• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Industrials

Industrial Updates From the Electrical Products Group Conference

It's a great opportunity for an overview of the industrial sector.
By JAMES GENTILE May 17, 2016 | 07:37 AM EDT
Stocks quotes in this article: XYL, DHR, ETN, WCC, PNR

The Grand Poobahs of the global industrials are meeting this week in Florida. The Electrical Products Group Conference is an annual affair that offers a pretty general overview of the global industrial demand environment, capital allocation in the space, and other subsector themes that industrial dorks like myself live to follow. 

While I am not there in person this year, I was able to listen to a few webcasts after my "Walk Around This Afternoon", published earlier.

First company of interest is Xylem (XYL). I own a very small amount of this stock in its dividend reinvestment plan and really like the uniqueness of the asset. Xylem was spun out of ITT Corporation in 2011. The company serves the global water infrastructure industry and is one of the few ways to play this theme in a high quality way. It has a portfolio of global brands, like Flygt, a world leader in the manufacture of water pumps.

The company also has a solid self-help story in the way of margin expansion. Since the spin, margin progress has been slowly moving northward. CEO Patrick Decker christened long-term margin guidance of 14%-15% and suggested that public water infrastructure spending is up 10% year over year. The stock has had a brisk move year to date on underlying strength within the U.S. and global infrastructure theme, so I'll start slow and wait for a pullback to increase my position.

Trifecta Stocks portfolio holding Danaher Corporation (DHR), another stock recently on steroids, discussed the pending Fortive spin (expected in July) and the integration of its pricey Pall Corporation purchase last year. The spin of the industrial assets leaves legacy DHR with a high-margin business skewed toward dental and healthcare equipment markets. I'm looking forward to see how Fortive will use its investment grade rating and intention to spend $3 billion in capital to grow through acquisitions.

Eaton Corporation (ETN) is also a name of interest at EPG. I reviewed the most recent quarter and listened to the presentation to learn that there is still a significant amount of margin left in the tank. While taking advantage of a low-tax jurisdiction in Ireland, the company's ESS segment has seen margin leakage in recent years, despite relatively recent stabilization. This has much to do with weakness in the industrial energy landscape, though. Overall, the power management theme should drive long-term share gains and cross-functional technology sharing.

We industrial dorks always speculated that Eaton would spin or sell the auto/truck supply business -- but after yesterday's presentation, it appears that nothing significant from a portfolio perspective is on the horizon. Finally, the recent change in CEO, following the beloved Sandy Cutler's pending retirement, has been reasonably well received.

Other snippets from Day 1 of this large-cap industrial dork fest include:

  • Wesco International (WCC) said its electrical distribution business was "less bad" in April.
  • Nonresidental construction spending remains quite strong in the United States.
  • Pentair (PNR) has some larger operational headwinds in its Valves & Controls segment.  There's some heavy lifting to do there.
  • 3M Company (MMM) has an amazing R&D apparatus (Duh, I know) and an equally amazing balance sheet.
  • The Johnson Controls (JCI) --Tyco International (TYC) tie up continues to be hashed out, with the combined entity targeting an additional $1 in EPS from productivity and synergies , and targeting the massive building efficiency and energy markets.
Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, James Gentile was long XYL, although positions may change at any time.

TAGS: Investing | U.S. Equity | Industrials

More from Industrials

Be a Scale Up Seller of Quanta Services

Bruce Kamich
Jan 20, 2021 1:58 PM EST

Let's check the charts and indicators.

3M and Mastercard Continue to Trade Sideways

Bruce Kamich
Jan 20, 2021 10:55 AM EST

Both stocks may eventually do better when investors sense that the economy is indeed going to do better.

At What Price Is Ballard Power Systems a Buy?

Bruce Kamich
Jan 15, 2021 3:09 PM EST

Let's check out the latest charts of BLDP.

Honeywell Jumps Into Vaccine Distribution but its Prices May Weaken

Bruce Kamich
Jan 15, 2021 9:14 AM EST

Let's review the charts and indicators.

Another Look at the Charts of Plug Power

Bruce Kamich
Jan 8, 2021 9:56 AM EST

Pay attention to the Japanese candlestick.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    I'll discuss price targets in my Saturday column.
  • 07:54 AM EST GARY BERMAN

    Friday Morning Fibocall for 1/22/2021

    SPX (Long-Term View) The 1/21/21 NEW high @ 3861...
  • 11:16 AM EST CHRIS VERSACE

    Worst Stocks to Buy for the Biden Presidency

    Biden's take on the minimum wage, likely moves on ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login