Industrials: Despite Bullish CEO Talk, Few Values
Among a mostly fairly valued industrials sector, some good values remain.
At a recent industrials conference in Florida, CEOs consistently preached macroeconomic bullishness, and nearly all expressed a near-uniform commitment to share buybacks. Implicit in these endorsements is that the underlying stocks of their companies are cheap. Even so, in aggregate, we find few bargains in industrials. Currently, the market-cap-weighted price/fair value estimate for the sector stands at 1. Fundamentals, however, remain attractive. Honeywell International (HON) CEO Darius Adamczyk said he’s "quite bullish on 2018, 2019 and to the extent he can see 2020," and added that "overall, the markets look very, very good, almost without exception." Honeywell has the advantage of several long-cycle businesses in its portfolio. Adamczyk said that he observes Honeywell’s aerospace backlog increasing, as well as healthy order activity from some of its technology and automation offerings. Representatives for 3M (MMM) were also enthusiastic about certain newer, innovative offerings, particularly in the data center space, which we also see also as a faster-growing line of business. 3M's immersion cooling, which allows data center companies to dip their electrical components into a nonconducting liquid to prevent overheating, is the latest response to this rapid growth.
Joshua Aguilar does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.