For Immediate Release
Chicago, IL – May 27, 2010 – Zacks.com Analyst Blog features: Boeing (BA), Textron (TXT), United Technologies (UTX), Hewlett-Packard (HPQ) and Western Digital (WDC).
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Here are highlights from Wednesday’s Analyst Blog:
Noisy Durable Goods Numbers
Stepping back to look at the longer-term trend, things look very healthy. Total new orders received in the first four months of 2010 are up 16.8% over the total new orders received in the first four months of 2009. Excluding Transportation, total orders on a year-over-year, year-to-date basis are up 14.3%, and excluding Defense they are up 16.9%. That is very healthy, and shows that manufacturing is coming back.
To get a sense of the state of the overall economy, it is better to focus on the numbers excluding Transportation Equipment. It is not that an order for a new 787 Dreamliner from Boeing (BA) is not a real order that will result in real economic activity. It is that each 787 costs a huge amount of money, and those orders tend to come in a very lumpy fashion, and it can make the overall durable goods series swing wildly from month to month.
While the bulk of the non-defense aircraft orders are to Boeing, it also includes orders for private jets and helicopters from firms like Textron (TXT) and United Technologies (UTX). In April, non-defense aircraft orders jumped 228.0%.
So are happy days back again in Seattle? Well maybe, but that jump comes on the heels of a 71.5% decline in March (revised down from a 67.1% decline), which in turn followed a 51.1% rise in February. On a year-over-year, year-to-date basis, though, things look great (or more precisely, things looked just plain awful a year ago) as civilian aircraft orders are up a stunning 270.3%. For transportation equipment as a whole, year to date orders are up 24.7%.
Where the Downbeat News Was
There is another sub-group in the report that is of particular interest, though, and there the news in April was a bit more downbeat. That is non-defense capital goods excluding aircraft, or what is sometimes called core capital goods. It is a very good proxy for how much businesses are actually investing in new plants and equipment, which can be a major swing factor in GDP growth.
In April, core capital goods orders fell by 2.4%. That, however, was after increases of 6.5% in March and 3.0% in February. Both of the previous months were revised higher, from 4.0% and 2.1% respectively.
Those with a “glass half empty” outlook will see it as evidence of a sharp deceleration in business investment. Those with a “glass half full” outlook will see that the overall level was basically unchanged from where we thought it was yesterday, thanks to the upward revision of the base.
Strength Year to Date
On a year-to-date basis, things still look very strong, with orders up 14.9%. There is also a bit of a seasonal pattern to core capital goods orders as well, with the first month of the quarter usually a bit weaker than the last month of a quarter.
On a year-to-date basis, gains are very widespread. With only one category, communications equipment, showing a decline (of 2.3%), and only two other categories, Motor Vehicles (up 9.0%) and Miscellaneous Durable Goods (up 4.4%), showing less than a double-digit gain.
On a year-to-date basis, orders for primary metals have been particularly strong, rising 45.8%, although that group did see a 2.0% sequential decline in orders in April. It is a similar case with Machinery orders — they fell sharply on a sequential basis in April (5.9%), but that is after increases of 10.5% in March and 7.1% in February (both numbers revised higher, from 8.6% and 6.9%, respectively).
Orders for computers and related products are up 18.7% on a year-to-date basis, but down 3.0% sequentially. Again, the sequential decline is more than cancelled out by the upward revisions to the previous months. In March, computer orders were up 18.1% instead of the previously reported 12.9%, and February’s rise was 5.5% instead of 4.6%. Year-to-date computer orders are up 18.7% from a year ago. That is good news not just for the likes of Hewlett-Packard (HPQ) but also for the makers of the components that go into computers, like disk drive maker Western Digital (WDC).
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