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雷达卡
13 January 2009
Global CapEx Outlook
Take Cover...it's a Twister
Nigel Coe, CFA
Research Analyst
(1) 212 250 7808
nigel.coe@db.com
Nicole Deblase
Research Associate
(212) 250 4525
nicole.deblase@db.com
Fundamental, Industry, Thematic, Thought-Leading
Deutsche Bank Company Research's Research Product Committee has deemed
this work F.I.T.T. for investors seeking differentiated ideas. Here our Multi Industry
team takes an in-depth look at 20 years of CapEx data from 2,000+ companies in
57 sectors to quantify possible peak/trough decline in CapEx this cycle.
Deutsche Bank Securities Inc.
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at
http://gm.db.com/IndependentResearch or by calling 1-877-208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE
LOCATED IN APPENDIX 1.
FITT Research
Companies featured
Danaher (DHR.N),USD54.58 Hold
Dover (DOV.N),USD31.97 Hold
Emerson Electric (EMR.N),USD34.71 Hold
Eaton (ETN.N),USD49.45 Hold
General Electric (GE.N),USD15.83 Hold
Honeywell (HON.N),USD33.77 Buy
Hexcel (HXL.N),USD7.00 Hold
Ingersoll-Rand (IR.N),USD18.42 Buy
ITT Corporation (ITT.N),USD47.08 Hold
Kaydon Corporation (KDN.N),USD30.36 Hold
The Manitowoc Company (MTW.N),USD7.11 Hold
Parker-Hannifin (PH.N),USD40.85 Hold
Regal-Beloit Corp (RBC.N),USD34.70 Hold
Rockwell Automation (ROK.N),USD30.26 Hold
SPX Corporation (SPW.N),USD39.91 Hold
Stanley Works (SWK.N),USD34.02 Sell
Tyco International (TYC.N),USD23.25 Buy
United Technologies (UTX.N),USD52.36 Buy
Fundamental: History suggests that 2-3 years of CapEx contraction is likely
After analyzing CapEx data for 2,000+ companies included in the MSCI Global
Index from 1985-2007, we observed that capital budgets typically expand for 5-7
years, followed by 2-3 years of contraction. Although we have the perfect storm of
collapsing profit margins and tightening credit markets, the downside could be
mitigated by 1) the reasonably well-balanced expansion during 2004/08, 2)
government stimulus efforts, and 3) well-capitalized corporate balance sheets.
Industry: Downside scenarios suggest >20% CapEx contraction through
2010
Nevertheless, history suggests that CapEx is one of the first areas cut as firms
tighten their belts. For the 16 most important Capital Goods categories, our DB
sector analysts are expecting CapEx to fall ~12% over 2009/10E with the most
severe contractions in the Non-Food Retail, Power and Semiconductor industries.
However, our downside scenario analysis indicates that >20% downside is
possible, with the most severe outcomes in Oil & Gas (down 46%), Commercial
Construction (down 33%), Utilities (down 29%), and Metals & Mining (down
29%). While there are clearly factors that could mitigate downside – such as
government stimuli, long-term supply/demand imbalances, etc – we believe this
analysis gives a good sense of where the greatest risks reside.
Thematic: How severe could the peak/trough earnings decline be?
We currently forecast EPS to decline 20% - slightly more severe than consensus –
over 2008/10. However, if CapEx does revert to trough levels, we project a >40%
decline, derived by assuming that sector ROIC reverts to levels consistent with
prior recessions. With the sector now trading at around 11x forward earnings, we
believe stocks are already pricing in this kind of bear-case scenario. As such, the
DB Universe trades at 14-15x bear-case EPS, which is at the midpoint of the 10-
18x trading range observed during the last downturn.
Thought-Leading: Letters matter more than numbers
Therefore, unless earnings can evade the bear-case trough or we are set for a true
V-shaped economic recovery (which is looking less likely by the day) it is difficult
to expect further multiple expansion. In this sense, we do not believe that 2009
share price performance will be affected significantly by downgrades to
consensus numbers, but rather by what shape (V, U or L) the recovery takes.
We are underweight on the sector at current levels
Following the recent rally, we are concerned that the potential for further
downside surprises and the prospect of an extended period of earnings stagnation
could lead the sector to underperform the S&P 500. We have pared down our Buy
ratings to just four names: UTX, HON, TYC and IR – stocks with significant
recurring revenues, above-average margin protection, and/or disproportionately
Table of Contents
Investment thesis .............................................................................. 3
Outlook ....................................................................................................................................3
Valuation methodology .............................................................................................................3
Risks ........................................................................................................................................3
Summary tables................................................................................. 4
Key themes......................................................................................... 5
CapEx outlook through 2010 .......................................................... 15
Our CapEx analysis methodology ...........................................................................................17
Airlines ...................................................................................................................................21
Automotive .............................................................................................................................22
Chemicals ...............................................................................................................................24
Food & Beverage ....................................................................................................................25
Food Retailers .........................................................................................................................27
Independent Power Producers ...............................................................................................28
Machinery ...............................................................................................................................29
Metals & Mining .....................................................................................................................30
Multi & Electric Utilities...........................................................................................................32
Non-Food Retail ......................................................................................................................33
Oil & Gas................................................................................................................................34
Paper & Packaging..................................................................................................................35
Pharmaceuticals.....................................................................................................................36
Semiconductors ......................................................................................................................37
Telecom.................................................................................................................................39
US Hospitals ...........................................................................................................................40
Non-Residential Construction..................................................................................................41
Conclusion ..............................................................................................................................43
Appendix 1: Macro outlook ............................................................ 44
US will likely remain in recession throughout 2009 ................................................................44
Western Europe is also heading into recession......................................................................47
Emerging Markets are slowing but still growing.....................................................................49
Select macro forecasts ...........................................................................................................51
Appendix 2: Tables .......................................................................... 52
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