CFRA’s Industry Surveys provide broad and fundamental industry overviews, helping investors familiarize themselves with an industry and identify key drivers.
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Money, Money, Money - March 23
The U.S. economy is reeling, the banking industry is assessing the damage, and the capital markets are in a state of flux. Those are the headlines, but beneath them we find a greater depth of discussion in our U.S. Regional Banks and Capital Markets surveys, both now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
Our analysts, Pauline Bell (U.S. Regional Banks) and Kenneth Leon (Capital Markets) provide information, analysis, and updates on these two critical industries, answering questions on topics such as:
- How will the Fed’s recent rate cuts affect the banking sector’s main financial metrics?
- What are the key drivers in the Capital Markets sector?
- Who are the key players in each industry?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the U.S. Regional Banks and Capital Markets surveys, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Machinery Still Matters - March 16, 2020
From the iconic ‘Yellow Iron’ of Caterpillar’s construction products to the easily recognizable green-colored Deere farm equipment, machinery remains an integral part of the economy and overall productivity.
But there is more to find out about the industry, and we are pleased to offer our Machinery Survey, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
Our newest survey from Equity Analyst Elizabeth Vermillion provides information and updates on the industry, answering questions on topics such as:
- What are the largest (by market cap) names in the Construction Machinery & Heavy Trucks, Industrial Machinery, and Agricultural & Farm Machinery sub-industries?
- How will the Chinese economy effect overall industry growth?
- Will an eventual infrastructure program deliver the goods for the industry?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Machinery Survey, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Getting Defensive with Utilities - March 9, 2020
When you turn on the switches in your home, you expect lights to illuminate your way around, while setting the thermostat hopefully insures a pleasant temperature regardless of the season. What’s the common theme? Both, and a lot more, come from power generated by a utility.
With the ultimate generation, transmission, and distribution ‘source’ in mind, we are pleased to offer our new Utilities Survey, which folds in our previously separate Electric and Gas Utilities Surveys into one, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
Our newest survey provides information and updates on the Utilities industry, answering questions on topics such as:
- What do we anticipate in the way of dividends from this typically ‘safe’ investment industry?
- How will these industries transition over to a ‘cleaner’ source of power beyond coal?
- In what ways could Battery Storage systems, powered by wind or solar, change the way power grids are constructed and run?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Utilities Industry survey, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Infrastructure Makes Its Debut - March 2, 2020
You asked for it, and now you’ve got it: a survey specifically focused on Global Infrastructure. It’s as critical a topic as you can find; here in the U.S. we are looking at critical infrastructure needs that too many politicians don’t want to talk about but know need addressing; meanwhile, in Asia, China, India, and Europe, initiatives are on the table, and plans are drawn up. But where do they stand today?
We are please to feature our new Infrastructure Survey, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA Industry Analyst Jia Yi Young provides information and updates on the industry, answering questions on topics such as:
- What are the critical funding and political issues facing the U.S.?
- How will China fare in its Belt & Road program?
- Who will lead the European effort to modernize the continent’s key infrastructure needs?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Infrastructure Industry survey, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Big News About Telecommunications - February 24, 2020
The big news coming out of the U.S.-based telecommunications world is the $26 billion merger of Sprint with T-Mobile US which was recently approved by U.S. District Court Judge Victor Marrero. Look out AT&T and Verizon…there’s a new player in town.
But that is not the only news in this booming industry. To see just what else is on the telecom burner, we’re pleased to feature our just released Telecommunications Survey, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Keith Snyder provides information and updates on the industry, answering questions on topics such as:
- Where are industry giants AT&T and Verizon in their respective 5G rollouts?
- What are the short and long-term ramifications to the Sprint/T-Mobile merger?
- How will new regulations impact industry growth?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Telecommunications Industry survey, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Telecom Heats Up Around the World - February 18, 2020
The telecommunications industry is, like virtually every other industry today, a global enterprise. The race to 5G rollouts, regulatory risks, and ‘bundled’ products and offerings takes place daily from the U.S., to Europe and Asia
With this in mind, we’re pleased to feature both our Telecommunications: Europe and Telecommunications: Asia surveys, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analysts Adrian Ng (Europe) and Ahmad Bin Abdul Halim (Asia) offer a wide variety of information and analysis across these key markets. Topics include answers to these, and other questions:
- Who are the key market competitors in each Region?
- What are the regulatory hurdles currently facing companies in each Region?
- Where do the key competitors stand in terms of critical 5G rollouts?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Telecommunications: Europe and Telecommunications: Asia surveys, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Life, Health, Property and Casualty: Insurance is Critical - February 10, 2020
Mention ‘insurance’ and most people roll their eyes. Why? Quite simply, it’s complicated! With a vast array of products from annuities to personal auto policies, and terms like ‘catastrophe bonds’ and ‘social inflation’, getting one’s arms around it all takes time and effort.
With this in mind, we’re please to highlight our Property & Casualty, and Life & Health Insurance surveys, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Catherine Seifert offers information and analysis into both important sub-industries by answering these, and other key questions:
- Who are the Top 10 Writers of Ordinary Life Insurance? Who are the Top 10 Property & Casualty Underwriters?
- How does the rise of the connected car and autonomous vehicles impact the current underwriting model in Property & Casualty insurance?
- What are the shifts in consumer habits that are making the biggest changes to the Life & Health insurance agent model?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Property & Casualty and Life & Health Insurance surveys, as well as all CFRA’s many other industry surveys, all of which are updated twice per year.
Millennials are Changing this Industry… - February 3, 2020
Products from dish detergent to diapers, soaps to motor oil, and toothpaste to dog food are all found within the vast majority of U.S., indeed, global, households. But the trends in purchasing these daily items are changing in ways that may surprise you. With this in mind, we’ve rolled out the Household Products survey, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Arun Sundaram digs into the changes in the industry by answering these, and other key questions:
- What are the demographic changes that are shaping the industry heading into 2020?
- How does the continued rise of e-commerce inform industry CEO’s choices on product innovations?
- Why are Private Label products so critical to the overall industry?
- As always, Amazon lurks in the background; what steps are industry companies taking to negate the ‘Amazon Effect?”
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Household Products as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Biotechnology Is More Than Just Drugs - January 27, 2020
Heading into the 2020 election, the biotechnology is a hot topic. New, innovative therapies are always on the horizon, while at the same time, patent expirations remain on the minds of both consumers and producers. Throw in the politics of drug prices, and you have a recipe for an industry certainly worth keeping on the (investing) radar. We’re pleased to bring the Biotechnology survey to the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Kevin Huang details the industry by answering these, and other key questions:
- What is CFRA’s overall outlook on the Biotechnology Industry?
- How are ‘biosimilars’ affecting the overall biotechnology market?
- Who produces the Top 10 Biotechnology drugs, and what are those drugs?
- How is the U.S. government trying to tackle the high cost of prescription drugs?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Biotechnology as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Metals Still Matter - January 20, 2020
From steel to gold to aluminum and copper, metals make an almost infinite number of products manufactured and sold around the world. Additionally, they also shape the trade (and now tariffs) landscape. We’re pleased to bring the Metals & Mining survey to the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Matthew Miller details the industry by answering these, and other key questions:
- What is CFRA’s overall outlook on the Metals & Mining Industry?
- Who are the Largest Steel Producing Countries in the World?
- What products are the greatest users of U.S. steel?
- How will the most recent (2019) mergers affect the industry going forward?
Check out the Sectors and/or Industry Surveys s tabs in MarketScope Advisor to review the Metals & Mining as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Of Bedding, Furniture and Home Furnishings… - January 13, 2020
Household Durables may not sound like the most exciting of industries on the surface, but beneath it investors will find a wide range of sub-industries, big-time market cap names, and a changing landscape that affects the entire Consumer Discretionary Sector. The Household Durables survey is now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Kenneth Leon brings the industry alive looking at some of these key questions:
- Who are the Top 5 Home Furnishing Import and Export Countries?
- What are the Top 10 U.S. Household Furniture product imports and exports?
- Where are the largest Source Countries of U.S. Household Furniture Imports and Exports?
- Why are online bedding retailers such a threat to the Home Furnishings business model?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Household Durables as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Flying the (Global) Skies - January 6, 2020
CFRA kicks off the New Year with another combined survey: we’ve melded our traditional Airlines with Airlines: Asia, added analysis on the European airline industry and bundled them all together into one Airlines survey for a truly global look at one of the most critical industries in the world. The (new) Airlines survey is now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
CFRA equity analyst Aaron Ho brings a keen eye and background to help answer some of these questions:
- Who are the Top 25 Largest Airlines by Market Capitalization?
- Which airlines are the market share leaders in the U.S.?
- Where are the most notable airports that commenced operations in 2019 located?
- Why is Asia-Pacific likely to be the fastest growing passenger traffic region?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Airlines Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
A New Look at Pharmaceuticals - December 23, 2019
In keeping with wants and needs of our readers, CFRA’s Industry Surveys continue to look towards a global perspective, and our new Pharmaceuticals Survey, now available in the Sectors and/or Industry Surveys tabs in MarketScope Advisor, extends the trend.
We’ve combined our traditional Pharmaceutical Survey, which was generally focused on the domestic (U.S.) market with our Pharmaceuticals: Europe survey to bring a comprehensive look to this ever-changing industry.
CFRA equity analyst Wan Nurhayati brings a global perspective to these key questions:
- What are the critical patent expirations companies face in 2020 and beyond?
- Does the current environment favor large-scale global M&A activity?
- Where are the largest corporate R&D efforts coming from, and how are those research monies being targeted?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Pharmaceuticals Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
From Plant-Based Hamburgers to Cannabidiol…. - December 16, 2019
With the millennial generation firmly taking its place in the demographic driver’s seat, the Food & Staples Retailing industry is undergoing rapid changes. It’s not just a move to ‘meal-kits’, and the growing demand for high-quality private label products that are driving the changes, either.
CFRA equity analyst Arun Sundaram delves deeply into the ‘weeds’ in our Food & Staples Retailing Survey now available in the Sectors and/or Industry Surveys tabs in MarketScope Advisor. Arun investigates these key industry themes as we head into 2020:
- What new threats does Amazon pose to the food retail industry?
- How are drug retailers navigating an uncertain and challenging regulatory environment?
- Who is winning the e-commerce grocery war?
- Where will the biggest revenue growth engines come from?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Food Staples & Retailing Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
It's the Holiday Season...Will You Pay Cash or Digitize Those Transactions? - December 9, 2019
The consumer trend of paying with something other than cash for transactions continues, and it has a profound effect on both domestic and overseas economies. CFRA Equity Analyst David Holt dives into this global spending trend in our Data Processing & Outsourced Services Industry survey, now available in the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
In addition to the growth in non-cash payments, David looks into these key themes as we head into 2020:
- While the top two credit card processing companies may not surprise you, do you know which company comes in third?
- What region generates the most transaction volumes?
- How does distributed ledger technology (Blockchain) work?
- Who is involved in the biggest merger & acquisition transactions for 2019?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Data Processing & Outsourced Services Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
5G Is About to Take Center Stage… - December 2, 2019
The race for 5G rollout and implementation is on. In the U.S. AT&T, Verizon and Sprint have all announced deployment plans of varying degrees, and consumers, in addition to investors, are waiting for more details on what comes next. Of course, 5G isn’t the only critical issue on the table for this ever-changing industry.
CFRA Equity Analyst Keith Snyder provides context and insight into this critical global industry in CFRA’s Communications Industry Survey, now available in the Sectors and Industry Surveys tabs in MarketScope Advisor. Keith looks at these questions heading into 2020 and beyond:
- Where are the major companies in their 5G staged rollouts?
- What does the U.S. ban on Huawei mean to the industry?
- How are companies in the industry working to address critical network and computer security issues?
- Who are the main players, and what shares of market do they hold for Worldwide Smartphone Shipments?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Communications Equipment Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Construction & Agricultural Equipment is More Than Just Yellow and Green - November 25, 2019
The Machinery Industry is undergoing some turbulent times. From global sub-industry leaders Caterpillar (Construction Machinery & Heavy Trucks) to Deere (Agricultural & Farm Machinery), competitive and global factors are taking a toll on growth and margins.
CFRA Equity Analyst Elizabeth Vermillion provides context and insight into this critical global industry in CFRA’s Machinery Survey, now available in the Sectors and Industry Surveys tabs in MarketScope Advisor. Elizabeth tackles the tough questions heading into 2020 and beyond:
- What are the key industry drivers that may provide clues to future industry performance?
- How does the Chinese economy-the second largest in the world-impact U.S. manufacturers?
- Where does the U.S. stand today in the Trade and Tariff wars being played out around the world?
- Can the proposed-but not yet enacted-U.S. infrastructure program deliver for the Machinery industry?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Machinery Industry Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
From Alphabet to Facebook… - November 18, 2019
If you were pleased with our Software Survey from Equity Analyst John Freeman, take a look at John’s Interactive Media & Services survey now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
John’s in-depth industry knowledge and analysis is on display throughout the pages, tackling these questions and more:
- What are the regulatory hurdles facing Alphabet (Google) and Facebook heading into 2020 and beyond?
- Have you ever heard of Metcalf’s Law? It’s an important concept as you will see after reading through John’s overview of the industry.
- Is the M&A Environment still ripe for acquisitions?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Interactive Media & Services Industry Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Computer Hardware, Semiconductors and More… - November 11, 2019
CFRA is pleased to kick off November with two new surveys linked by one analyst. Senior Equity Analyst Angelo Zino, CFA, authors both our Technology Hardware, Storage & Peripherals, and Semiconductors & Semiconductor Equipment surveys, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
Looking at the former, Zino sets out to answer these and other questions…
- Whither Apple? As the clear sub-industry major player, what can we expect from Cupertino into 2020?
- Do we see continued growth in Smartphones, and if so, from what region do we expect the greatest increase?
- Have we reached, or are we passed, an inflection point in the wearables market?
- What might be the biggest future market for the sub-industries? Hint: look inside your car!
- Where do we stand on the roll-out of 5G?
- How do valuations (P/E based) look heading into the coming year?
A Refresher Course in Software - November 4, 2019
For many, ‘Software’ means Microsoft, Oracle or Adobe; to CFRA’s new software analyst John Freeman, it means a whole lot more. John’s 15+ years of digging into the weeds and thinking about a changing-by-the-minute industry brings answers to questions lots of investors haven’t even considered:
- What’s the ‘true’ size of the software industry in terms of players and value?
- How do the three major Cloud Computing Service Models work?
- Which companies account for most dividend payouts and stock buybacks?
- How does the Software industry operate heading into the next decade?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Software Industry Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Who Doesn’t Like to Go Out to Eat? - October 28, 2019
With overall market sales expected to exceed $860 billion in 2019, restaurants represent a huge slice (65.4%) of the Consumer Services industry group, and nearly 14% of the broader Consumer Discretionary sector’s total revenue. With that kind of footprint, CFRA is pleased to roll out our new Restaurants survey, which we’ve broken out from our Hotels, Restaurants and Leisure survey at the request of clients, investors and subscribers.
CFRA Equity Analyst Tuna N. Amobi continues his long-standing coverage of the industry, and he provides keen insight into the answers to these, and other questions:
- What does a shift to Digital Ordering and Third-Party Delivery mean for new market entrants?
- With only one major M&A transaction closed in 2018, and two pending in 2019, what do we anticipate for 2020 and beyond?
- How do ‘Asset Light’ strategies work?
- Who are the biggest U.S. restaurant chains, ranked by foodservice sales?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Restaurants Industry Survey as well as all CFRA’s many other industry surveys – all of which are updated twice per year.
Retail Still Rocks! - October 20, 2019
Despite high-profile bankruptcies at Barneys New York, Charming Charlie and Charlotte Russe, lower retail sales in September and big box store closures from The Gap, J.C. Penney and L Brands, the retail industry is far from entering any kind of ‘retail apocalypse’.
CFRA equity analyst Camilla Yanushevsky gives vivid life to the industry in CFRA’s Retail survey, now available on the Sectors and/or Industry Surveys tabs in MarketScope Advisor.
Dig in as we address some of the biggest questions on the most important issues:
- Is Amazon still the 800-lb gorilla in the room?
- What is ‘inclusivity’? and how does it factor into consumer buying behavior?
- Which industries will feel the biggest brunt of the ongoing trade and tariff wars?
- How does “Share of Voice” inform winners and losers in the battle against Amazon?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the new Surveys as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
Our Newest Surveys Cover the World - October 14, 2019
More and more, investors and CFRA see industries from a global perspective. With this in mind, we are pleased to introduce a rethinking of our Industry Surveys, to treat global industries as truly global.
For example, CFRA’s Global Automobile Manufacturers survey, in which we’ve merged our Automobiles U.S. and Automobiles-Europe surveys, takes a deep dive to answer some of these key questions:
- Who are the major global automobile manufacturers, and what shares of both revenues and EBIT margin do they represent?
- What is the breakdown of total vehicle sales by region (including North America, South America, Europe, China, Japan and Africa)?
- Are electric passenger vehicle sales showing enough growth to sustain them into the next decade?
- Is the growth of e-Commerce in the industry here to stay?
Both surveys are now available in the Sectors and/or Industry tabs in MarketScope Advisor.
Coming soon, we will offer a similarly global focus for these industries:
- Airlines
- Food, Beverages & Tobacco (including a section on cannabis)
- Oil, Gas & Consumable Fuels
- Pharmaceuticals
- Multinational Banks
In each of these new surveys, CFRA clients will get a sense of who the biggest players are, no matter where their headquarters are located. The highly-valuable Comparative Company Analysis tables in the back of each survey will include not only U.S.-listed companies, but firms from around the world.
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the new Surveys as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
Welcome to Our Newest Survey: U.S. Regional Banks - October 8, 2019
Regional banks play a critical role in the banking and financial services worlds, yet with the ‘Big Banks’ taking up most of the spotlight, they are sometimes overlooked.
Until now. CFRA is pleased to introduce our newest survey, U.S. Regional Banks, now available on the Sectors and/or Industry tabs in MarketScope Advisor.
We’ve tried to address some pressing questions within the industry:
- Who are the largest players among the regional banks, ranked by assets?
- The Thrift industry has undergone massive changes over the past decade; who are players remaining in this still important niche?
- What are the regulatory issues facing these industries, and how are they being addressed?
Check out the Sectors and/or Industry Surveys abs in MarketScope Advisor to review the new U.S. Regional Banks Industry Survey as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
Metals & Mining Still Retains a Shine - September 30, 2019
While gold retains its luster and investment cache, steel and copper stare into the coming year facing headwinds. Escalating tension amid trade disputes in the U.S. and China serve to ratchet up the difficulties, in spite of Washington working to revive manufacturers fortunes.
These topics and key insights are found in our published in September CFRA’s Metals & Mining Survey. We look to answer to answer some key questions, including:
- Who are the Top Five steel producing countries? (The answer may surprise you)
- What does CFRA expect to be the key drivers of gold demand in the coming years?
- Are the Barrick Gold/Randgold Resources and Newmont Mining/Goldcorp merger and acquisition, respectively, the last of the big moves in the industry?
- What lies in store for the Regulatory Environment as the Trump Administration works through tariffs on some countries, and the impending USMCA agreement?
The Chemicals Industry Rides the Strength of the U.S. Economy - September 23, 2019
The business environment for the chemicals industry will likely remain healthy and manufacturing volumes will likely continue to expand this year, according to CFRA’s Chemicals analyst Chris Muir. Muir also see’s good EPS growth driven by higher volumes and prices, partly offset by higher input costs and unfavorable currency changes
Beyond just the numbers, however, our Chemicals survey, published earlier in September, looks to answer these questions:
• The Chemicals industry features five sub-industries. Can you name them? (For a quick reference, look to Page 10 where we start our Porter’s Five Forces analysis.)
• What are the most notable plant expansions and startups in the U.S., and which companies are leading the way with these actions?
• What are the largest industry mergers since 2016?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Chemicals Industry Survey as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
From Traditional Services to a Digital Revolution: IT Consulting is a Changing Industry - September 16, 2019
The IT Services industry is largely characterized by mature revenue profiles and an exclusive set of dominant incumbents. That said, a silver lining has formed, as the “digital” term was coined by Accenture in 2013, which was meant to highlight their specific approach of working closely with clients to implement better ways to conduct business.
As the industry changes, our IT Consulting & Other Services survey, published August, looks to answer these questions:
- Who generates the largest profit (EBITDA) margins in the industry? (The answer may surprise you, but it also may not last)
- What are the skill sets that are the hardest to recruit for in the new and growing employment model profile?
- How is a blockchain transaction processed?
- Where does the industry stand on any potential Brexit outcome?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the IT Consulting & Other Services as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
CFRA Kicks off Fall with Capital Markets and Health Care - September 9, 2019
As September ushers in a new season, so too does it bring CFRA’s next round of Industry Surveys. We start out the month with two, both critical players in the U.S. economy.
Our Capital Markets survey looks to answer key questions like:
- Does the recent change in the yield curve mean we are headed into a recession?
- How will Brexit impact the industry?
- What can investors expect from Bitcoin and Blockchain technology in the future?
Meanwhile, Health Care Equipment & Supplies reflects on these key issues:
- What role does Big Tech play in the future of Health Care Equipment?
- Which area of the Health Care Industry represents the most profitable?
- Who are the largest Global Medical Technology companies?
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the Capital Markets and Health Care Equipment & Supplies Surveys, as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
Introducing CFRA’s First-Ever Alternative Energy Industry Survey - September 3, 2019
Responding to client requests, CFRA just launched its first-ever Alternative Energy Survey. The 51-page survey identifies the major players in this growing industry and answers important questions like:
- Which alternative energy is most dominant?
- Which alternative energy is fastest growing? (Hint: the answer to the first two questions is not the same.)
- Which companies in this industry boast the highest revenues? The highest profits? (Hint: very little overlap between the biggest revenue and biggest profit producers.)
- What’s the industry’s 2020 revenue growth forecast?
- Which countries are leading the charge towards adopting alternative energy?
- And much more.
Check out the Sectors and/or Industry Surveys tabs in MarketScope Advisor to review the first-ever CFRA Alternative Energy Industry Survey, as well as all of CFRA’s many other industry surveys – all of which are updated twice per year.
What’s In Your Pantry? - August 26, 2019
Branded household products are a staple of the kitchen pantry and medicine cabinet; as names like Proctor & Gamble (Pampers), Kimberly-Clark (Kleenex), Colgate-Palmolive (Ajax) and Clorox (Glad Bags) fight it out for a share of the Household Products wallet, other entrants lurk to grab a piece of the pie.
CFRA equity analyst Arun Sundaram, CPA, covers the ongoing industry challenge, and more, in our Household Products survey currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from the survey, found in the Executive Summary pages.
Demographic Trends are Reshaping the Industry
The face of the United States is changing – Americans are now more racially and ethnically diverse than ever before, millennials now make up the largest portion of the U.S. labor force, and women now have a much larger role in the labor force. Additionally, Americans are having fewer babies each year. In fact, in 2018 the number of babies born in the U.S. fell to the lowest level in 32 years, according to the Centers for Disease Control and Prevention (CDC). These dramatic shifts and trends are having a profound impact on the household products industry. In this survey, we examine how these trends are causing companies to rethink its long-term strategy and reallocate resources accordingly.
Innovation is the Lifeblood
Procter & Gamble (PG) CEO, David Taylor, stated that if PG is doing its job right and constantly innovating, then it should come at the expense of some other company. We believe that in a highly competitive industry, innovation remains to be the lifeblood for companies attempting to compete with other branded products as well as retailers’ low-priced, private-labeled goods. To remain competitive, we believe the industry will look to develop a continuous stream of new, value-added products.
Growing Middle Class in Emerging Markets = $$$
According to a 2018 report from the nonprofit research firm, Brooking Institute, 2018 marked the first time in modern history that just over 50% of the world’s population, or about 3.8 billion people, are now considered “middle class”. We expect real GDP in emerging markets to grow at a faster rate than advanced economies. For companies within the household goods space, this means lucrative opportunities abroad, which is opportune since the U.S. household goods market is more competitive and saturated than ever before.
On Your Mark…Get Set…The Race for 5G Is On - August 19, 2019
With the continued explosion of mobile technology, the much-anticipated rollout of 5G technology is at the forefront the telecommunications industry. Who will win this competition, and in what expected timeframe, are questions consumers and investors ponder as we start to turn the corner on 2019 and head into 2020.
CFRA equity analyst Keith Snyder covers this ongoing industry challenge, and more, in our Telecommunications survey, currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from the survey, found in the Executive Summary pages.
Data Traffic Will Continue to Grow Rapidly
Mobile data traffic has exploded in recent years as consumers consumed a greater amount of video on their devices. According to Cisco Systems, 78% of the world’s mobile data traffic will be video by 2021, up from 50% currently. By 2021, the average smartphone will generate 6.8 GB of traffic per month, a four-fold increase over the 1.6 GB in 2016. To cope with this traffic growth, service providers will continue to invest in fiber deployments, network capacity and small cell antenna deployments.
The Battle Of 5G Network Superiority Has Just Begun
2018 was a year of lots of talk surrounding 5G deployments with very little in the way of actual deployments outside of a number of test networks and small deployments in some select cities. 2019 will be the year consumers get their first taste of mobile 5G technology. We expect service providers will begin shifting spending towards 5G radio access deployments as the first 5G handsets hit the market early in the year. While a small group of “power users” will be quick to adopt this new technology, we believe mass adoption will occur at a much slower rate as most consumers won’t be able to justify purchasing a new handset. In addition, Apple has stated that it won’t release a 5G phone until 2020 or later.
Climate Change Impact Presents New Challengers to a Changing Industry - August 12, 2019
Wildfires, hurricanes, and other weather-related natural catastrophes are increasingly a critical element to consider for the Property and Casualty industry, as it struggles to model premiums vs payouts into the future.
CFRA equity analyst Catherine Seifert covers this ongoing industry challenge and more, in our Property and Casualty Survey, currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from the survey, found in the Executive Summary pages.
Climate Change Injects Uncertainty into Underwriting Models
The chaotic and violent weather patterns emerging as a side effect of global warming are presenting insurers with an array of challenges, including the presence of flooding in areas not previously designated as flood zones, more violent storm patterns, and prolonged draught and heat waves that increase wildfire risk. The degree to which insurers are able to model and predict these events will greatly impact results and likely bifurcate the industry as some underwriter’s struggle with this challenge.
Premium Growth May Decelerate
Property-casualty insurers may find themselves at an inflection point in 2019, particularly regarding their top line growth prospects. After enduring more than a decade of sub 5% premium growth, the property/casualty insurance industry reported net earned premium growth of 9.8% in 2018- triple the rate of growth produced in 2017. Some of this growth reflected altered reinsurance transactions that were prompted by changes in the U.S. tax code. CFRA believes underlying pricing and demand fundamentals for the industry are relatively healthy- but could deteriorate if the economy softens considerably. Personal lines pricing has remained relatively firm, but there are some indications that competitive pressures have led some carriers to cut prices to maintain market share. Commercial lines pricing remains more fluid, with anecdotal evidence of pricing strength and firmer commercial rates not entirely translating into revenue growth. Against this backdrop, CFRA forecasts property-casualty earned premium growth of 5% to 9% in 2019 and 5% to 8% in 2020.
Biotechnology Changes the World One Breakthrough at a Time - August 5, 2019
The Biotechnology industry is one of the most capital intensive, and lucrative, sectors in the economy. In between those two points are years of research, testing and trials, government regulations and patent applications…and that’s all before a drug hits the market!
CFRA equity analyst Kevin Huang, CFA covers that, and more, in our Biotechnology Survey currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from the survey, found in the Executive Summary pages.
Orphan Drug Sales Continue to Expand and Pipelines Appear Robust
CFRA expects the biotech industry to sustain healthy growth over the next several years as orphan drug sales (diseases and disorders affecting only a small population) will likely continue to be a key growth driver for the biotech industry. Sales of these drugs are forecast to grow 10% annually through 2024, with total sales of $209 billion by 2024. CFRA believes that the industry pipeline is encouraging for growth because several newly, commercialized drugs targeting large disease markets (e.g. oncology, diabetes, respiratory) have the potential for blockbuster sales. EvaluatePharma forecasts that sales of biotechnology-derived therapies will comprise 38.6% of worldwide biopharmaceutical sales in 2024, up from 34.8% in 2018 and 20.8% in 2008.
M&A Environment Appears Favorable
While the pace of M&A deals has been slower in 2019, a few mega-deals have been announced, e.g. Bristol-Meyers Squibb’s (BMY) $74B acquisition of Celgene (CELG) and AbbVie’s (ABBV) $63B acquisition of Botox manufacturer Allergan (AGN). Industry debt levels, while still low, have risen over the last four to five years. Also, many biopharmaceutical companies appear cheap in 2019. We see at least several mature biopharmaceutical firms that are looking to offset lost revenues from expiring patents or failed ventures with promising late-stage pipeline additions. For example, we see Gilead Sciences (GILD) and Biogen (BIIB) as likely acquirers in the near future. We expect GILD to be interested in M&A to offset its declining HCV therapy sales and we expect BIIB to engage in M&A activity to make up for the failure of its late-stage Alzheimer's disease treatment. Most biotechnology companies have low debt levels and attractive valuations relative to other industries, making for a favorable M&A environment.
Was it Hot Enough for You? - July 29, 2019
The recent intense heat wave that enveloped much of the country brings to mind the importance of the power grids that service those of us sweating it out.
CFRA equity analyst Christopher Muir covers that, and more, in our just-released Electric Utility Industry Survey, currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from the survey, found in the Executive Summary pages.
Transition Toward Cleaner Generation
Over the longer horizon, we see a shift away from coal by regulated utility companies to increase use of lower carbon natural gas and carbon free generation. In addition to worrying about potential future carbon regulations, some regulated utilities see an advantage to replacing traditional generation with renewable generation. As a result, we see a shift to an increasing amount of regulated renewable generation leading to higher capital spending levels for the regulated companies, driving rate base growth.
Stronger Earnings Ahead, Combined with Higher Dividend Payout
Looking at 2019, we expect EPS growth of 3.5% for electric utilities and 4.6% for multi-utilities. Electric utilities have benefited from several years of hotter-than-normal summer temperatures and we see cooler (more normal) summer temperatures in 2019. Partly offsetting this, we think warmer winter temperatures in past years will give way to cooler, (more-normal) winter temperatures in 2019 and 2020, helping both electric utilities and multi-utilities. We see higher EPS growth of about 5.0% for electric and 6.0% for multi-utilities in 2020.
We believe that relatively strong EPS growth combined with higher dividend payout ratios should lead to dividend growth of 6.0% for electric utilities and 6.5% for multi-utilities in 2019. In our view, a shift to a higher proportion of earnings coming from regulated operations and pressure on utilities to increase their yields due to higher interest rates should help to drive industry payout ratios higher. In 2020, we expect dividend growth of 5.5% for both electric and multi-utilities.
Are Men Shopping More Than Women? - July 22, 2019
This intriguing question is just one of many contained in CFRA’s Textiles, Apparel & Luxury Goods survey currently available on the Sectors or Industry Survey tabs in MSA.
CFRA equity analyst Camilla Yanushevsky also tackles the continuing effect Amazon is having on the entire industry, with an innovative look at how Amazon is disrupting the jewelry and accessories and apparel and footwear sectors.
Here’s a quick look at highlights from the survey, found in the Executive Summary pages.
Global Trade Concerns Re-emerge
Higher tariffs will mean higher prices for the U.S. consumer. A recent study by Trade Partnership Worldwide found that the 25% tariff will impose an annual cost of $767 per year for an average family of four. While the move is unlikely to push the economy into a recession, the hike is expected to reduce U.S. GDP growth by 0.2% to 2.5% and China’s by 0.5% to 6.2%.
Manufacturers Play Consumer Direct Offense
Beyond China, direct-to-consumer (DTC) is another channel poised to blossom. By cutting out the middlemen, apparel and footwear makers are forming personal relationships with customers, maximizing margins and engaging in data-oriented marketing.
Beyond Retail, Apparel Makers Go Bankrupt At A Staggering Pace
But a diverse sales channel and geographic footprint isn’t enough. Despite several rounds of consolidation activity over the past years, the industry remains highly competitive. Fashion designers and manufacturers lacking differentiation and adaptability are filing for bankruptcy at a staggering pace. As the chart below indicates, six U.S. textiles, apparel & luxury goods companies filed for bankruptcy year to date through July 7, 2019, according to data from S&P Global Market Intelligence.
Health Care and Homebuilding Kick Off July Surveys - July 15, 2019
The calendar flipped once again, bringing in July and a new group of Industry Surveys CFRA will roll out according to schedule. We’ve started out with a bang, spotlighting two critical area of the U.S. economy, Heath Care Providers and Services, and Household Durables.
Both are in the news as the economy continues to move ahead, unemployment levels remain low and consumer confidence remains high. But there are challenges ahead with implications to both Industries.
CFRA equity analysts Kevin Huang, CFA, and Ken Leon both bring a wealth of knowledge, and more, to these featured surveys, currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from each survey, found in the Executive Summary pages.
This from Kevin…
Will the Affordable Care Act (ACA) withstand efforts to have it repealed?
While the Trump administration and Republican party’s efforts to repeal the ACA have largely been unsuccessful, they have succeeded in limiting expansion of the ACA and repealing the individual mandate for 2019, which required most Americans to have health insurance. In addition, the ACA could be repealed through the American court system because a federal judge in Texas ruled the ACA to be unconstitutional in December 2018. We expect the judge’s decision to be appealed and we don’t expect any near-term changes to Americans’ health coverage as a result of the ruling. However, headline news related to the ACA could significantly impact stocks.
Health care distributors will likely continue to struggle with weakening prescription volumes.
The health care distributor sub-industry has struggled lately from generic drug price deflation and tepid growth in prescription drug volumes. The drug supply segment comprises over 90% of sales for the health care distribution sub-industry. Looking ahead, we see a mix of positive and negative factors that balance each other out. On the positive side, we expect distribution revenues to receive a tailwind from growth in both prescription drug volumes and FDA novel drug approvals. On the negative side, we think profit margins will continue to be pressured by integration and consolidation in the drug supply chain.
…while Ken weighs in on one of his areas of expertise:
U.S. Housing Market Benefit from Lower Mortgage Rates in 2019
Affordability has improved with the 30-year fixed rate mortgage declining from just below 5.0% in November 2019 to 3.8% in mid-June 2019. The housing market has low inventory, fewer speculative homes in new homebuilding communities and low household debt. The S&P CoreLogic Case-Shiller Indices continues to show a declining rate of price increases, up only 2.3% in the March 2019 data in the May 28 release.
China-U.S. Trade Tariffs Pose New Challenges to Higher Input Costs
Manufacturers in home furnishings, household appliances, and houseware and specialties face higher manufacturing costs with trade tariffs. Many U.S companies are looking for alternative source countries then China to produce home furnishing, large appliances and other household durables. On the demand side, there are only a few household durable companies with sales exposure and risk to the China consumer market.
Tiny Houses: Not Just a Show on HGTV - July 9, 2019
The CFRA Household Durables Industry Survey, newly published in July, provides strong evidence of the trend toward smaller homes.
CFRA has a neutral outlook on the household durables industry, which is highly dependent on the U.S.household and the U.S. housing market. Here are the key investment themes that we have highlighted for the largest sub-industries that cover homebuilders, home furnishings and related areas.
U.S. Housing Market Benefit from Lower Mortgage Rates in 2019
Affordability has improved with the 30-year fixed rate mortgage declining from just below 5.0% in November 2019 to 3.8% in mid-June 2019. The housing market has low inventory, fewer speculative homes in new homebuilding communities and low household debt. The S&P CoreLogic Case-Shiller Indices continues to show a declining rate of price increases, up only 2.3% in the March 2019 data in the May 28 release.
Rising Home Equity Values Benefits Household Spending
We believe U.S. households have the debt capacity to initiate home equity loans. Since the financial crisis, U.S. households are more conservative with lower consumer and mortgage debt. In past years, households took advantage of lower rates to refinance their mortgages. Average household debt-to-income ratio confirms this trend with the peak ratio in 2006 at 13.23% compared to its lowest level at 9.88% in Q4 2018 (latest release), as tracked by The Federal Reserve Board.
Consumer Confidence Remains at High Levels
We project the Consumer Confidence Index will remain at high levels in 2019. Unlike investors worry about the stock market, the U.S. economy is healthy with consumers assessment of current business and labor market conditions. The May 2019 release of the Consumer Confidence Index was 134.1, a gain from 129.2 in April, as consumers expect the economy and the job’s outlook to remain positive.
China-U.S. Trade Tariffs Pose New Challenges to Higher Input Costs
Manufacturers in home furnishings, household appliances, and houseware and specialties face higher manufacturing costs with trade tariffs. Many U.S companies are looking for alternative source countries then China to produce home furnishing, large appliances and other household durables. On the demand side, there are only a few household durable companies with sales exposure and risk to the China consumer market.
New Home Construction and Sales in 2019 will be Challenging
The spring selling season did benefit builders with lower mortgage rates starting off slow in Q1 2019, but picking up momentum in Q2 2019. Average selling prices (ASP) have also peaked, in our view, as builders are shifting to more new communities for first-time homebuyers. In order to meet affordability to demographic trends with increased millennials looking to purchase their first home, the industry is shifting to building smaller square footage homes in order to maintain gross profit margins. Geography will also be a differentiator to identify where there may be new home sales growth. The Sunbelt markets in AZ, FL, NC and TX will outpace new residential construction in other parts of the country, by CFRA analysis.
Above is the Executive Summary of the CFRA Household Durables Industry Survey. Check out the full 44-page report on the Industry Surveys or Sectors tabs of MarketScope Advisor.
Taking Off! - July 2, 2019
CFRA’s outlook for the Airlines industry is positive. Here are some key themes impacting the industry in 2019. (All of the below is from the Executive Summary of the CFRA Airlines Industry Survey, published June 2019; more details in the full survey, available on the Industry Surveys or Sectors tabs in MarketScope Advisor.)
Oil Prices Have Been Volatile
After rising through the first four months of 2019, oil prices have receded on rising U.S. production and high inventory levels. However, geopolitical tensions threaten, including recent attacks on oil tankers in the Gulf of Oman and worries about tensions between the U.S. and Iran. In addition, OPEC production cuts are aimed at getting prices higher. With jet fuel costs representing the first or second largest cost for U.S. airlines depending on the carrier, the direction that oil prices go will play a big part in overall airline industry profitability.
Pricing is Key for the Industry in 2019 and 2020
U.S. airlines have been highly focused on getting unit revenues higher and have been relatively disciplined in keeping capacity growth below passenger growth. Airlines have pushed through several fare increases so far in 2019 and are likely to remain focused on further rate hikes over the next year, as airlines look to boost profits rather than gain market share. However, airlines are always tempted to boost revenue growth by accelerating capacity growth, so we will see if they are able to continue to restrain themselves in order to continue to raise fares. Investors have been highly focused on unit revenue growth as a driver for profits, and we think that it’s vital that unit revenue growth continues for airline valuations to improve.
Less Reliance on Economy Fares
Airlines have been focused on rising ancillary fees, upselling customers to more profitably seats and increasing market share among business travelers as ways to boost revenues and have become somewhat less reliant on economy fares. Baggage and other fees are likely to continue to rise as customers have largely absorbed the fees without much alternative. Most airlines have segmented cabins into some version of basic economy in order to compete with low cost carriers, while at the same time proving options for more leg room, seat assignment choices and other options to boost revenue streams.
737-MAX Issues Impact Summer Schedules for American, Southwest, United
With the grounding of the Boeing 737-MAX fleet following two crashes, airlines have been forced to cancel thousands of flights and take the planes out of their schedules. This is leading to lower capacity, which we think is a positive as it should help pricing, but also leads to higher costs to park and maintain the planes that are not in service and does lead to some loss of revenues due to the flight cancellations. Timing of the planes’ return to service is still a mystery, though the aircraft are off airline schedules through summer. While only United, Southwest and American have the planes, and they don’t have many, it’s still an issue clouding the industry until the planes safe return to service. There is also worry about passengers’ reluctance to fly the planes once they are recertified.
Overall Demand Remains Robust
Through the first half of 2019, passenger traffic has remained strong despite rising air fares. We expect record summer travel volumes and expect air travel demand to remain strong, boosted by strong consumer confidence and a still-strong U.S. economy. However, global economic concerns, including tariffs, Brexit and a slowing Europe and geopolitical tensions threaten this demand.
Round the World with Industry Surveys - June 25, 2019
June was a banner month for CFRA’s non-U.S. Industry Surveys. Specifically, we published two Europe-focused Industry Surveys -- “Food Retail: Europe” and “Pharmaceuticals: Europe” – and one Asia-focused title – “Airlines: Asia”.
The Europe- and Asia-focused Industry Surveys contain all the same great information and data CFRA clients come to expect from the U.S.-focused surveys. Each CFRA Industry Survey starts off with a one-page Executive Summary, which highlights the top themes and changes in that particular industry. Read the Executive Summary and you will be ready for that elevator conversation with your boss or your own clients.
The rest of the CFRA Industry Survey offers a deeper dive. The Industry Snapshot page shares key takeaways, a review of the past year and a preview of the coming year, a breakdown of the major players by ranked by market cap, near-term themes (both bullish and bearish) and a 10-year (or more) look back at stock market performance versus a broader index.
The following pages contain Industry Financial Metrics and Key Industry Drivers, each with a chart showing past data trends and text with our forecast. We also include a Profit Pool Map, so you can easily track which players have the biggest share of the revenue as well as their profit margins. We use a Porter’s Five Forces framework to review the competitive environment of every industry, reviewing the strengths and weaknesses, opportunities and threats. We also review the operating, regulatory/legislative and M&A environment.
In the back of every CFRA Industry Survey, we explain “How the Industry Operates,” “How to Analyze a Company in this Industry,” a Glossary, Industry References and Comparative Company Analysis tables with a wealth of data (much of it going back 10 years) on each individual company in the industry.
Be sure to check out all Industry Surveys, available on the “Sectors” or “Industry Surveys” tabs in MarketScope Advisor.
Of Trade Wars and Tariffs - June 18, 2019
From the ‘yellow-iron’ color of Caterpillar construction equipment to the immediately recognized green of Deere agricultural and farm machinery, CFRA maintains a focus on the machinery industry. After several years of growth, we see a much slower pace through 2020 due to softening growth in construction spending and industrial production. Critical to our thinking is the current trade and tariff situation.
CFRA equity analyst Elizabeth Vermillion addresses these, and other issues, head on in our Machinery survey, currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at some key issues Elizabeth addresses in the survey, found in the Executive Summary pages.
Tariffs and the Trade War
In the last year and a half, it has been hard to think about the Industrials sector with acknowledging the significant impact tariffs and the trade war have had across the sector. Machinery companies have been at the center of the tariff and trade conversation. Steel and aluminum tariffs have caused significant material cost inflation across the machinery industry. Many of the machinery companies are global companies that source materials, manufacture products and sell those products both in the U.S. and countries across the world. A global manufacturing footprint, while often a cost-benefit, has led to increased input and production costs due to tariffs. The trade war also brings a lot of uncertainty to the sector. CFRA thinks this uncertainty has led to lower demand as customers have chosen to hold off on some larger purchases.
Major Macro Economic Indicators
Machinery companies are heavily impacted by the overall health of the economy, are typically very cyclical and are closely tied to the business cycle. CFRA tracks numerous metrics to gauge the overall health of the global economy and of manufacturing activity. CFRA tracks the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI), industrial production and capacity utilization from the U.S. Federal Reserve and U.S. and global gross domestic product (GDP). Data currently reflects continued growth, though at a generally slower rate than the average in the last few years.
Making Sense of Pharmaceuticals - June 11, 2019
As you stand in line waiting to fill your prescription at your favorite pharmacy, does your mind start to wonder about things like: 1) why does this medicine cost as much as it does? 2) is there an alternative ‘generic’ that works just as well, and perhaps costs half the price? 3) what can, or should, the government be doing about that cost, and 4) what kind of research are the pharmaceutical companies doing for future therapies?
CFRA equity analyst Colin Scarola tackles these questions, and more, in our Pharmaceuticals survey, currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at some key issues Colin addresses in the survey, found in the Executive Summary pages.
Rapid Development of Immuno-Oncology Therapies
Leading the growth in brand drug sales over the past few years has been immuno-oncology (I-O) treatments. This relatively new field has brought biologic drugs to market that improve the ability of a patient’s own immune system to fight cancer, rather than the drug directly attacking tumors. Among the leading I-O drugs in 2018 were Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo, both of which were approved in 2014 and in 2018 generated around $7 billion in annual sales each. The tremendous success of I-O drugs has brought significant new R&D investment into the drug industry, as have promising developments in gene and cell therapy treatments.
Drug Prices in the Political Crosshairs
Beyond economic forces in the drug industry playing out in typical fashion, intense public scrutiny on high prices for certain brands has loomed large over the industry. In 2018 President Trump unveiled a plan to tackle high drug prices, focusing on two areas – ensuring consumers benefit from drug price rebates negotiated by pharmacy benefit managers rather than letting companies pocket them, and increasing the negotiating power of Medicare Part D drug plans. Then, in early 2019, executives from top drug makers and pharmacy benefit managers were grilled by the Senate Finance Committee about high drug prices. So far there have been only proposals and hearings, with no actual regulatory or legislative action. New laws and regulations will be a key area to watch in 2019 – 2020, especially as new politicians have arrived in Washington following the Fall 2018 election, and as 2020 presidential candidates vet their ideas to control health care costs in the upcoming debates.
Kicking off June with…Food! - June 4, 2019
With every turn of the monthly calendar page, CFRA starts to roll out new surveys according to our schedule. We’re pleased to start out the June calendar with a twofer, both focused on the ever-rapidly changing and evolving food industry.
CFRA equity analyst Arun Sundaram offers his insights and expertise in the Food & Staples Retailing survey, while Jia Man Neoh weighs in similarly in our Food Retail: Europe survey. Both surveys are currently available on the Sectors or Industry Survey tabs in MSA.
Here’s a quick look at highlights from each survey, found in the Executive Summary pages.
This from Arun…
Amazon is Everyone's Enemy
Amazon is becoming a bigger pest throughout many industries. Just a couple years ago, it seemed like Amazon was only out to war with "big-box" retailers like Walmart and Target, or specialty stores like Best Buy and Home Depot. Yet, we've seen Amazon make new enemies as of late. In August 2017, Amazon woke up the food retail industry by purchasing Whole Foods for nearly $14 billion. Then, Amazon shook the health care sector by acquiring online pharmacy PillPack in June 2018. Just when we thought other retailers are beginning to catch up, Amazon decides to change the game again by introducing one-day free shipping. It seems like Amazon is quickly moving up everyone's blacklist, if they aren't already on the top.
Eating in vs. Eating Out Remains Key
Consumption of food away from home has been key in the average American diet. According to the USDA, food away from home spending has steadily risen from 47% of total food expenditures in 1997 to 51% in 2018. This has benefited food distributors and restaurants, which have seen prices rise faster than food-at-home retailers. Companies like Sysco and U.S. Foods, which dominate the food distribution industry, boast more than 60% of its sales from restaurants. We think the shift in consumer preferences is partly due to high levels of consumer sentiment. In fact, the Consumer Sentiment Index in May 2019 surged to its highest level in 15 years. A high consumer sentiment index should continue to lead to increased food away from home spending.
…and a take on the industry in Europe, courtesy of Jia Man…
Pricing Competition Remains Tough
In our view, pricing will remain the key facet of food retail competition; market share gains or losses of the players continue to point towards price, rather than product, as the deciding factor in grocery purchases. While the increasing rollout of private-label products by the incumbent grocers could be an effective competitive response, we believe that it will not be enough to halt the advancement of discounters, as the latter are able to maintain significant price gap thanks to their differentiated business models.
Brexit Poised Near-Term Headwind
In the near-term, we see two major catalysts that could materially impact the industry. We believe that the withdrawal of the U.K. from the European Union (Brexit) could bring about substantial supply disruptions to the U.K. grocers if an orderly exit is not secured before the deadline on October 31, 2019. The resulting increases in food costs and deterioration of consumer sentiment could accelerate market share gains by value-oriented players, particularly the discounters.
Staying on Top of Market Changes - May 28, 2019
In late 2016, the paper industry was a fraction of its once-formidable self. To keep up with the changing times, CFRA discontinued its Paper Industry Survey to launch more tech-oriented titles. And then a funny thing happened: Paper, and specifically paper packaging, made a huge resurgence, led by the robust growth of online shopping (and shipping). It became obvious that it was time to re-launch the survey. So after a two-year hiatus (from November 2016 to November 2018), and a slight tweaking of the title and focus (the old survey had been called Paper & Forest Products), the newly-relaunched Paper & Paper Packaging Industry Survey made its debut.
Earlier this month, we published the second iteration of the CFRA Paper & Paper Packaging Industry Survey (U.S. surveys are updated twice per year). Here’s a peek at the Executive Summary (below). Check out the full survey on the Sectors or Industry Surveys tabs in MSA and you, too, may be surprised at the resurgence of this industry.
CFRA has a neutral outlook for the paper & forest products industry and the paper packaging subindustry. Here are some of the key themes to watch for in 2019.
Digitization Poses Risks and Presents Opportunities
In an increasingly digital world, it is not uncommon to have the perception that the paper and forest products industry has a bleak future. The reality is that this industry is still growing, albeit at a slow pace. Although graphic paper (newsprint and coated and uncoated papers) has been in decline for several years, other products are filling the gap. Faster-growing areas include packaging (both industrial and consumer), tissue papers and pulp for hygiene products.
An Evolving Consumer is a Boon for Paper Packaging
Major consumer trends (such as sustainability, convenience and e-commerce) create new growth opportunities for the paper packaging sub-industry. CFRA expects the strong growth in e-commerce to be a long-term tailwind for box demand (and other paper packaging products). E-commerce is changing the packaging landscape, as companies must focus on the unboxing experience, counterfeiting measures, optimizing the last-mile delivery and product safety. Paper is generally the preferred packaging material and, as the economy continues to expand, demand for paper packaging is likely to increase. Consumer disdain towards plastic packaging appears to be gaining momentum and this could benefit paper packaging demand.
Asset Rationalization and Repurposing
The paper & forest products industry and paper packaging sub-industry are undergoing major transformations. Restructuring and consolidation have been major themes in recent years, as well as rationalizing unutilized capacity and repurposing capacity away from paper, towards containerboard and pulp. Several paper companies have recently focused on increasing pulp capacity, given the positive secular trends for tissue and hygiene products. Demand for tissue paper tends to grow along with the worldwide economy and is also likely helped by the growing middle class in emerging countries in Asia and Latin America. In addition, substitute products and technology advances do not have a significant effect on tissue demand.
Paper Mills: Survival of the Fittest
Given the strong secular decline in demand for communication papers, there have been a significant number of the least-economic paper mills that have closed or shifted to producing more attractive products. This reduction in paper capacity has created a tighter market and companies with high-performing paper assets are benefiting from higher paper prices and expanding volumes. The remaining paper mills are generating significant free cash flow in the current market environment.
Looking for Sector-Specific Industry Surveys? - May 21, 2019
CFRA offers 44 different titles in our U.S. Industry Surveys product. But suppose you are looking only for Industry Surveys for one specific sector? This is easier than it first appears.
There is no need to look at the full list of titles and try to guess which ones belong to each sector. Instead, using the Sectors tab in MSA, you can find sector-specific Industry Surveys in a flash.
Here’s how: Click on any sector name in the Sector Scorecard that appears on the landing page of the Sectors tab. Just underneath the summary write-up for that sector and the Average STARS Ranking for that sector, you will see a PDF icon. Click on “Download Industry Survey” and you will be presented with a full list of all the CFRA Industry Surveys for that specific sector.
For example, if you click on Financials and then “Download Industry Survey,” you get a list of all seven CFRA Industry Surveys associated with the financial sector: Asset Management & Custody Banks, Capital Markets, Consumer Finance, Banks, Life Insurance, Property & Casualty Insurance and Real Estate Investment Trusts.
April Industry Surveys - May 14, 2019
April was a banner month for CFRA Industry Surveys. Not only did we unveil our new color design and new content sets (a new Industry Snapshot page, Profit Pool mapping, Porter’s Five Forces analysis), but we did so across 13 different titles. We’ve written in depth about some of our April Industry Surveys in this space, but here is a full list of all the surveys published in April:
- Aerospace & Defense
- Asset Management & Custody Banks
- Automobiles
- Banks
- Chemicals
- Commercial Services & Supplies
- Electronic Equipment & Instruments
- Hotels, Restaurants & Leisure
- IT Consulting & Other Services
- Real Estate Investment Trusts
- Retail
- Software
- Automobiles: Europe
Be sure to check out all of our valuable industry research. Industry Surveys can be found on the Industry Surveys tab or the Sectors tab in MarketScope Advisor.
Asset Management: Opportunities and Threats - May 7, 2019
By now, we’ve all heard the trials and tribulations of the asset management industry. Grappling with near-term pressures from a shift in investor preferences to lower-cost passive investment products that is exerting downward pressure on the industry’s fee structures and revenue base, the industry has a growing need for more comprehensive technology solutions to manage a wider array of functions and lower costs.
Considering the fast pace of change, CFRA determined the Asset Managers (and Custody Banks) needed their own Industry Survey (asset managers had previously been covered in the Capital Markets Industry Survey). Just last month, we launched our first iteration of the CFRA Asset Management & Custody Banks Industry Survey, which will now be updated twice per year like our other U.S. surveys. The survey is written by CFRA’s own Cathy Seifert, a seasoned professional with 30 years of experience as an equity analyst. Here are some of the high-level insights you will read about in this in-depth 42-page report:
Secular Challenges Will Continue to Pressure Most Traditional Asset Managers
An equity market correction and a secular shift to passive investments (like exchange traded funds or ETFs) drained nearly $1.1 trillion from equity mutual funds worldwide in 2018. Despite a Q1 market rebound, equity mutual funds continued to experience net outflows as investors opted for lower cost ETFs. These outflows and shifts to lower cost products will exert downward pressure on most asset managers. Favorable equity market conditions could relieve some of those pressures, but the long-term environment for active equity managers remains challenging.
ETFs Represent Both a Challenge and an Opportunity for Asset Managers
Market acceptance for ETFs has fueled growth at a compound annual growth rate (CAGR) of nearly 24% over the last fifteen years -- nearly double the rate of growth in managed assets during the same period. A handful of active fund managers have sought to increase their exposure to this rapidly growing market but gaining inroads here will be tough -- the ETF market remains very concentrated, with the top five providers control nearly 95% of the market. CFRA expects the ongoing downward pressure on fees to fuel a consolidation trend among smaller players seeking scale.
Technology Will Be a Differentiating and Bifurcating Force Within the Custody Business
The custody business is another highly concentrated area of the financial services market. CFRA estimates that the top four custody banks control more than 80% of industry revenues. While historically this group provided fairly simple “back office” functions, an arms race of sorts has emerged as firms seek to address their clients’ more complex needs, move farther up the food chain and stave off total disruption from the likes of blockchain. CFRA expects the custody business to bifurcate along the lines of the “tech savvy” and the “tech-challenged”.
Private Equity (PE) Still Has Plenty of Dry Powder Despite Some Macro Headwinds
CFRA expects PE deal value to rise by 12% to 17% in 2019 (to between $900.5 billion and $940 billion), above the industry’s 10-year CAGR of 9.64% but below the 32% rise seen in 2018. This reflects our view that industry-wide “dry powder” of nearly $2 trillion will drive deal flow, though a more muted macroeconomic climate may make year-to-year growth comparisons more challenging.
The Industry is Poised for Additional Consolidation
CFRA expects industry consolidation to be propelled by two needs -- scale and diversification. Against a backdrop of shifting consumer preferences that favor passive investing over active management, coupled with a continued downward pressure on asset management fees across most asset classes and strategies, we expect an uptick in industry consolidation among smaller asset managers seeking to build scale, while some larger asset managers may seek to diversify their mix of assets under management (AUM) or technology capabilities and will likely do so through acquisitions.
Be sure to check out the new CFRA Asset Management Industry Survey and all CFRA Industry Surveys. The CFRA Industry Surveys underwent a design overhaul in April, and several new sections, including an Industry Snapshot, Industry Profit Pools Mapping, and Porter’s Five Forces (SWOT) Analysis now featured in all surveys. Check them out on the Industry Surveys tab or the Sectors tab on MarketScope Advisor.
New trends in Hotels & Restaurants - April 30, 2019
The world, by now, has gotten used to the rapid pace of change in the technology sector. But restaurants? Leisure? Believe it or not, those industries are also changing at a furious pace. To keep up, CFRA’s “Hotels, Restaurants & Leisure” Industry Survey is a must-read. In the newest iteration, published on MarketScope Advisor on April 24, readers will be brought fully up-to-date on various trends:
Further Adoption of Digital Ordering Capabilities
We see further acceleration in the deployment of digital ordering by quick-service restaurants (QSRs) via customized websites and dedicated mobile apps (mobile order and pay), and further rollout of digital self-order kiosks and other features to ease ordering, payment and pick-up. Increasingly, such features will become one of the crucial competitive differentiators for QSRs.
Growth in Off-Premise Sales and Third-Party Delivery Services
Continued traction in off-premise sales will likely outpace the overall industry growth as more restaurants introduce innovative offerings for the relatively nascent segment. Increasingly, this should be complemented by a continued penetration of third-party delivery services, as more restaurants further deploy such services across their U.S. locations.
Sustained Focus on Refranchising and “Asset-Light” Strategies
We expect continued execution of the so-called “asset-light” strategies as some of the major hotels and restaurant chains transition from property ownership to franchising and management. We see further asset recycling by hotels, with proceeds toward share buybacks and dividends.
Selective M&A Activity and Strategic Realignments
We think the industry could see a relatively measured pace of M&A activity or other strategic actions such as spin-offs or IPOs. A few companies could tap into the capital markets to raise additional funds while aiming to unlock further shareholder value.
Multi-Year Cycle of Global System and Capacity Expansion
We see a multi-year cycle of system expansion via new restaurant openings and hotel development, with a notable focus on Asia-Pacific and other emerging markets. Also, the major casinos will likely continue ride a recent wave of capacity expansion in Macau – despite some persisting trade tensions between the U.S. and China – while cruise ship operators expand their fleet to tap into pent-up demand in key international markets.
Persisting Wage Pressures and Labor Shortages
Restaurants will likely remain under pressure from rising labor costs, with several states now above the federal minimum wage. Increased competition for low-skilled workers from Amazon and others could exacerbate wage pressures for restaurants and hotels in a tight labor market.
Rise of Sharing Economy with Alternative Accommodations
The proliferation of alternative accommodation listings on Airbnb and other online destinations will remain a steady influence within the so-called sharing economy. Despite a potential slowdown in the overall growth trends for vacation rentals, we think this trend could harbor some lingering concerns with a potential disruption in the global hotels and lodging industry.
Potential Opportunities on Legalization of Sports Gambling
With more states likely to move toward a legalization of sports gambling within their domains in the wake of last year’s U.S. Supreme Court decision, casinos will likely and increasingly seek to capitalize on potential new business opportunities across their regional domestic markets.
Check out the Industry Surveys or the Sector tab to see all CFRA Industry Surveys.
Re-introducing CFRA Industry Surveys - April 23, 2019
Starting this month, CFRA is unveiling long-awaited changes to our much-loved Industry Surveys product. You’ll notice the changes from the first instant, since each survey now boasts a topic-appropriate color cover. Let’s look at the just-published Automobiles survey together to review the changes.
(There are several ways to access CFRA Industry Surveys. You can use the Sectors tab or the Industry Surveys tab in MarketScope Advisor to go straight to all the surveys. Or, you can look up a specific stock, General Motors (GM), for instance, and click on the link to the relevant survey at the top of the stock’s landing page.)
Moving beyond the beautiful new cover, let’s go to page 2, the Table of Contents page. Each listing here is a hyperlink to the relevant section. So if you want to go directly to the Comparative Company Analysis tables on page 28, no need to scroll past 27 other pages. Simply click on the link in the Table of Contents and you will be brought automatically to the material that is most relevant to you.
Similarly, and in response to client requests, there is an index of all the charts and tables in each Industry Survey, now helpfully listed on page 3. These, too, are hyperlinks; click on any of them and you will be taken automatically to the relevant page.
Page 3 also boasts a section highlighting the “New Themes” and what’s changed since the last iteration of the survey. This is intended to be a time-saving tool for regular users of the surveys, to determine which new sections have been added since the last time the survey was updated.
Now check out the brand new page 5, and Industry Snapshot page that is intended to give readers an at-a-glance update on the industry as a whole. If you have only 10 minutes before an important meeting about a specific industry, be sure to read the Industry Snapshot page for that specific industry – then go back and read the full survey later at your leisure.
Page 6 features the revised Financial Metrics section, with a cleaner and more updated layout make it easier to read and quickly assess how the industry is performing on various key metrics.
Going forward, all CFRA Industry Surveys will include Profit Pool Mapping and an analysis of Porter’s Five Forces (also sometimes called SWOT analysis). In the newly-released Automobiles survey, you can see the Profit Pool Map on pages 9 and 10. The Porter’s Five Forces analysis begins at the bottom of page 10.
Even as CFRA made all of these improvements, we kept all the crucially important information that has always been in our Surveys: the competitive, operating, regulatory and M&A landscape; How the Industry Operates; How to Analyze a Company in this Industry; a Glossary; and References.
Who’s Doing the Clothes Shopping? The Answer May Surprise You - April 16, 2019
There’s little doubt that ‘fashion’ and fashion industry are critical drivers of the American, indeed, the world, economies. So, it may come as a bit of a wake-up call to investors that a key trend in the Retail industry is developing…one that’s been building for some time, and has the potential to shake things up long term and provide a boost to the industry.
Indeed, retail is far from the verge of collapse; it just continues to evolve. Our analysis of net store openings data from S&P Global Market Intelligence shows that store openings continue to outpace store closures. Alongside these transformations, industry fundamentals remain positive.
One of the best ways to keep up-to-speed on the Retail industry is through CFRA Industry Surveys, available on the Sectors tab or the Industry Surveys tab in MarketScope Advisor. Here are excerpts from the Executive Summary of the Retail Industry Survey, which was published on the MSA platform in early April:
Retail Woes Are Still Evident:
Competition in the retail industry is heating up and retailers are filing for bankruptcy at a staggering rate. Year-to-date through March 18, nine U.S. specialty and multiline retailers have filed for bankruptcy, compared to 16 in 2018 and 29 in 2017, according to data from S&P Global Market Intelligence. With the retail industry still over-stored, we expect store rationalization to continue at 2018’s pace.
Is Amazon to Blame?
The rise of Amazon, we believe, is partly to blame. According to a CFRA analysis of Alexa Internet’s Share of Voice data, Amazon’s expansion efforts have significantly threatened the market share of incumbents within the sporting goods, home furnishings, computer & electronics and office supply industries, and partly disrupted the niche of jewelry and accessories players; the apparel & footwear and cosmetics industries, we found, are maintaining strength.
Inclusivity Is Now in Fashion:
That said, we believe retailers can stay relevant by embracing inclusivity. According to a recent study by Chicago-based marketing analytics company, Sprout Social, 66% of consumers say it’s important for brands to take a public stance on social and political issues. Viewed as a source of differentiation, social activism builds a positive brand image, attracts and retains customers, and can even improve employee engagement.
Are Men Shopping More Than Women?
We see opportunities for retailers to gain market share by expanding men’s offerings. According to a CFRA analysis, the men’s apparel category outperformed women’s in the fourth quarter of 2018. CFRA attributes the outperformance to men shopping for apparel more than women.
Check out all 44 CFRA U.S. Industry Surveys on MarketScope Advisor. Titles published in April include Retail, Automobiles and Automobiles: Europe. Our March surveys feature Capital Markets, Health Care Equipment & Supplies, Media, Midstream Oil & Gas, Road & Rail, Chemicals, Banks, Banking-Europe and Metals & Mining.
Keeping Up With The Kardashians Miners - April 9, 2019
The on-again/off-again hook-ups. The minting of fresh billionaires. The bling. Yes, we’re talking about the metals & mining industry. Can anyone really keep up?
So far this year, Goldcorp agreed to be acquired by Newmont Mining. Barrick made a hostile bid for Newmont Mining, was spurned, and ultimately agreed to a joint venture instead. Amidst all of this drama, a lot of bling (gold and other metals) is being pulled out of the ground.
One of the best ways to keep up-to-speed on the metals & mining industry is through CFRA Industry Surveys, available on the Sectors tab or the Industry Surveys tab in MarketScope Advisor. Here are excerpts from the Executive Summary of the most recently-published (March) Metals & Mining Industry Survey, on the MSA platform:
A Surge of M&A is Reshaping Gold Mining
If Newmont closes its acquisition of Goldcorp (subject to approvals), there will be two giants in the gold-mining world. In early January, Barrick Gold closed its acquisition of Randgold Resources, which was followed by the announcement that Newmont Mining would acquire Goldcorp. Subsequently, a hostile bid from Barrick directed at Newmont has instead resulted in the world’s largest gold mining
joint venture, as both companies agreed to form a partnership in Nevada. CFRA thinks both groups of shareholders are poised to benefit from the massive synergy potential. We think this is the beginning of a new wave of M&A activity, as large miners are likely to first divest assets deemed non-core, followed by more acquisitions, in an effort to improve the size and quality of reserves.
Domestic Steel is Regaining Market Share and Pricing Power
Driven by a combination of strong demand growth (helped by regulatory and tax reform) and the Section 232 tariffs/quotas on steel imports, domestic steel mills in the U.S. have been utilizing a larger
proportion of available capacity. According to the American Iron and Steel Institute (AISI), year-to-date steel production in the U.S. through March 16, 2019 totaled 20.3 million net tons, at a capacity utilization rate of 81.4%. That represents a 6.7% year-over-year increase from the 19.0 million net tons produced during the same period in 2017, when the capacity utilization was 76.6%.
Steel prices in 2019 face tough comparisons, given the initial spike in steel prices following the announced tariffs/quotas. Although steel prices fell sharply from the summer 2018 peak, we think
prices have stabilized and several consecutive weeks of domestic capacity utilization above 80% should be supportive of price appreciation during the remainder of 2019.
Copper is Headed for a Structural Supply Deficit
Although copper has been stuck in a narrow trading range following the escalation of trade tensions between the U.S. and China, CFRA believes copper prices are poised to appreciate meaningfully. We expect the world will see only limited growth from green and brownfield projects. In addition, some of the largest mines in the world have been experiencing lower ore grades, a trend that we think will continue.
The demand outlook is also bullish, in our view. Although Chinese economic growth is slowing, its ongoing investment in infrastructure remains robust. China is also the world’s leader in electric
vehicle sales. CFRA forecasts strong secular growth globally in copper consumed by electric cars and the necessary charging infrastructure.
Check out all 44 CFRA U.S. Industry Surveys on MarketScope Advisor. Titles published in March include: Capital Markets, Health Care Equipment & Supplies, Media, Midstream Oil & Gas, Road & Rail, Chemicals, Banks, Banking-Europe and Metals & Mining.
Thought-Provoking Facts in CFRA Industry Surveys - April 2, 2019
Did you know corporate debt has surged to more than $6.3 trillion --- up from $3.5 trillion in 2008. What’s more, nearly 50% of all investment grade credit, about $2.5 trillion, is rated “BBB”, just one tier above “junk bond” status. This could have huge implications for the banking industry.
Learn more in CFRA’s Banks & Thrifts Industry Survey. Here’s the Executive Summary, which hints at all the great information in the 55-page report:
CFRA has a Neutral outlook on the Banks & Thrifts industries. Here are the key themes and our outlook for 2019.
The Big Banks are on a roll…
The 5,406 Federal Deposit Insurance Corporation (FDIC)-insured commercial banks and savings institutions profits continue to grow, reaching a record $236.7 billion in 2018. Leading the growth in profits included higher operating revenues, lower income taxes due to the Trump tax cut program, and lower loan-loss provisions, as indicated by the FDIC.
…but higher deposit costs will be a negative for earnings growth.
Deposit costs increased more rapidly in 2018 as more banks experienced funding pressures and responded by marketing deposit specials – limited time, promotional offerings on their accounts. Funds are shifting into higher-yielding accounts like certificates of deposit (CDs) as many customers prefer to receive rates of 1.5% to 2.0% on their deposit accounts after continuously low rates for years.
The regulatory environment continues to look appealing…
Make no mistake, the Trump administration wants to make it as easy and risk-proof as possible for banks to thrive. Recent appointments of Randal Quarles (Federal Reserve), Joseph Otting (Comptroller),
Jelena McWilliams (FDIC) and Kathy Kraninger (CFPB) suggest the administration is planning regulatory relief across a wide spectrum of the banking industry and financial services sector.
…but will the Fed throw up a barrier?
The Fed, under the new leadership of Jerome Powell, is giving off signals that suggest it knows a slowdown is coming and may yet relax any interest rate increases. However, Powell recently hedged his bets, indicating on February 26, 2019 that the economy was showing ‘conflicting signals’ and the Fed may take a “patient approach” to interest rate changes.
A new deal could change the banking landscape.
In February, BB&T and SunTrust announced a $66 billion merger of equals, set to close in the fourth quarter of 2019, wherein the combined bank will own $442 billion in assets, of which $301 billion are loans; and $324 billion in deposits, of which $285 billion are located in the Southeast, representing around 20% market share in Florida, North Carolina and Georgia. We expect increased M&A activity in the industry this year, driven by easing regulations and Trump’s tax reform, which enabled banks to build a war chest for client acquisition and spending on technology.
Throughout each year, CFRA publishes 44 different U.S. surveys, as well as eight Europe surveys and two Asia surveys.
A CFRA client recently noted, “One thing I’ve always liked about the industry surveys is the ability to drill down to the data points that really drive the industry. I like the market cap breakdown and the near-term themes.”
There are several easy ways to find Industry Surveys on MarketScope Advisor. The Industry Surveys tab (in the left-hand navigation bars) brings users to a list of all surveys. Click on any one, and you will see a complete history of all the previously-published surveys on that topic. Or, on the Sectors tab, you will see a listing of the most recently-published Industry Surveys. Lastly, for any given stock, there is a link to the relevant Industry Survey right on the stock’s landing page.
*Pro Tip
With the February 2019 publication, CFRA combined Banks and Thrifts into one Industry Survey. You can still see the previous iterations of the separate Banks and Thrifts surveys by clicking on the relevant title on the Industry Surveys landing page.
Chemical Industry Update - March 26, 2019
Why do chemists like nitrates so much? They’re cheaper than day rates. Groan! Okay, so you won’t find any cheesy chemists’ jokes in the last CFRA Chemicals Industry Survey. What you will find is a wealth of useful information on this important materials sector industry. What follows is the Executive Summary from the March 2019 Chemicals Industry Survey:
Our fundamental outlook for the diversified chemicals sub-industry for the next 12 months is positive. The business environment for the chemicals industry will likely remain healthy and manufacturing volumes will likely continue to expand this year, in our view. Importantly, we see continued feedstock and energy advantages for U.S. petrochemical companies relative to overseas peers, improving fundamentals for fertilizer and agricultural chemical companies, and a growing economy supporting industrial gases and specialty chemical companies.
Chemical Companies’ Results Driven by a Handful of Companies
Of the 42 companies in the S&P Composite 1500 (S&P 1500) Chemicals Sub-industry Index, the eight highest market cap companies in the index account for 75.4% of the total. DowDuPont alone makes up 22.9% of the index and Linde PLC 15.7%. The rest of the companies in the index are each less than 10% of the total market cap.
Commodity Chemicals Benefit from Strong Competitive Position in the U.S.
The strong U.S. competitive position for commodity chemical companies (8.3% of the S&P 1500 Chemicals Index) stems from U.S. natural gas prices that are significantly cheaper than oil prices. Currently, WTI oil prices are 20.5 times Henry Hub natural gas spot prices and North Sea Brent oil prices are an even higher multiple. However, we see challenges due to lower volumes and higher costs in 2019 hurting EPS.
Merger Savings and Higher Volumes Should Drive Diversified Chemicals Growth
Diversified chemical companies (26.2%) should benefit from merger savings driven by the DowDuPont merger. DowDuPont, which makes up 87.4% of diversified chemicals market cap, expects total synergies of $4.3 billion. We also see higher volumes driven by economic growth, but see higher input costs offsetting these benefits and leading to lower results in 2019.
More Balanced Market Should Boost Fertilizer & Agricultural Chemicals Results
We see slowing urea capacity growth falling below demand growth over the next several years leading to a more balanced market for fertilizer & agricultural chemical companies (6.6%). Additionally, we see a balanced market in potash and phosphates. These factors should support prices, and we see demand growth leading to higher volumes.
Economic Growth and Merger Savings Should Drive Industrial Gases Results
The industrial gases sub-industry (23.1%) became substantially larger following the Linde PLC and Praxair merger, completed at the end of October 2018. Linde expects to achieve $1.2 billion in merger synergies. The industrial gases sub-industry results are also driven by economic growth. Linde’s sales are heavily weighted toward the Americas and Europe, followed by Asia.
Higher Volumes and Prices Should Aid Specialty Chemicals Results
Specialty chemicals companies (35.9%) is another industry facing rising raw materials costs, but its competitive position allows most companies to recoup the increased costs through increasing product prices. Volume growth and cost savings efforts are also helping to drive improved results.
That’s just the tip of the iceberg. The full 54-page CFRA Chemicals Industry Survey contains much more information, including broad fundamental overviews, recent performance statistics, and analysis of trends, supplying the facts needed to quickly identify the key drivers of the chemicals industry. Check out the Industry Surveys tab in MarketScope Advisor to see the complete list of all the industries CFRA covers.
Fun Facts in CFRA's March 2019 Industry Surveys - March 19, 2019
Did you know what DARQ is? (Tech sector investors will increasingly need to know this acronym; answer at the bottom of this article.**) Or how about this: Against a backdrop of record hurricane claims in recent years that have been exacerbated by the multi-billion-dollar claims emerging from the California wildfires last fall, insurers are starting to more publicly acknowledge the role global warming and climate change is having in weather patterns and in catastrophes? Or this: CFRA expects the biotechnology industry to post revenue growth of 9.6% in 2019 and 9.8% in 2020?
These are examples of the interesting facts you can find about various industries in the Industry Surveys published by CFRA in February. Throughout the month, CFRA published eight different Industry Surveys: Biotechnology; Consumer Finance; Household Products; IT Consulting & Other Services; Life Insurance; Property & Casualty Insurance; Oil, Gas & Consumable Fuels; and Oil & Gas: Europe.
Throughout each year, CFRA publishes 44 different U.S. surveys, as well as eight Europe surveys and two Asia surveys.
Here’s what one satisfied CFRA client had to say about Industry Surveys: “For industries that I am unfamiliar with, CFRA Industry Surveys are really good at getting me up-to-speed quickly. We use them for assisting clients and getting periodic updates on what we expect to be coming, consensus expectations for key metrics in that particular industry. We read them when working with a specific client in a particular field. My go-to sections of the CFRA Industry Surveys are Industry Trends, specifically any information about industry drivers. Also Industry Snapshot and Financial Metrics. For more complex industries, or perhaps an industry I’m less familiar with, I will also read “How the Industry Operates” and “How to Analyze a Company in this Industry” sections. All in all, we like that they summarize key performance trends and are a bit more comprehensive and industry-wide than what we can get from analyst reports.”
There are several easy ways to find Industry Surveys on MarketScope Advisor. The Industry Surveys tab (in the left-hand navigation bars) brings users to a list of all surveys. Click on any one, and you will see a complete history of all the previously-published surveys on that topic. Or, on the Sectors tab, you will see a listing of the most recently-published Industry Surveys. Lastly, for any given stock, there is a link to the relevant Industry Survey right on the stock’s landing page.
*Pro Tip
Sign up for alerts to receive an e-mail as soon as any given Industry Survey title is published! In MSA, click on the Alerts tab near the top of the screen. Then click on Industry Surveys. You can select individual Industry Survey titles or you can elect to receive alerts for all titles. It’s a fast and easy way to ensure you don’t miss any of CFRA’s valuable Industry Survey content.
**DARQ stands for “distributed ledger, artificial intelligence, extended reality and quantum computing” – which CFRA identifies as the next set of technologies needed for companies to carve out competitive advantages. Expect to hear more of this term in the coming years; remember that you heard it here first!
Keep your eye on this space for other useful tips and tricks to make your MarketScope Advisor experience more useful. And be sure to check out the “Help” tab for “Frequently Asked Questions” and other navigation tips. As always, if you need help navigating MarketScope Advisor, please reach out to cservices@cfraresearch.com or call 1 800.220.0502 (Monday - Friday 9:00am - 5:00pm ET).
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