CHICAGO, May 24, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Machinery, including Deere & Company (NYSE:DE), Caterpillar Inc. (NYSE:CAT), CNH Global NV (NYSE:CNH), AGCO Corporation (NYSE:AGCO) and Kubota Corporation (NYSE:KUB).
A synopsis of today's Industry Outlook is presented below. The full article can be read at
Recovery -- or the extent of recovery -- from the lows experienced since the 2008 global crisis is on everyone's mind today. Achievement on this front, as witnessed from the equity market improvements, has been quite remarkable. But can we say the global economy has rebounded completely to its pre-crisis level?
Well, the pursuit is still on. The path to recovery has not been an easy one with ever-present headwinds hindering growth, the most disconcerting of which was the Eurozone debt crisis that significantly slowed down the overall growth pace in 2011 and 2012.
According to the International Monetary Fund's (IMF) World Economic Outlook published in Apr 2013, promising signs to growth are expected from the world's emerging and developing nations, while advanced economies are expected to exhibit slow but appreciable growth.
Projections by the IMF suggest that the world economy will likely grow by 3.3% in 2013 and 4.0% in 2014. Growth in advanced economies and emerging and developing countries are projected at 1.2% and 5.3% in 2013 while the same for 2014 are estimated at 2.2% and 5.7%, respectively.
No doubt obstacles still persist in the form of an unstable European economy and slowly reviving advanced countries; nevertheless, the overall growth picture may not materially deteriorate from the IMF's Apr 2013 forecast.
Regarding the Machinery industry, increasing economic activities spur demand for industrial products, which in turn also boosts the need for new/advanced machinery. Based on this direct correlation, anticipation of improvement in global economic growth is a positive sign for the future prospects of the machinery industry.
The major end-markets for the machinery industry include agriculture, construction, mining and energy industries, among others. A brief discussion providing a glimpse of the future prospects of the machinery industry in different nations is provided below.
Machinery Industry Prospects in the U.S.
The IMF expects the United States to grow 1.9% in 2013 as against 2.1% predicted earlier and roughly 3.0% expected in 2014. High unemployment still seems to be a disturbing factor, though there is a glimmer of hope emanating from evidence of strengthening demands in the housing as well as durable goods markets. Conditions in the credit markets are also improving slowly.
The Machinery industry is one of the most attractive industries in the country. Growth prospects for this industry can be deduced from the indicators to the performances in the recent past. In the first quarter of 2013 (Jan-Mar), industrial production in the United States rose by an annual rate of 5.0%, while the same in the month of April rose by 1.9% as compared with the year-ago period. Manufacturing output grew 5.3% in the quarter.
According to the US Census Bureau report published in May 2013, machinery shipments in the first quarter 2013 increased 6.0% year over year while new machinery orders grew 3.6%. However, machinery order backlog at the end of the quarter was down 12.5%. Shipments for construction and industrial machinery rose by 40.0% and 18.2%, respectively, while that for mining equipment and farm machinery dipped 3.7% and 8.0%, respectively.
Export demand has been considered crucial for the future growth prospects of the U.S. machinery industry. According to a report published by the Association of Equipment Manufacturers (AEM) in Feb 2013, the United States' construction equipment exports rose 13% in year 2012, while agricultural equipment exports registered a 16% increase.
For the years to come, international demand for technologically advanced construction and agriculture equipment are expected to improve for the United States. In this respect, it is worth mentioning that the US-Russia trade bill will boost U.S. exports of construction equipment to Russia, the 11th-largest export market for U.S. construction equipment.
Important Players of the Machinery Industry
Deere & Company's (NYSE:DE) fiscal second quarter 2013 (ended Apr 2013) results were impressive. For the quarter, equipment sales rose roughly 9%, with price realization contributing 3%. The agricultural and forestry equipment provider is expanding globally to leverage benefits from the growing global farm industry. For fiscal year 2013, equipment sales are expected to grow 5% year over year and for the third quarter by 3%. Net earnings for 2013 are projected to be approximately $3.3 billion.
Caterpillar Inc. (NYSE:CAT) posted an 18% decline in Machinery and Power Systems sales in the first quarter of 2013. For the year 2013, the company expects revenue to range within the $57-$61 billion range as against $60-$68 billion expected earlier due primarily to the expectation of weak demand for mining equipment.
Italy-based CNH Global NV (NYSE:CNH) posted a year-over-year increase of 1% or 3% on a constant currency basis in its equipment sales (agricultural and construction) in the first quarter 2013.
Other top players in the agricultural, construction and mining industry includes: AGCO Corporation (NYSE:AGCO) and Kubota Corporation (NYSE:KUB), among others.
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