- Merrill Lynch's John Inch is out with an interesting note saying that last Friday, Emerson (NYSE:EMR) CEO Dave Farr discussed his view of the global macro environment that is quite different from Rockwell's recent upbeat pronouncements. Farr anticipates that the U.S. manufacturing economy will likely continue to marginally decelerate beyond obvious pockets of automotive and housing weakness. We think that Emerson is well insulated to withstand the prospects for further North American manufacturing economy deterioration given its global business positioning (53% of revenues outside of the U.S. excluding Appliance and Tools) and order strength. However, Farr did caution that protracted U.S. weakness could spill into Europe in the second half of the year.
In contrast to Emerson, Rockwell (NYSE:ROK) management asserted at a recent investor conference that they expect North American automation demand to accelerate over the course of this year based on their "front-log" (ie, dealer and sales rep survey). Emerson's CEO expects domestic factory automation demand to remain sluggish and possibly weaken.Given Rockwell's admittedly limited visibility, they think a more prudent forecast scenario is Emerson's more downbeat domestic outlook.
Emerson also noted that despite robust balance sheets and high utilization among domestic manufacturers, incremental capital investment that would otherwise drive automation demand may be directed to overseas economies - particularly in Asia Pacific - in a possible "second wave" of off-shoring. ML thinks continued manufacturing strength in Asia should still be good news for Emerson, considering the company has been in the Asian markets for decades. Unfortunately for Rockwell, the company appears to have hit a "wall" in Asia with single digit growth being realized despite booming regional economies.
Maintains Sell on ROK.
Notablecalls: Nice catch by MLCO's John Inch. I think ROK will see some selling pressure over the next couple of days. Think I'm going to call this one actionable.
In contrast to Emerson, Rockwell (NYSE:ROK) management asserted at a recent investor conference that they expect North American automation demand to accelerate over the course of this year based on their "front-log" (ie, dealer and sales rep survey). Emerson's CEO expects domestic factory automation demand to remain sluggish and possibly weaken.Given Rockwell's admittedly limited visibility, they think a more prudent forecast scenario is Emerson's more downbeat domestic outlook.
Emerson also noted that despite robust balance sheets and high utilization among domestic manufacturers, incremental capital investment that would otherwise drive automation demand may be directed to overseas economies - particularly in Asia Pacific - in a possible "second wave" of off-shoring. ML thinks continued manufacturing strength in Asia should still be good news for Emerson, considering the company has been in the Asian markets for decades. Unfortunately for Rockwell, the company appears to have hit a "wall" in Asia with single digit growth being realized despite booming regional economies.
Maintains Sell on ROK.
Notablecalls: Nice catch by MLCO's John Inch. I think ROK will see some selling pressure over the next couple of days. Think I'm going to call this one actionable.
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