美国电子设备行业：虽然慢但仍在高质量增长

1、GlobalResearch10 January2019EquitiesAmericasIndustrial, DiversifiedSteven WinokerAnalyst HYPERLINK mailto:steven.winoker +1-212-713DamianKaras,CFAAnalyst HYPERLINK mailto:damian.karas +1-212-713PeterLennox-KingAnalyst HYPERLINK mailto:peter.lennox-king HYPERLINK mailto:ng +1-212-713DavidSilberman As

2、sociateAnalyst HYPERLINK mailto:david.silberman HYPERLINK mailto:n +1-212-713EquitiesAmericasIndustrial, DiversifiedSteven WinokerAnalyst HYPERLINK mailto:steven.winoker +1-212-713DamianKaras,CFAAnalyst HYPERLINK mailto:damian.karas +1-212-713PeterLennox-KingAnalyst HYPERLINK mailto:peter.lennox-kin

3、g HYPERLINK mailto:ng +1-212-713DavidSilberman AssociateAnalyst HYPERLINK mailto:david.silberman HYPERLINK mailto:n +1-212-713Cognizant of ongoing risks, but see opportunity in 2019 for EEMI stocks2018 was a challenging year for EEMI stocks, particularly during 2H when themarket seeminglylookedforju

4、staboutanyexcusetosell,rangingfromglobalmacroconcerns including tariffs and China/EM risks, exposure to end markets such as auto and oil & gaswhereproductionisfearedtohavepeaked,andhigherfinancialleverageinarising interest rate/ decelerating GDP growth environment. Yet amid all the volatility and ne

5、gativesentiment,companieshavecontinuedtopostsolidrevenue(5%organically) andEPS(+25%)growth. Weassesskeysectorissuesinthisnoteevervigilantofthe risks to growth/margins, our top-down/bottom-up analysis leaves us optimistic. In our view,thereisnoone-size-fits-allanswerforhowtoplaythesector,andstockswit

6、hthe right combination of earnings upside (both organic and inorganic) and attractive valuations(onhistoricalandcurrentrelativebasis)shouldoutperformin2019.So, where are we in the cycle? We see decelerating but still solid growth WhereareweinthecycleistheeternalpivotalquestionforEEMIstocks. Weexpect

7、 theupcycletolastanothercoupleofyears,with2019ssetupasoneofslowerbutstill healthy growth, on average. We are forecasting a slowdown of organic growth from 5.5% to 4.5%, with most EEMI companies growing 4%+. This growth along with marginexpansionshouldtranslateto11%EPSgrowthonaverage(downfrom25%in 20

8、18e which includes tax reform tailwind). However, decelerating top-line growth doesnotcondemnthesectortopoorstockperformance,asevidencedbythepast.Valuations now cheaper; Interesting opportunities across valuation spectrum Followingbroad-basedde-ratingpressureacrosscyclicals,EEMIisnowtradingatavg. P/

9、E of 14x/9% discount to the S&P 500, vs. 18x/5% premium a year ago. This reset in valuations has created some interesting opportunities for investors to buy into a handful of EEMI stocks where we believe some combination of earnings and valuationmultiplesareoverlydiscounted. EEMIstocksarenotmerelypr

10、icinginmodest growthdecelerationbutdiscountingmorediremarketrisks. Wethinkitsprematureto beapplyingpeakcyclemultiples;evidencebasedonhistoricalISMcyclessuggeststhat industrial stocks should fare well in the current economic environment, with factor returns most correlated to near-term earnings growt

11、h.Buy Buy HON Honeywell$135$176Buy DHR Danaher$103$125Buy SPXC SPXCorporation$28$39Buy CR Crane$75$90Buy FTV Fortive$68$85Buy EMR Emerson Electric$61$75 Buy UTX United Technologies$109Buy ETN Eaton$68$84BuyDOV Dover$76$91BuyIRIngersoll-Rand$93$110BuyGDI GardnerDenver$22$27Buy GTES Gates$14$18 Buy RO

12、K Rockwell Automation$153Buy SWK Stanley Black & Decker $128Neutral PNR Pentair$40$43Neutral IEX IDEX$135$145Neutral MMM 3MCompany$192$200Neutral JCI Johnson Controls$32$34Neutral ATKR Atkore$22$24Neutral GWW Grainger$279$300Neutral WCC Wesco$50$53Neutral FLOW SPXFlow$31$35 Neutral SITE SiteOne Land

13、scapeSuppl $56$60 Neutral LII Lennox$222Sell ITT ITT$50$4830%21%37%21%25%24%24%23%20%19%24%27%19%17%8%7%4%6%10%8%7%12%8%1%(4%)$8.08 $7.90$4.85 $4.81$2.49 $2.54$6.46 $6.48$3.45 $3.60$3.64 $3.64$7.78 $7.79$5.71 $5.85$5.90 $5.62$6.26 $6.31$1.87 $1.90$1.18 $1.28$9.01 $9.01$8.76 $8.79$2.52 $2.55$5.72 $5.

14、77$10.71 $10.77$1.85 $2.32$3.13 $3.10$17.91 $18.04$5.62$2.79$1.93$5.52$2.75$2.09$12.28 $12.27$3.51 $3.592%6.1%6.5%1%21.5x19.9x5.0%5.4%(2%)11.2x10.1x9.7% 10.3%(0%)11.5x10.6x8.4%9.4%(4%)18.9x17.6x5.3%5.9%0%16.7x14.9x6.6%7.3%(0%)14.0 x12.6x6.4%8.0%(2%)11.6x10.7x8.8%9.4%5%13.5x12.5x7.9%8.4%(1%)14.7x13.2

15、x6.8%7.6%(2%)11.5x10.5x8.1%8.6%(8%)11.0 x10.2x6.9%8.1%0%17.0 x15.7x6.1%6.8%(0%)14.6x13.2x6.9%7.4%(1%)15.6x14.5x6.6%6.9%(1%)23.4x21.9x4.9%4.8%(1%)17.8x16.5x5.4%5.9%(20%)13.8x11.7x5.5%8.1%1%7.0 x6.6x 13.5% 14.9%(1%)15.5x14.1x7.1%6.0%2%9.0 x8.0 x 11.2% 12.0%1%11.4x10.4x 13.8% 11.6%(8%)26.7x21.0 x3.4%4.

16、4%0%18.1x17.3x4.9%5.5%(2%)13.9x12.6x6.6%6.5%7.2%7.8%6.6%7.4%14.9x13.5x14.3x12.9xEEMI mean EEMI median17.1x15.5xFCF Yield(UBSe)20192020P/E(consensus)201920202019% UBS Street / Below EPSEPSStreetCurrent UBS Price Upside / PriceTarget Rating TickerCompany HYPERLINK /investmentresearch /investmentresear

17、chThis report has been prepared by UBS Securities LLC. ANALYST CERTIFICATION AND REQUIRED DISCLOSURES BEGIN ON PAGE 39. UBS does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could af

18、fect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.ContentsTOC o 1-2 h z u HYPERLINK l _TOC_250017 PortfolioManagerSummary3 HYPERLINK l _TOC_250016 StockPicksandChangestoFinancialEstimates/PriceTargets4 HYPERLINK l _

19、TOC_250015 WhatAretheKeyIssuesWeAreMonitoring?10 HYPERLINK l _TOC_250014 Industrial Process Markets /ProjectActivity11 HYPERLINK l _TOC_250013 Upstream Oil & Gas12 HYPERLINK l _TOC_250012 Auto14 HYPERLINK l _TOC_250011 Tariffs / China17 HYPERLINK l _TOC_250010 Currency21 HYPERLINK l _TOC_250009 Leve

20、rage / Ability to EffectivelyDeployCapital22 HYPERLINK l _TOC_250008 Pulling it all together24 HYPERLINK l _TOC_250007 The InfamousCycleQuestion25 HYPERLINK l _TOC_250006 2018 Good Biz Results, Poor StockReturns25 HYPERLINK l _TOC_250005 EEMI Growth 2019 Still LooksGood27 HYPERLINK l _TOC_250004 Sec

21、tor/FactorAnalysisDontDitchIndustrialsJustYet29 HYPERLINK l _TOC_250003 Valuation32 HYPERLINK l _TOC_250002 Risk Trends(BetaTracking)34 HYPERLINK l _TOC_250001 ShortInterestTrends35 HYPERLINK l _TOC_250000 CompanyNotes36Steven WinokerAnalyst HYPERLINK mailto:steven.winoker +1-212-7132716DamianKaras,

22、CFAAnalyst HYPERLINK mailto:damian.karas +1-212-7132267PeterLennox-KingAnalyst HYPERLINK mailto:peter.lennox-king HYPERLINK mailto:ng +1-212-7133215David AssociateAnalyst HYPERLINK mailto:david.silberman HYPERLINK mailto:n +1-212-7132228Portfolio Manager SummaryOne Size Does Not Fit AllWithout a dou

23、bt 2018 was a challenging year for Electrical Equipment & Multi- Industry (EEMI) stocks, particularly during the second half of the year in which themarketseeminglylookedforjustaboutanyexcusetosell,rangingfromglobal macroconcernsincludingtariffsandChina/EMrisks,exposuretoendmarketssuch as auto and o

24、il & gas where production is feared to have peaked, and higher financialleverageinarisinginterestrate/deceleratingGDPgrowthenvironment. Yetamidallthevolatilityandnegativesentiment,EEMIcompanieshavecontinued to post solid revenue and earnings growth.Following this reset in valuations, we see an oppor

25、tunity for investors to buy intoahandfulofEEMIstockswheresomecombinationofearningsandvaluation multiples look excessively discounted. At the same time, we are ever vigilant of riskstoearnings,aswellasfurthermultiplecompressionparticularlywheresteep premiums still exist.Inourview,thereisnoone-size-fi

26、ts-allanswerforhowtoplaythesector. Inother words, the answer isnt as simple as avoid everything with auto OEM, oil & gas, and residential construction exposure or flock to high quality compounderswith strong balance sheets. Although during fits of market volatility EEMI stocks may trade this way, we

27、 believe that ultimately stocks with the right combination of earningsupside(bothorganicandinorganic)andattractivevaluations(onhistorical and current relative basis) will outperform in 2019. This belief is rooted in UBSs top down view that global economic growth is merely slowing down and US recessi

28、onriskremainssubdued,becomingmoreelevatedexiting2020.Accordingly,insomeinstanceswethinklesscyclicalcompanieswithmoresecular growth and margin stability that also do happen to carry valuation premiums to peers, such as HON and FTV, will outperform. On the contrary, we see less upside/downside for oth

29、er high quality compounding stocks, such as IEX, MMM, and LII, where we think there is less re-rating potential and/or more risk to earnings. Inothercases,welikeperceivedcyclicals,suchasEMRandETN,which we think the market is overly penalizing and not fully pricing in true earnings powerandcashflowge

30、neration. See HYPERLINK l _bookmark0 Figure1andsubsequentdocumentbodyfor our EEMI sector stock rankings.We acknowledge that a notable deviation from our baseline macro assumption could lead to a quite different set of stock outcomes. For example, tariff/trade resolutions between the US and China/oth

31、ers and favorable central bank/govt policies could see more cyclical and financially leveraged stocks significantly outperform. On the contrary, should trade tensions and global macro pressures leadtosharperGDPdecelerationorpotentiallypushtheUSintorecession,thena flight-to-safety would likely lead t

32、he less cyclical and stronger balance sheet companies to outperform.Asrelatestovaluation,de-ratingpressurehasbeenbroad-basedacrosscyclicals, with Industrials the second most negatively impacted sector behind only Energy (since March 2018). EEMI average forward price to NTM earnings is now trading at

33、 13.9x, or a 9% discount to the S&P 500, compared to 18x and a 5% premium a year ago. However, there is a notably wide range of stock valuationsacrossthesectortoday(rangingfrom6xto27xonNTMP/Ebasis),aswellaseach stocksrelativevaluation(vs.theS&P500)comparedtohistoricallevels. Onthese bases,somestocks

34、inherentlyappearcheap,whileotherslookpriceybutsome areboundtoprovevaluetraps,withotherswortheverybitoftheirpremium.Stock Picks and Changes to Financial Estimates / Price TargetsHeading into 2019, we are roughly in-line with the Street, on average; looking at all estimates across our EEMI coverage un

35、iverse, the median variance versus Consensusis-0.5%,whilethemeanvarianceis1%belowConsensus(excluding JCI for which sell-side estimates are inconsistent/ not comparable due to Power Solutions pending sale). HYPERLINK l _bookmark0 Figure 1 below reflects our updated estimates and 12-month price target

36、s for our 26stocksundercoverage;forallchangesfromUBSpriorestimates,pleaserefer to HYPERLINK l _bookmark1 Figure 2.2019P/E (consensus)FCF Yield2019P/E (consensus)FCF Yield (UBSe)CurrentUBS Price Upside / Rating TickerCompanyPriceTarget Downside% UBSStreet/ Below EPSEPSStreet$8.08$7.902%2019202017.1x1

37、5.5x201920206.1%6.5%BuyHON Honeywell$135$17630%BuyDHR Danaher$103$12521%$4.85$4.811%21.5x19.9x5.0%5.4%BuySPXC SPXCorporation$28$3937%$2.49$2.54(2%)11.2x10.1x9.7%10.3%BuyCRCrane$75$9021%$6.46$6.48(0%)11.5x10.6x8.4%9.4%BuyFTVFortive$68$8525%$3.45$3.60(4%)18.9x17.6x5.3%5.9%BuyEMR EmersonElectric$61$752

38、4%$3.64$3.640%16.7x14.9x6.6%7.3%BuyUTX United Technologies$109$13524%$7.78$7.79(0%)14.0 x12.6x6.4%8.0%BuyETNEaton$68$8423%$5.71$5.85(2%)11.6x10.7x8.8%9.4%BuyDOV Dover$76$9120%$5.90$5.625%13.5x12.5x7.9%8.4%BuyIRIngersoll-Rand$93$11019%$6.26$6.31(1%)14.7x13.2x6.8%7.6%BuyGDIGardnerDenver$22$2724%$1.87$

39、1.90(2%)11.5x10.5x8.1%8.6%BuyGTES Gates$14$1827%$1.18$1.28(8%)11.0 x10.2x6.9%8.1%BuyROK Rockwell Automation$153$18219%$9.01$9.010%17.0 x15.7x6.1%6.8%BuySWK Stanley Black&Decker$128$15017%$8.76$8.79(0%)14.6x13.2x6.9%7.4%Neutral PNRPentair$40$438%$2.52$2.55(1%)15.6x14.5x6.6%6.9%Neutral IEXIDEX$135$145

40、7%$5.72$5.77(1%)23.4x21.9x4.9%4.8%Neutral MMM 3MCompany$192$2004%$10.71 $10.77(1%)17.8x16.5x5.4%5.9%Neutral JCIJohnsonControls$32$346%$1.85$2.32(20%)13.8x11.7x5.5%8.1%Neutral ATKR Atkore$22$2410%$3.13$3.101%7.0 x6.6x13.5%14.9%Neutral GWW Grainger$279$3008%$17.91 $18.04(1%)15.5x14.1x7.1%6.0%Neutral W

41、CC Wesco$50$537%$5.62$5.522%9.0 x8.0 x11.2%12.0%Neutral FLOW SPXFlow$31$3512%$2.79$2.751%11.4x10.4x13.8%11.6%Neutral SITE SiteOneLandscapeSuppl$56$608%$1.93$2.09(8%)26.7x21.0 x3.4%4.4%Neutral LIILennox$222$2251%$12.28 $12.270%18.1x17.3x4.9%5.5%SellITTITT$50$48(4%)$3.51$3.59(2%)13.9x12.6x6.6%6.5%EEMI

42、 mean14.9x13.5xEEMI median14.3x12.9x7.2%7.8%6.6%7.4%Source: FactSet, UBS estimatesHoneywell is our top pick for 2019In HON, we think investors have the opportunity to own a high quality name that islesscyclical,highergrowth,moreprofitable,andmoreconsistentthanjustayear ago, but whose multiple does n

43、ot reflect the companys structural improvement. HON is poised to meaningfully outperform Industrial peers in 2019, as we think it cangenerateMSD+organicgrowth,+50bpsofmarginexpansion,and100%FCF conversion. In terms of EPS, we are 2.2% and 2.5% above consensus in 19E & 20E and our PT implies a 19.5x

44、NTM multiple as we think consensus and the marketfailtoappropriatelyrewardHONforitsrelativelylessriskycashflowprofile (50% of the portfolio is short-cycle), potential value creation from capital deployment in the hands of prudent stewards of capital, and sustainable 100% FCFconversion. 2018hasbeenat

45、ransformativeyearforHONasitexecutedtwo business spin-offs (Transport/Homes), continued executing on prioracquisitions, and acquired a bolt-on in Transnorm. Moreover, HON no longer has any auto or resi exposure (two of the higher risk end markets, in our view), and has demonstrated it can stay ahead

46、of inflationary headwind with productivity and price. For more in-depth discussion and analysis on HON, please see our concurrent HYPERLINK /shared/d2mZHArrEh Top Pick note.Other top picks include FTV / DHR, and SPXC / CR among SMID capsMoving to some of our other highly favored picks, we continue t

47、o like Danaher andFortiveashigh-qualitycompoundingstocks. Fromabusinessstandpoint,both companiespossessaportfolioofassetsleveredtokeyseculargrowththemes,such as favorable demographic trends for LS&D/Healthcare markets, as well IIoT/digitizationinindustrialmarkets. Moreover,theseassetscarryahighrecur

48、ring revenue base via consumables, software, and other aftermarket/service product offerings. Additionally, their respective business systems (which are cut from the same cloth), also offer continuous margin expansion opportunities that few other EEMI names are capable of matching, particularly unde

49、r more challenging economic conditions. Hence, whether or not our precise economic outlook materializes in 2019, we would expect both DHR and FTV businesses to performrelativelywellundermorebullishormorebearishscenarios.We find valuation, generally speaking, is the one pill that investors often find

50、 hardesttoswallowasitrelatestobothDHRandFTV,asthestockshaveseldom appearedcheap. However,wefirmlybelievethatanM&Apremiumshouldalways befactoredintovaluation,aboveandbeyondnormalgrowth/margin,returns,and cashflowconsiderations. Whileneitherstocklookscheapat40%(DHR)and24% (FTV)premiumstothemarketcurre

51、ntly,historicallyinhindsighttheyhaveproven their value.LookingatFTV,thestocksvaluationhascomedownsuchthatrelativeP/Etothe S&P500hoversnearthelowendofits1-yearrange. Wethinkthiscanatleastin part be attributed to the earnings hole created following the Automation & Specialtyspinoff,aheadofthependingac

52、quisitionofJ&JsAdvancedSterilization business. However,webelievetheASPdealwillprovehighlyvalueadditiveover time,bringinghigherrecurringrevenueandlesscyclicalhealthcareexposuretothe portfolio. Moreover, we expect that FTV will not miss a beat and keep the M&A train rolling, with ample balance sheet c

53、apacity plus strong free cash flow. We view current upside/downside at around 1.7:1 (see note HYPERLINK /shared/d2mZHArrEh here).HON has attractive growth and margin opportunity, + strong cash flow /balance sheet we see upside toboth Consensusestimatesand valuationFTV and DHR are high quality compou

54、nders with best in class business systemsFTVs valuation premium has moderatedWith respect to Danaher (which we note is co-covered along with UBS Life Sciences&DiagnosticToolsanalyst,DanielBrennan),weseeanimprovingorganic growth profile with more room ahead, M&A upside and the virtues of DBS as suppo

55、rting our bullish view on the stock. Following the companys Analyst Dayin December,webelievethattheDHRplaybookcontinuestoresonate,withaneven bigger focus on innovation. Such innovation has contributed to a 200bps Life Scienceacceleration,forexample,andappearssustainable. OnM&A,weestimate that acquis

56、itions could generate up to 15-20% EPS accretion over three years, andwebelievethateachofDHRsthreesegmentshasattractiveopportunities;see our HYPERLINK /shared/d2EcJQqhtLV0L4 12/6/18 Analyst Day Preview note for our thoughts on capital allocation, including potential sizeable acquisition opportunitie

57、s. More recently, on HYPERLINK /shared/d2raDdDIqgOuT 1/8/19 HYPERLINK /shared/d2raDdDIqgOuT DHRpre-announced4Qcorerevenuegrowthof5%(above4%consensus)and EPS near the high-end of $1.25-$1.28 guidance; this strong performance could soothe some investor concerns about how China/global macro picture cou

58、ld impact the company (and the broader Toolsspace).Among the SMID cap stocks under coverage, we highlight SPXC and CR as top picks. RegardingSPXC,webelievethestockonceagainrepresentsadeepvalue opportunity, trading at 10 x forward earnings / 11% FCF yield, despite an increasinglylesscyclicalandhigher

59、qualityportfolio. Thecompanyhasbeenable to outgrow worse than expected margin pressures in 2018, and we expect a return to price/cost parity by 1Q19. Furthermore, the strategic shrinking of the process cooling business is now nearing completion, enabling SPX to inflect to positive organic growth in

60、early 19. Over the next few years, we continue to expect DD earnings growth, driven by core growth, margin execution, andCUES dealaccretion,with$400Mofgo-forwardbalancesheetcapacityofferingupside toourcurrentestimates/PT. Weassessupside/downsideat3:1(seenote HYPERLINK /shared/d2mZHArrEh here)Similar