21
APRIL 2015
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
.
Heavy equipment
manufacturers
shares have
bounced back
a little, but they
are far from
setting pulses
racing in the way
themainstream
indicators are.
Chris Sleight
reports.
A
bit of life in the
Euro-zone economy
drove stock
markets around theworld to
somenewhighs inFebruary
andMarch. TheEuropean
Central Bank’s (ECB’s) long
overduedecision in January
to launch aquantitative
easing (QE) programhas put
someoptimismback into the
regional economy andboosted
exporters’ prospects thanks to
theEuro’s depreciation.
Add to this the continued
lowoil price, and theglobal
economy is lookingbrighter
than itwas in the early fall.
A lowoil price isn’t good for
everyoneof course– it isbad
news forbig exporters like
OPEC–but fornet importers
like theU.S. andEurope, it
amounts toauseful pieceof
economic stimulus.
Thishelpedpush some
key indexes tonewhighs in
February. TheDow set anew
record, butwehavegot used to
that over the last 18monthsor
so.Arguablymore significant
was theUK’sFTSE100hitting
itshighest levels since the
height of the techbubble in
1999. Similarly, theNikkei in
Japanachievedanew15-year
higharound the same time.
Not so rosy
Thepicture isnot quite
the same foroff-highway
machinerymanufacturers’
shareshowever, as represented
by
ACT
’sHeavyEquipment
Index (HEI) of shareprices.
Although therehasbeenan
up-tick in the sectorover the
last fourweeksor so, as this
month’s graph illustrates, the
sector is still about 10percent
lower than itwas ayear
ago,while themainstream
benchmarks areupbyabout
15percent.
As reported lastmonth,
part of theproblem is the
gloomyoutlookCaterpillar
postedwhen it announced its
full-year results in January.
It expects about a10percent
fall in revenuesdue towhat it
sees as aweakglobal economy,
combinedwith continuing low
commodityprices.
-10%
-5%
-15%
-20%
10%
15%
20%
5%
0%
% change
52weeks to April 2015
Cat is an industrybellwether,
andothermanufacturers’
shares tend to track it. But they
arenot necessarilydrivenby
the same factors. Yes, emerging
markets remainweak, and
whileEurope is growingbetter
than it has, it isnot posting
excitingGDP figures.On that
level,Caterpillar is right – the
global economy ispickingup,
but is arguablynot healthy.
Caterpillarhasmuchgreater
exposure to commodity
prices thanother equipment
manufacturers. It relieson
themining industryand the
oil andgas sector for abig
sliceof its revenues. This is
not necessarily the case for
other construction equipment
makers, particularly those
at the lighter endof the
spectrum.
While investorsmaybe a
littledownon companies
within theHEInow, there is a
chance theywill get apleasant
surprise if the improving
economic conditions can
stimulate equipment sales in
Europe andNorthAmerica.
■
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.
Trailing the pack
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P500
