Hexcel Corp (HXL), a supplier to Boeing, was down after announcing a CEO change. The new CEO has previously served as the CEO of Spirit AeroSystems, a company which has a long history of quality problems, an inability to generate cash, and an inability to drive margin expansion. This has led to downgrades by brokers, citing both uncertainties stemming from the upcoming leadership change and the possibility of an FAA investigation on the Boeing 787, a key program for Hexcel’s portfolio. The stock breached support along all its key moving averages and is trading 21% off its 52- week high. It has the next level of support at $58.81 (-6%).
Author: vipin khare
O’Neil Capital Equipment Sector Weekly
Mazagon Dock Shipbuilders (MZK.IN; MAZDOCKS IN) – $5B market cap; $34M ADV: We added Mazagon Dock Shipbuilders to the Emerging Markets Focus List as the stock retook its 50- and 100-DMA on ~8x the average volume. Mazagon Dock is a Government of India majority-owned company and is India’s third largest shipyard. It builds and repairs warships and is the sole domestic player building conventional submarines and destroyers for the Indian Navy. It is benefitting from the government’s Make-in-India push for defense procurement. The company’s strong order book (~5x the FY23 revenue) and pipeline, coupled with new initiatives to expand its repairs and refits business, provide good visibility for revenue growth in the future. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Paychex (PAYX), a provider of payroll services, reported mixed Q3 FY24 results. Revenue (+4% y/y) missed estimates by 1%, while adjusted EPS (+7% y/y) beat estimates by 1%. Management revised its overall revenue growth guidance downward to
5–6% y/y growth from 6–7% y/y growth guided earlier. The stock declined 6% intraday. However, it recovered and closed above all its key moving averages. It has been trading sideways in a tight range since December 2023. RS line is in a downtrend,
with a weak RS Rating of 56. A/D Rating of D-.
O’Neil Capital Equipment Sector Weekly
Alfa Laval (ALF.SE; ALFA SS) – $17B market cap; $26M ADV: We added Alfa Laval to the Developed Markets Focus List as the stock broke out of a stage-one 10-week cup base on above average volume into a new all-time high. Alfa Laval is the global market leader in heat transfer, separation, and fluid handling equipment. Its products include heat exchangers, separators, and pumps with application in the food & beverage, shipbuilding, and oil & gas industries, among others. Decarbonization and the energy efficiency push continue to drive the demand for its heat exchangers. The company’s marine application products should benefit from a recovery in the shipbuilding industry and the global oil consumption. The emerging trend of plant-based foods and growing demand for biofuels are aiding the sales of its separators. Consensus expects revenue and EPS CAGR of 6% and 15%, respectively, over the next two years. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
Toyota Tsusho (TYTS.JP; 8015 JP) – $23B market cap; $62M ADV: We added Toyota Tsusho to the Developed Markets Focus List. The company is one of the seven general trading companies in Japan. It has presence across industries, such as metals, electronics, chemicals, and energy, with high exposure to the automotive end market (~70% of profit). Toyota Tsusho should benefit from the increasing demand for automobiles globally, with Toyota Motors as its primary customer for metal and other automotive parts. Increasing adoption of automobiles in Africa is expected to be a key growth driver. It is the largest provider of renewable energy in Japan and is expected to double its capacity globally by FY30. Consensus expects revenue and EPS CAGR of 3% each over the next two years. Fundamental & Technical note
O’Neil Capital Equipment Sector Weekly
E Ink (PVI.TW): Held its earnings call last week. It reported weaker-than-expected Q4 FY23 numbers in the previous week. Revenue (-32% y/y) missed estimates by 4%, while EPS (-32% y/y) missed estimates by 20%. We recommend that investors hold positions and look for support near TWD 220 (-5%), with next support at its 50-DMA (-9%).
O’Neil Capital Equipment Sector Weekly
VAT (VACN.CH): Reported FY23 results yesterday before market open. Revenue (-23% y/y), came largely in line with estimates, while EPS (-38% y/y) beat estimates by 5%. Q1 FY24 revenue guidance came in 15% below estimates. The stock
has pulled back 6% from its 52-week high. We recommend investors hold positions and look for support at its 21-DMA (-1%), followed by its 50-DMA (-4%).
O’Neil Capital Equipment Sector Weekly
Federal Signal (FSS): Reported its Q4 FY23 results yesterday before market open. Revenue (+15% y/y) beat estimates by 5%, and adjusted EPS (+30% y/y) beat estimates by 14%. The stock is extended from an ideal buy point. We
recommend that investors add positions on a low-volume pullback to its 10- or 21-DMA.
O’Neil Capital Equipment Sector Weekly
E Ink (PVI.TW) – $8B market cap; $50M ADV: We added E Ink to the Emerging Markets Focus List as the stock broke out of a stage-two 34-week cup-with-handle base on above average volume. It is 5% off its 52-week high and is actionable
here. E Ink manufactures electronic paper displays used in e-readers, electronic shelf labels, and digital signage. The company pioneered the technology and is a global leader in the e-paper market with ~90% share. The market is expected to
have a 20%+ CAGR over the next four years. Adoption of electronic shelf labels by Walmart is expected to drive adoption across retailers in the U.S. Its TAM is expected to grow as newer applications, including colour-changing cars, billboards,
and indoor and outdoor signage, evolve. Consensus expects revenue and earnings to have a CAGR of 24% and 26%, respectively, in FY23–25.
O’Neil Capital Equipment Sector Weekly
TransDigm (TDG): Reported Q1 FY24 results. Revenue (+28% y/y) beat estimates by 7% and EPS (+56% y/y) beat estimates by 12%. The stock was down 1.6% post results and has taken support at its 10- DMA. We recommend that investors hold positions and look for a high volume bounce off its 10- or 21-DMA. On the downside it has support along its 21-DMA (-4%) followed by its 50-DMA (-9%).
