Mr. Collopy: I've been following the group individually and as a member of a group from time to time since 1970. And going back in time, it's taken on several different iterations. Industrial equipment used to be known as the machinery group and then capital goods, and now industrial equipment, none of which really makes any difference. I was with Robert Baird for years and industrial equipment was one of our mainstays, if you will, from a research standpoint, because we had such a concentration of it out in our area. Now to bring you forward to today, Briggs-Ficks Securities is a very small firm here in Milwaukee and I follow a group of industrial equipment stocks concentrated in Wisconsin, or at least its borders. So that's our background. And as far as my pedigree, I have both the Series 86 and 87 of the NASD, or research principal, which doesn't make me any better or worth any more, it's just a matter of having them. Here are some of the names I follow: Actuant (ATU), Bucyrus International (BUCY), Briggs & Stratton (BGG), Joy Global (JOYG), Ladish (LDSH), Manitowoc (MTW), Modine (MOD), National Presto (NPK), to some extent an industrial equipment company, Oshkosh (OSK), Regal Beloit (RBC), Rockwell Automation (ROK), AO Smith (AOS) is considered by some to be in industrial equipment, Snap-on Tools (SNA), and Twin Disc (TWIN).
TWST: The companies in this group do a little bit of everything. Is it possible
even to say what the status is of this sector, or are they too diversified?
Mr. Collopy: The group is diversified but if you look back into 2008, the
fundamentals of the group were uniformly pretty good, when compared with other
sectors, until the third quarter or early fourth quarter, when fundamentals
deteriorated rather quickly and sharply - with the exception perhaps of Bucyrus
International and Joy Global. Joy Global reported a very good second quarter
recently (JOYG is on an October year) and we estimate it will report 3.9 a
share for fiscal 2009 compared with 3.45 a share last year. However, management
cautioned in its Q2 conference call that it is managing the business as if 2011
revenues will be down some 40%. Management will not offer a revenue estimate for
2010 - it will let the analyst community work on that. Management is suspicious
of worldwide demand for industrial commodities over the next two years, and
consequently demand for both suface and underground mining equipment may
contract. We should emphasize that it isn't a certainty that this scenario will
develop, just that management is taking a prudent course at this time. Bucyrus
International, on the other hand, has not altered its 2009 guidance and, as of
April, has stuck to its previous estimate of 475 million of EBITDA which we
translate into about 3.1 a share of earnings versus 3.14 in 2008. We will be
interested in management's guidance when they report Q2 (ended June 30) in late
July. We suspect it will not be unlike Joy Global's outlook.
Tickers included in this excerpt: BUCY, JOYG, LDSH, MTW, NPK, OSK, ROK, SNA, TWIN
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