While some companies may be consolidating, others are reconfiguring and expanding. General Electric Company (NYSE: GE) has acquired a small airplane engine company in the Czech Republic. Selling it's appliance business and adding more to it's portfolio of aircraft and engine capability should be a good move. The Wall Street Journal (subscription required) reported today that GE hopes to improve its competitive position against Pratt & Whitney.
A response from a Pratt & Whitney spokesman played down the increased competition and said that although the company takes this GE move seriously it has a 45-year history producing small engines and holds a solid position in the market place. This type of comment is to be expected and has some validity, but that does not make it good news for P&W.
P&W is a division of another major giant industrial conglomerate United Technologies (NYSE: UTX). Both GE and UTX stocks were up in early morning trading today.
UPDATE: GE closed at $26.91 up $0.40 (1.51%). UTX closed at $61.05 up $1.35 ( 2.26%).
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of GE.
TheStreet.com's Jim Cramer says recent downgrades are killing whole industries, and they're coming at a terrible time.
You can't lose autos and aerospace. Yet that's what's happening. The devastating aerospace downgrade by Goldman yesterday had pin action galore, wrecking everything from United Tech (NYSE: UTX) (Cramer's Take) and Parker-Hannifin (NYSE: PH) (Cramer's Take) to BE Aerospace (NASDAQ: BEAV) (Cramer's Take). It took the whole frame down with it and made everything toxic. And it happens at a terrible time. It isn't like Honeywell (NYSE: HON) (Cramer's Take), which with a few days left in the quarter can come out defending itself. Goldman rolled a perfect strike.
How the mighty have fallen, at least in the stock market. GE (NYSE: GE) trades near a 52-week low at $31.
Now, short sellers have added insult to injury. The short interest in GE has moved up 11 million to 68.7 million between May 15 and May 30. That percent increase is almost as high as the jump in the short interest at US Air (NYSE: LCC).
The fact that so many shares are bet that GE will fall further is extraordinary. The company still holds one of the best credit ratings of any corporation in the US. Its infrastructure business, the firm's largest division, continues to do remarkably well.
But investors are assuming that GE's industrial, medical and financial operations could have more bad quarters ahead of them.
Shares in rival conglomerate United Technologies (NYSE: UTX) have far outperformed GE during the last year.
That says a mouthful.
Douglas A. McIntyre is an editor at 247wallst.com.
"Dividend growth has become increasingly scarce on Wall Street," says says Chuck Carlson, an expert on dividend reinvestment plans. In his The DRIP Investor he looks at two stocks boosting their payouts.
"For the first time in five years, the number of companies in 2007 boosting their dividends declined nearly 6% from the previous year, according to Standard & Poor's. And the slowdown in dividend growth continued in the first quarter of 2008.
"The first quarter marked the seventh consecutive three-month period of year-over-year declines in the number of companies raising dividends. Through the first three months of this year, 19% fewer companies raised dividends than in the year-earlier quarter.
"Even more alarming, 83 companies decreased their dividends during the fi rst quarter, according to S&P. That's up from just 19 in the same period in 2007 and is the highest number of dividend decreases since 1991.
"Nevertheless, there are still plenty of companies willing to boost their dividends, and you can now buy such companies at bargain prices.
According to this article at CNBC, industrial manufacturer Honeywell (NYSE: HON) doesn't see the current recession (or slowdown, if you believe recession is too harsh a term) hurting its plans all that much. Shareholders of the company should certainly rejoice at management's assertion that the company will still be able to deliver somewhere between $3.70 and $3.80 in earnings per share for 2008.
Reaffirmation is always a good thing in a market as tempestuous as this one has been. The question is, when you see a news item such as this, what actionable inference can you take from it? In other words, should you be looking at Honeywell? Investors should indeed perform some due diligence on the company, because based on the current price of the stock, Honeywell isn't overly pricey. Plus, the stock is really close to a 52-week high. I'm not the biggest fan of buying at 52-week highs, but for those who believe in trading via chart science, a stock near the top end of a range is oftentimes attractive since, in theory, a majority of the weak holders will be out of it by that point.
But being patient for a pullback is usually a virtue with any strong stock. And here's something else to consider. Competitor United Technologies (NYSE: UTX), which has a similar dividend yield to Honeywell, is further away from its 52-week high, but well off its 52-week low. Does that make UTX more attractive? Possibly. And Goodrich Corp. (NYSE: GR), while not having as high a dividend yield, is also not at a 52-week high. So while the reaffirmation bodes well for Honeywell, definitely kick the company's financial tires a bit before making any decision, and look around to similar companies that you might think are better values.
Disclosure: I don't own shares in any company mentioned here; positions can change at any time.
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
Readers of this space know that selected defense contractors are my preferred plays, growing U.S. economy or not. (But let's hope it's a growing U.S. economy). And the reason for the defense contractor bullishness is obvious enough. The geopolitical climate can change, of course, but it looks like defense, national security and anti-terrorism efforts will remain at the top of the U.S.'s concerns, for the foreseeable future.
Further, when one can combine a defense contractor with an industrial play, including commercial aviation, the potential exists for superior return on equity. And with the above in mind, United Technologies is worth a review.
United Technologies (NYSE: UTX) is one of those handful of stocks in which you can buy 200 shares or 50 shares for your child's college fund, and then look back on it in 10 years and be very glad you did.
Here are some attributes: Leadership position in high-value-add sectors, substantial defense contracts, infrastructure/capital improvement businesses, technological leadership, diversification and operational balance, economies of scale, massive amounts of engineering talent, long history of steady earnings growth and dividend growth. The Reuters F2008/F2009 EPS consensus estimates for UTX are $4.88/$5.45.
TheStreet.com's Jim Cramer says that rebuilding from natural disasters can alter the growth picture for a country.
Is it Katrina all over again? Or is it bigger? Much bigger? That's what I am thinking about this Chinese earthquake.
Katrina distorted the U.S.'s growth pattern for more than a full year. The raw materials, the effort, the work, the reconstruction affected businesses from small-scale retail to refining and infrastructure.
We don't really know how China works, although a lot of people tell us they do. To me, the Chinese are always a day away from revolution or civil war and the trick of the government is to stay one step ahead of the posse. (Chinese hands will dispute that, but you have to appreciate that it takes a special skill to be wrong for more than a century and still maintain credibility.)
That means massive reconstruction: bricks, lumber, cement, steel and all the trimmings. Massive imports, not controlled by the Chinese and their little negotiation games like they play with iron and steel and coal. Just full-bore buying and something that could take growth for China back to the levels that everyone thought it couldn't absorb without more inflation.
Barnes Group (NYSE: B) is an international aerospace and industrial components manufacturing and distribution company. The firm operates through three divisions. Barnes Aerospace is a highly specialized manufacturer of components and assemblies used in commercial, business and military jets and industrial gas turbines. Barnes Industrial is the largest manufacturer of precision springs in North America and one of the largest makers of nitrogen gas springs in the world. Barnes Distribution is a leading provider of maintenance, repair, operating and production supplies, such as fasteners, electrical components, abrasives, adhesives and tools. Customers include General Electric (NYSE: GE), Honeywell International (NYSE: HON) and United Technologies (NYSE: UTX).
The company surprised the Street last week, when it reported Q1 EPS of 60 cents and revenues of $388.6 million. Analysts had been looking for 53 cents and $381.2 million. The CEO attributed success to the firm's global reach. Management also guided FY08 EPS to $2.30-$2.39 ($2.24 consensus).
TheStreet.com's Jim Cramer says there's some reason for caution, but no reason to get out of the market here.
There all right there. Don't you feel it? Hundreds of stocks at resistance. Hundreds have formed a nice base. The Transports and the Dow are moving in synch. The earnings period surprisingly great, with so many companies not stung by the raw costs. Three straight up weeks, with all the commodity stocks showing signs of rolling over; most at crucial "must hold" levels except for gold, which has already crashed, making the inflation case much dimmer in the eyes of the traders.
Yet, you simply can't read the papers. They are too awful. The cost to the consumers for everything from food to gasoline is humongous and going higher, according to all the food execs I had on last week. We are getting nowhere near a bottom in housing. The layoffs, while not significant in the Labor Report on Friday, sure seem endless. The two major presidential candidates from the Democratic side want to tax the oil companies into oblivion, the leaders of the last year. Exxon (NYSE: XOM) (Cramer's Take) blew the quarter. So did GE (NYSE: GE) (Cramer's Take).
Too far, too fast, based on those grim items.
To me, this is the first week since the Bear Stearns (NYSE: BSC) (Cramer's Take) bottom that I think seems aimless.
But perhaps there's a "split the difference" way to approach this week: options expiration.
United Technologies (NYSE: UTX) is expected to report Q1 EPS on April 17. Deutsche Bank says "UTX remains a high-quality stock, selling at a bargain." UTX April & May option implied volatility of 27 is near its 26-week average according to Track Data, suggesting non-directional risk.
3M Company (NYSE: MMM) is recently trading at $78.71 this morning, below its close of $80.35, after GE lowered 2008 profit guidance. MMM is expected to report Q1 EPS on April 24. MMM May option implied volatility of 27 is near its 26-week average according to Track Data, suggesting non-directional risk.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
About a year ago, I had a chance to hear a presentation by Laurence Fink, who is the CEO of BlackRock (NYSE: BLK), which is a mega money manager. Simply put, he was a bit concerned about the markets. With the huge amounts of leverage, he thought that investors weren't getting enough premium for the potential risk.
Yes, it was a good call. And the upshot is that BlackRock has been a stellar performer.
Well, now Fink is more sanguine. In fact, in this week's Barron's [a paid publication], there is an interview with him.
What's his take? First of all, he think investors should dip into equities, such as the big caps that benefit from global growth. Some of his choices include: General Electric (NYSE: GE), Monsanto (NYSE: MON), United Technologies (NYSE: UTX) and Boeing (NYSE: BA).
He also likes high-grade mortgage debt. Basically, the spreads are attractive (and seem to account for the risk levels).
Finally, Fink is bullish on overseas markets, especially commodity-based counties like Brazil.
TheStreet.com's Jim Cramer says investors should be negative, but they have to keep an eye out for rallies.
Have you looked at the charts lately? I still carry them around and, frankly, have been reluctant to sit down and look at one after another the way Helene Meisler has for years and years.
But I have forced myself to do so since this year began just to remind myself that this bear market is a vicious one and you better have a darned good reason to buy a stock because you are most likely going to lose money otherwise.
The charts are amazingly bad. The vast majority of stocks are simply awful. You eliminate the oils, the golds, the ags, you have nothing, I mean, really, nothing. You can see that an Avon (NYSE: AVP) (Cramer's Take) could rally or maybe a Coke (NYSE: KO) (Cramer's Take), and you can make a case for the utilities to bottom on interest rate compares but that's really about it. The banks? They all look like they have no bottom.
It is alarming to me that the same people who screw up the economy (or stand by watching) are the ones that are now promoting the remedies. They have proven without a shadow of a doubt that this is not their strong suit. The proposed economic stimulus package has bi-partisan support and calls for an estimated $156 billion of tax rebates ranging from $500 to $1,000 (+ $300 for each child) that might show up in May.
If we are going to add on to our already humungous joke of national debt, than I want to invest this capital in something that will bring a higher return on invested capital (ROIC) than the paltry one time mad money. That expenditure should be for national infrastructure projects like roadways, bridges, tunnels, and waterways.
We have all heard about the poor condition of our national infrastructure and the hundreds of billions of dollars of repair work and replacement that is desperately needed.
This alternative would bring visible results that every single person in the country would benefit from and improved linkages always stimulate economic growth. Road improvements even reduce fuel consumption by shortening routes and reducing friction both strategically and physically.
MOST NOTEWORTHY: Diebold, EOG Resources and Barnes & Noble were today's noteworthy downgrades:
Jefferies downgraded shares of Diebold (NYSE: DBD) to Hold from Buy on valuation following United Tech's (NYSE: UTX) offer, as they do not see enough upside over the near-term to maintain a Buy rating.
Oppenheimer cut EOG Resources (NYSE: EOG) to Underperform from Perform on valuation, as they think the 20% run-up post analyst meeting was unjustified.
Barnes & Noble (NYSE: BKS) was lowered to Underweight from Neutral at JP Morgan, as they believe Street SSS expectations are too high given slowing sales and secular margin pressure.
While some companies may be consolidating, others are reconfiguring and expanding. General Electric Company (NYSE: GE) has acquired a small airplane engine company in the Czech Republic. Selling it's appliance business and adding more to it's portfolio of aircraft and engine capability should be a good move. The Wall Street Journal (subscription required) reported today that GE hopes to improve its competitive position against Pratt & Whitney. 
United Technologies
About a year ago, I had a chance to hear a presentation by Laurence Fink, who is the CEO of 
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. He also operates 
It is alarming to me that the same people who screw up the economy (or stand by watching) are the ones that are now promoting the remedies. They have proven without a shadow of a doubt that this is not their strong suit. The proposed 
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