Quanta Services (PWR) – $17B market cap; $189M ADV: We removed Quanta Services from the U.S. Focus List as the stock breached support along its 50-DMA on above average volume. The stock has come under selling pressure as NextEra (NEE) announced a likely delay in its solar projects due to the U.S. trade investigations into Chinese solar panel suppliers. PWR generates 4–5% of revenue from NEE and 14% from its renewables segment. We will continue to monitor the stock and may revisit it on technical improvement.
Author: Sambit Mohanty
O’Neil Capital Equipment Sector Weekly
Lockheed Martin (LMT) reported Q1 FY22 results. Revenue missed estimates by 3.8%, while adjusted EPS beat estimates by 3.7%. The company said it had received a good number of international orders for the F-35 aircraft, but margins contracted due to inflation and pandemic-related costs. The stock was down 1.6% post-print and is forming the right side of a stage-two flat base. It has a good RS Rating of 93 and an A/D Rating of B-.
O’Neil Capital Equipment Sector Weekly
Boeing (BA) announced that it delivered 41 jets in March, up from 29 in the same period last year. The company also announced that 141 orders were placed in a limbo following the Ukraine war, and it no longer expects to deliver these planes. Deliveries of the 787 Dreamliner remain frozen due to inspections and repairs. The stock is trading 32% below its 52-week high and has poor technical ratings. Avoid.
O’Neil Capital Equipment Sector Weekly
Iron Mountain (IRM) – $16B market cap; $125M ADV: We added Iron Mountain to our U.S. Focus List as the stock broke out of a stage-one cup-with-handle base, and is trading at a new all-time high. IRM is the market leader in information storage and retrieval. It is expected to benefit from the increasing adoption of digital information access, demand for data centers, and the expansion into the asset lifecycle management market. Consensus estimates revenue and normalized FFO/share to have a CAGR of 10% each in the next two years.
O’Neil Capital Equipment Sector Weekly
Sojitz (NIIW.JP; 2768 JP) – $4B market cap; $22M ADV: We added Sojitz, a diversified trading and manufacturing company, to our Developed Markets Focus List as the stock broke out of a stage-one 19-week cup-with-handle base on above average volume. We expect the company to benefit from rising coal and crude oil prices, a recovery in the global automotive market, rising demand for biomass-derived chemicals, and a recovery in global air traffic. The company aims to increase its ROE to more than 10% by FY23E, driven by investments in infrastructure, health care, and fertilizers. Consensus expects the company to report a revenue CAGR of 12% and EPS CAGR of 68% in the next two years.
O’Neil Capital Equipment Sector Weekly
Pentair (PNR) announced the acquisition of Manitowoc Ice from Welbilt (WBT) for $1.6B. Manitowoc, a producer of commercial ice makers, has a global installed base of 1M ice machines and generates revenue of $308M with an EBITDA margin of 30%. The acquisition is expected to be part of Pentair’s water solutions platform. Manitowoc’s revenue is expected to have a CAGR of 10% in FY21–25. The acquisition would become EPS-accretive by $0.25 in FY22 and by $0.40 by FY25. Pentair expects annual EBITDA synergies of $20M–25M by FY25. PNR is in a downtrend and trading 33% below its 52-week high. It has a low RS Rating of 25 and a poor A/D Rating of C-. Avoid.
O’Neil Capital Equipment Sector Weekly
CRH (CRH) announced the sale of its building envelope business to KPS Capital Partners for an enterprise value of $3.8B. The building envelope business operates primarily in North America and
contributed to 24% of the company’s building products revenue ($7.2B in FY20). The business generated EBITDA of $337M in FY20. Proceeds from the sale are expected to be used to fund
capex, acquisitions, and cash returns to shareholders. The stock has declined 21% from its 52-week high and breached support along its 200-DMA on above average volume. It has a declining RS
line with a low RS Rating of 34 and an A/D Rating of E. Avoid.
O’Neil Capital Equipment Sector Weekly
Cintas (CTAS; $38B market cap; $210M ADV) – We removed Cintas from our U.S. Focus List due to technical deterioration. The stock is trading below its 50- and 200-DMA and has a
low A/D Rating of D-, indicating distribution. The uniform rental and facility services (80% of revenue) faces margin pressure due to increased labor and fuel costs. Management’s
guidance for 8% y/y growth each in sales and EPS in FY22 was slightly below estimates.
O’Neil Capital Equipment Sector Weekly
Indutrade (INDT.SE; INDT SS) – $8B market cap; $10M ADV: We removed Indutrade from our Developed Markets Focus List due to technical deterioration. The stock has declined more
than 25% from its 52-week high and breached support along its previous pivot. Due to supply chain issues, its sales and EBITA margin were negatively impacted, leading to higher
components costs and prolonged delivery time in Q4. For FY22, management expects supply chain challenges to persist despite the improved demand. We are booking a gain of 67% on
the stock and will revisit it on technical improvemen
O’Neil Capital Equipment Sector Weekly
We added Vinci (DG@F.FR; $67B market cap; $142M ADV) to our Developed Markets Focus List as the stock is actionable after breaking out from a stage-one nine-week cup base.
Vinci is the largest construction company in Europe by market capitalization and enjoys market leadership positions in many of its end markets. The company is expected to benefit from
the recovery in road and air traffic in its high-margin concessions business and the €4.9B acquisition of Cobra IS. An ROE of 12%, operating margin of 9%, and strong free cash flow are
factors helping the company stand out among peers.
