15
DECEMBER 2014
ACT
BUSINESSNEWS
AUTHOR:
CHRISSLEIGHT
is
one of theworld’smost
internationally renowned
construction businesswriters,
with specialist expertise in
financial markets and stock
market analysis. He is editor
of KHL’smarket-leading
International Construction
and
is a regular contributor to
ACT’
s sister publication,
International Cranes
and Specialized
Transport
.
After the wobbles
of the late summer,
stockmarkets
bounced back
inNovember to
hit new highs.
However,
Chris
Sleight
reports
that the heavy
equipment sector
was slower to
regain ground.
S
tockmarkets
around theworld
were shaken in
September, as fears about
economic slowdown, tensions
withRussia, theEbola
outbreak andweakness inkey
economies such asEurope
andChina all dented investor
confidence. But as if toprove
what a fickle thing this is, by
earlyNovember theDowhad
rebounded to anew record
high.
Oneof the reasons for this
was that key thirdquarter
financials confounded the
doom-mongers. In theheavy
equipment sector, for example,
Caterpillar saw its revenues
edgeup slightly in the third
quarter compared to the
positionayear ago,whilenet
profits rose8percent.
Notwithstanding the
concerns in theworld, the
majorworries for equipment
makers continue tobe
weakness inglobalmining
markets and the slowdown in
key emergingmarkets suchas
China. Thiswasborn-out by
financial results fromothers
besidesCaterpillar. In the
casesofTerexandManitowoc,
actual results for the third
quarter reflectedguidance
from earlier in the summer
whenboth companies said
weak emergingmarketswere
impacting their salesof cranes.
Slower recovery
This all goes someway to
explainingwhy the rebound
for theheavy equipment
sectorhasbeendisappointing
compared to themainstream
market indicators.Asour
graph shows, theDow reached
newhighs comingback from
theSeptember/Octoberdip,
andwasupabout 11percent
on itspositionayear ago.
Similarly, theS&P500 isup14
percent ona rolling12-month
basis and theNASDAQ is 18
percent higher.
However, the
ACT
Heavy
Equipment Index (HEI)has
clearlybeen left behind. It fell
further than thebroadmarket
indicators, andwhile therehas
been somebounce-back, it is
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P500
25%
20%
15%
10%
5%
0%
-5%
% change
52weeks to November 2014
onlyabout 8percent higher
than itwas ayear ago.
Sowhile some companies
in the sector areholdingup
well, it is clear that someof the
pressures in themarket arenot
recedingas fast as theymight.
When these issues started to
impact on results ayearor
twoago, the expectationwas
that bynow thingswouldhave
turned the corner.
The feelingnow is that it
will be2015before there
is genuine strengthening.
Thiswas certainly theview
expressed inCaterpillar’s
results statement,which
said, “Froman economic
perspective,webelieve there
is a reasonable likelihood that
world economicgrowth could
improve in2015. Indeveloped
countries, growth-oriented
monetarypolicies should
support continuedmodest
economic improvement.”
That is an encouraging
pieceof snippet, but for the
meantime the sentiment for
the equipment sector feels a
littledown-beat.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’smost
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Market rebound
