No Sign of U.S Manufacturing Slump

Machinery stocks may outperform the market through the end of the year as new orders rebound, helping to defy concerns about another U.S. recession.

American manufacturers booked $32.6 billion in new orders for machinery equipment in September, the most since July 2008, according to data from the Census Bureau released Oct. 26. The Standard & Poor’s Supercomposite Machinery Index, which includes Caterpillar Inc. (CAT) and Deere & Co. (DE), has gained 26 percent since Oct. 3, while the S&P 500 has risen 13 percent. The machinery index lagged behind between July 7 and Oct. 3, when it fell 35 percent, compared with a 19 percent decline for the S&P index.

“There’s skepticism about the industrial economy and machinery stocks, but robust activity suggests the risk of a double-dip recession is less likely,” said Stephen Volkmann, a New York-based analyst at Jefferies & Co. The sector may continue to rally through December, as it has tended to outperform from November through year-end during the past decade, he added.

There’s “no evidence” of a collapse in North American manufacturing as shipments still are growing, said Ann Duignan, a New York-based analyst at JPMorgan Chase & Co. The total for September was $31.1 billion worth of machinery equipment, up 13 percent from a year ago, Census Bureau data show.

“Companies are still reporting modest growth with no wholesale change in demand,” Duignan said.
Rising Outlook

Parker Hannifin Corp. (PH), based in Cleveland, increased its fiscal 2012 outlook for industrial North American-segment revenue growth to about 8.3 percent from about 6.2 percent, as orders “re-accelerated” during the period ended Sept. 30, said Duignan, who maintains a “neutral” rating on the stock. The motion- and control-technology maker’s orders from the region grew 16 percent compared with a year ago, following an 11 percent rise the previous quarter, the company said Oct. 18.

“There’s a lot of activity,” and “order trends here in North America are still very positive,” President and Chief Executive Officer Donald Washkewicz said on an Oct. 18 conference call.

Caterpillar, based in Peoria, Illinois, reported third- quarter revenue of $15.7 billion, compared with $11.1 billion a year ago, the company said Oct. 24. The construction and agricultural-equipment maker’s order backlog was $24.4 billion, up 40 percent.
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