Edison Investment Research

Market Commentary - Housing, Infrastructure, Construction and Services 1st March 2017

CRH, Carillion and Costain all have their finals for 2016 released today. Wolseley has new CFO, Mike Powell, who joins from BBA Aviation. Mitie has also made the announcement that it has disposed of its healthcare operations to private equity for £2 plus £9.5m, to be used to achieve turnaround and to cover trading losses.

Boeing comes to Sheffield

The US aerospace giant is spreading its wings into Europe

Last week, Boeing announced it would be opening its first ever manufacturing facility in Europe. Where will it be I hear you ask? Sheffield. I imagine that isn’t what you were expecting. I certainly wasn’t. The decision is significant for two reasons; what it says about Boeing’s relationship with Europe, and what it says about UK industrial capability.

Market indices riding on political outcomes

Is now really the time to throw in the towel on active management?

When Trump addresses Congress this evening, global investors will be looking for more than promises. US equity investors are now waiting to price in the delivery of markedly higher US corporate profits. Market indices look expensive and thus the fortunes of passive investors seem unusually reliant on political outcomes; is it really the time to throw in the towel on active management?

Market Commentary - Housing, Infrastructure, Construction and Services 28th February 2017

Taylor Wimpey and Interserve have released their 2016 results today. The contrast between them is substantial. Interserve and Carillion were the best performers yesterday with rises of 3.8% and 2.9% respectively.

Market Commentary - Housing, Infrastructure, Construction and Services 27th February 2017

Persimmon, Gleeson and Keller opening the batting today in what promises to be a very busy week for the sector. The Berkshire Hathaway/Warren Buffet annual letter to investors, published late last week, puts accounting adjustments, a very common feature of UK HICS stocks into a managerial context. The results round so far has been one of virtually two opposites.

Market Commentary - Housing, Infrastructure, Construction and Services 24th February 2017

St Gobain released its 2016 results last night and provides the best guide to UK HICS stocks this morning. Aside from Morgan Sindall’s 8.6% increase yesterday most moves were in a tight range. MGNS has been indicating for some time that it enjoyed a very good 2016 and more importantly provided indications that there was much good revenue and margin growth to come. Closing at 982p last night the shares are 30% YTD.

India e-commerce, Edison View: “Flipkart likely to buy Snapdeal

“India e-commerce – Flipkart likely to buy Snapdeal.  The latest in a series of woes that has hit the Indian e-commerce market reinforces our view that in network based businesses, there really is only space for one player to do well. This time around it is Snapdeal which is cutting costs by laying of 800 people, cutting the salaries of its founders to zero and exploring the sale of its mobile wallet FreeCharge at a big discount to what it paid for it in 2015 ($400m). The founders of Snapdeal admit to spreading themselves too thin and not executing optimally, but the real issue here is much more fundamental.

FOMC minutes: Fairly soon = March or June?

FOMC minutes highlight risk market will be caught offside by Fed in 2017

The most recent FOMC minutes suggest to us that March is a live meeting for the next US interest increase, in contrast to market expectations which imply a less than 20% probability of a hike. We believe the market continues to underestimate the resolve of the US Federal Reserve to use the opportunity of low unemployment and close to target inflation to re-normalize US interest rates.

All eyes on the Geared Turbofan

2017 is a make or break year for Pratt & Whitney’s beleaguered engine programme

The Geared Turbofan (GTF) engine is proof that innovating in aerospace is never an easy task. When Airbus and Boeing first introduced the concept of their new re-engined narrowbodies (A320neo and 737MAX) they were quick to reassure airlines and investors that this was a simple development proposition - a design modification rather than a clean sheet aircraft. I remember noting at the time that Airbus and Boeing were cleverly transferring the majority of engineering risk to the engine original equipment manufacturers (OEMs), and it has proved to be ever thus.

Market Commentary - Housing, Infrastructure, Construction and Services 23rd February 2017

Morgan Sindall, Howden Joinery and Rentokil have released their 2016 Finals this morning. We did not expect to see Serco decline 20% yesterday to close at 119p. We attended the meeting which provided few reasons for such a dip, in our view.