I’ve recently come across a number of positive indicators relating to the financial health of manufacturing. One came from the National Electrical Manufacturers Association (NEMA), another courtesy of The New York Times and the third from analyst Longbow Research.
Electrical Equipment
Results from NEMA’s latest business conditions survey showed the economic environment facing the North American electroindustry improved for a second straight month in November. Though the Electroindustry Business Confidence Index (EBCI) for current North American conditions slipped to 56 from 57.4 in the previous month, it nonetheless cleared the 50 mark above which more panelists than not see an improvement in the business environment. Twenty percent (20%) of survey panelists reported improved conditions in November compared to the previous month while only 8% experienced deteriorating conditions. The vast majority–72%–saw no change in conditions.
Likewise, while November’s EBCI for future North American conditions eased to 60 from 63 a month ago, the gauge of expectation six month hence continued to point in a positive direction. Some 32% of panelists said they expected conditions to improve to at least some degree over the next six months versus 12% anticipating they will worsen.
Auto Industry
From The New York Times, the Center for Automotive Research said it expected Detroit automakers to hire 14,750 hourly employees in the next four years. It expects about 15% in Detroit automakers while nearly 80% at suppliers.
It further says that about 590,000 people now work in the auto industry, 13 percent more than in July 2009.
Analyst View of Rockwell
Mark Douglass, senior analyst with Longbow Research, issued a report on Rockwell Automation (ticker symbol ROK) based on his visits during Automation Fair. Below are some summary points—note he lists Rockwell as a “Buy.”
• ROK recently hosted its annual analyst meeting and Automation Fair, its highest attended event in its twenty-year history with nearly 10,000 attendees. The general air of the Automation Fair booths was very positive, with many partners, suppliers and distributors having a positive outlook towards capital spending in automation despite what we see in the headlines and in the market.
• The key themes: plant-wide optimization incorporating Logix and PlantPAx platforms, scalability with new low-to-medium range systems providing greater flexibility and affordability for customers, particularly equipment OEMs, and the expansion of its variable frequency motor drives portfolio. With its value-add products and solutions, and position as one of only two global players that cover both process and discrete automation, ROK continues to expect to outperform in the $68-70B automation markets, which are expected to grow above global GDP.
• We also walked the show outside the analyst meeting. Overall the mood was upbeat not just for ROK products but the ancillary items displayed by a wide variety of Alliance partners. Most of the attendees indicated confidence heading into 2012 based on current order trends and backlog.
• We also conducted an international survey to check on demand and outlook in Brazil, Germany, France and Mexico. We provide some of the highlights from the survey in this report, but for further information see our other report published today “International Automation: Demand Mixed, Outlook Moderating Sharply.”
• We are maintaining our BUY rating and 12-month target price of $88 looking ahead to FY13E as we are more confident in our FY12 estimates and see a clearer path with large opportunities within both Architecture and Control Products as customers push for plant-wide optimization, sustainability and performance. We think ROK’s strong product offering will help it realize market share gains. Its mid-to-late cycle end market exposure (e.g. oil & gas and mining) provide excellent opportunities for growth through 2012 and beyond.
