It’s shaping up to be a rough earnings season for the industrials sector. Name a stock in the sector that’s reported or pre-released guidance, from Honeywell (HON) to Dover (DOV) to Alcoa (AA), and look at the results. That’ll paint a perfect picture of the outlook for the Industrial economy.
It’s not good.
And if there was any lingering doubt about this, General Electric dashed those hopes this morning.
- The industrial conglomerate’s earnings per share were down -12% in the third quarter to $0.22
- Revenue, which missed Wall Street consensus analyst expectations, was up just 4% to $29.3 billion.
- The range for full-year earnings per share guidance was narrowed to $1.48-$1.52, from $1.45-$1.55.
General Electric CEO Jeffrey Immelt kicked-off the company’s earnings call saying results had been impacted by “a slow-growth environment” and “global growth continues, but at a low level.”
Add this to what we’ve already heard from other multi-billion dollar companies this week:
- "We continue to operate in a challenging economic environment," said W.W. Grainger CEO DG Macpherson, after the company cut its earnings guidance.
- Dover's Chief Executive Officer, Robert A. Livingston, said, "Our third quarter results were disappointing. The continuing weak macro environment, further declines in longer cycle oil & gas exposed markets, and production inefficiencies in our retail refrigeration business impacted both volume and earnings.”
- Ford is cutting production, by idling four North American assembly plants this month, as U.S. demand for new vehicles slows.
We’ve been cautioning investors for some time now about global #GrowthSlowing and recently warned about this quarter’s #DoubleDipRecession in Industrials given, what we think, is an unsustainable +18% run-up in the sector from the January lows.
There you have it. As of yesterday’s close, Industrials earnings were down -20% year-over-year. Here’s the breakdown (also see chart below for the complete earnings scorecard):
- 18 of 67 Industrials in the SP500 had reported
- In the aggregate, the sector posted a year-over-year (non-GAAP) earnings per share decline of -20%;
- The Industrials sector (XLI) is down -2.6% for the month of October.
As if this wasn’t bad enough, this week’s industrial production data continued its worst non-recessionary losing streak ever. With nearly fifty more Industrial companies still to report, it could get a lot uglier from here.
