Third Quarter Earnings Review of An Industrious Sector
Submitted by: Bidness Etc
2013-11-10 00:01:19
The Industrials sector in the US has shown moderate revenue and earnings growth in the first three quarters of 2013. The sector missed revenue estimates by 0.63%, but beat earningsestimates by 3%
(OPENPRESS) The Industrials sector includes some of the largest companies in the US that manufacture construction machinery, capital goods and equipment for the aerospace and defense industries.
The sector is a bellwether for the US economy as well as the international economy. Industrials typically are the first to benefit from economic booms, as more investments are made in construction, machine manufacturing and other industrial activities. The flipside is that these companies are also the first to be affected by economic busts, as investments in the sector are the first to decline.
In the US, 65 out of 76 industrial companies have reported earnings for the third quarter (3Q) of 2013. Revenues for the entire group are up 1.8% year-over-year (YoY) and earnings increased 6.24%. 34 companies reported YoY growth in revenues while the remaining 31 were down. While the group missed revenue estimates by 0.63%, it surprised investors by when it beat earnings by 3%.
Construction & Materials (C&M)
The segment missed sales estimates of $14.58 billion and actual sales were $14.14 billion, a negative surprise of 3%. It did, however, beat earnings by 3.6%. Vulcan Materials Company (VMC) was the top performer in the segment, with a 2.6% sales surprise and a 21.7% earnings surprise. The company reported $7.2 billion in 3Q sales, and reported an EPS of $0.32, higher than the estimate of $0.263.
Five companies in the C&M segment have so far announced third quarter earnings while Jacobs Engineering Group Inc. (JEC) is yet to report. Sales increased almost a tenth of a percent, whereas earnings grew by a more substantial 25.8%.
This segment is further divided into Building Materials & Fixtures, and Heavy Construction. Building Materials surprised on both sales and earnings by 2.4% and 4.9% respectively. Revenues increased 9.5% and earnings went up almost 39%. Heavy Construction reported $8.3 billion in revenues, missing estimates of $8.9 billion. Earnings for the Heavy Construction segment were up 10.2% YoY.
Exxon Mobil Corporation (XOM) more than made up for the disappointing results in the previous quarter when it beat estimates and announced $112.4 billion in revenues for 3QFY13. This was a significant turnaround for the company which had recently announced its worst ever results since 2010.
Earnings from its Upstream segment noticeably improved on both a year-over-year (YoY) and quarter-over-quarter (QoQ) basis. The segment performed better because global oil pricing benchmarks like the price of Brent crude oil increased during 3QFY12. Exxon is also increasing its exposure in liquid production to capitalize on high crude oil prices and upstream volumes also increased 1.5% YoY.
The decline in refining and marketing margins is a cause for concern and hit earnings but the possible impact was partially offset by an increase in volumes in 3QFY13. The Dartmouth refinery, which is being converted into a marine terminal, remained functional over the quarter, which also contributed to the higher refining volumes.
Exxon's Chemicals business was the highest growing segment in the previous year. Margins as well as volumes have improved compared to the previous quarter and the previous year's same quarter.
Management also stated that in its earnings call that capex for FY13 was in accordance with guidance. The company's cash balance over the quarter rose by $700 million to $5.7 billion. This indicates Exxon's ability to keep on paying dividends and also continue its share buyback program. Dividend paid out by Exxon this quarter was $2.8 billion and the company also bought back 34 million shares worth $3 billion.
