20

25

6/21

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019.50

.75

1.00

1.25

1.50

1.75

2.00

2.25

.50

.75

1.00

1.25

1.50

1.75

2.00

2.25

6/21

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* Price divided by 12-month forward consensus expected operating earnings per share.** Sector or industry forward P/E relative to S&P 500 forward P/E.

*** Sector or industry forward P/E relative to sector or industry consensus 5-year LTEG forecast.Source: Thomson Reuters I/B/E/S.

S&P 500 INDUSTRIALS VALUATION

Forward P/E* (16.0)

Relative P/E** (1.0)PEG Ratio*** (1.0)

Figure 13.

Earnings Growth & Valuation



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