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Rolls Royce, Seimens - >>> This Jet Engine Giant Accelerates Electric, Hybrid Propulsion Unit
Investor's Business Daily
by APARNA NARAYANAN4
6-18-19
https://www.investors.com/news/electric-planes-siemens-sells-eaircraft-business-rolls-royce/?src=A00220&yptr=yahoo
Siemens (SIEGY) agreed to sell its electric aircraft-propulsion business to Rolls-Royce, the U.K.-based rival to General Electric (GE) and United Technologies (UTX) in jet engines. Siemens stock, GE stock and United Technologies stock all rose.
Rolls-Royce and Siemens eAircraft were already working with plane maker Airbus (EADSY) on a hybrid-electric propulsion system, the E-Fan X, to power a large jet.
The acquisition is set to close in late 2019. Financial terms were not disclosed.
"We have already made significant strides in realizing our strategy of 'championing electrification' and this move will accelerate our ambitions in aerospace by adding vital skills and technology to our portfolio," Rob Watson, director of Rolls-Royce Electrical, said. "It brings us increased scale and additional expertise as we develop a product range of hybrid power and propulsion systems."
Electric planes took center stage at this week's Paris Air Show. Airbus told the Associated Press Monday it hopes to sell hybrid or electric planes by 2035, aligning with earlier reports. United Technologies also told CNBC it seeks to fly a hybrid-electric commuter aircraft within three years, with the platform eventually benefiting both Airbus and Boeing (BA) jet.
And Israeli startup Eviation snagged the first customer for its electric planes — Cape Air, a regional U.S airline.
Shares of Siemens gained 2.3% on the stock market today to rise above the 50-day line. GE stock rose 3.7% and United Technologies stock gained 1.9%.
GE told IBD its aviation unit has booked $50 billion in orders so far this week at the Paris Air Show. That included a $23.1 billion Air Asia order for 200 Leap-1a engines to power 100 Airbus A321neos, which was booked Tuesday after being announced in July 2016.
It also included an aircraft-leasing deal for an undisclosed amount with Amazon Air, as Amazon (AMZN) Air builds out its delivery and transport network.
Amazon Air will add 15 Boeing 737 cargo planes to the five it already leases from GE's aviation financing and leasing arm. By 2021, Amazon Air will have 70 aircraft in its fleet, Amazon said in a release.
GE also booked $20 billion from Indigo for Leap-1a engines to power 280 Airbus planes, the largest single engine order in history.
Indigo, India's largest airline, reportedly moved the order to GE joint venture CFM International after United Tech's Pratt & Whitney engines developed issues.
In 2017, GE booked roughly $31 billion at the Paris Air Show.
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Eviation -- >>> All-electric jet firm Eviation announces US regional airline as first customer, predicts delivery in 2022
CNBC
JUN 18 2019
by David Reid
https://www.cnbc.com/2019/06/18/all-electric-jet-firm-eviation-announces-us-airline-as-first-customer.html
Venture capital-backed Eviation is developing a nine-seat electric aircraft.
The firm sees regional travel as being under served by aviation.
A prototype of its electric plane has been unveiled at the Paris Air Show.
Eviation chief executive Omer Bar-Yohay reveals future plans for his company’s nine-seat electric plane at the 2019 Paris Air Show.
PARIS — The Israeli start-up Eviation announced at the Paris Air Show that U.S regional airline Cape Air is to buy its electric aircraft.
Eviation is developing a nine-passenger aircraft designed to fly up to 650 miles at around 240 knots (276 miles per hour). A commercial jet would cruise around 500 miles per hour. The electric plane — called Alice with a prototype being unveiled at the show this week — is designed for the sort of distances usually conducted by train.
Cape Air is set to buy a “double-digit” number of the plane which has a list price of around $4 million each. It’s expected that any customer would be able to negotiate a smaller figure.
The company’s chief executive, Omer Bar-Yohay, told a press conference Tuesday that he expected to receive certification by late 2021, with deliveries predicted for 2022.
“This aircraft is not some future maybe. It is there, ready and waiting,” he said.
Bar-Yohay cited the contributions from Honeywell who built the plane’s controls as well as Siemens, and magniX who provided the electric motor and related functions.
A rendered image of the Eviation Alice. An electric aircraft designed to take 9 passengers up to 650 miles at 240 knots.
Source: Eviation
Bar-Yohay said the plane would now travel to Arizona in the United States where it would be flight tested before being put forward for certification with the U.S. FAA (Federal Aviation Administration).
The CEO added the plane should satisfy FAA concerns that it might create a backlog of training for pilots, as it was “probably one of the easiest planes to fly,” adding “this is one of the specimens that the FAA wants to see happen.”
The Eviation boss said that eventually, future planes would be built in the United States.
Most of Eviation’s funding is from Clermont Group, the private investment fund of Singapore-based billionaire Richard Chandler. Clermont has given Eviation $76 million in exchange for a 70% stake in the company, according to a filing with the U.S. Securities and Exchange Commission dated January 3.
In a in a letter to staff, Chandler said commercial-scale electric aircraft would “change the culture of air travel for future generations,” and that the aerospace industry was entering a new era.
“45% of all flights are under 500 miles – approximately the distance from London to Zurich, or New York to Detroit. This puts almost half of all global flights within the range of an electric motor.”
Clermont also owns and funds magniX, the firm that manufactures the three electric motors that provide the aircraft with roughly 900 kilowatts of power. Bar-Yohay claimed if there was a problem with the two wing engines, it could continue flying on the rear rotor only.
The CEO of magniX, Roei Ganzarski, also attended the launch, telling CNBC it was “exciting to see a dream come true.”
Ganzarski said his engines would be split between new clean sheet aircraft such as the Eviation and retrofitting existing small aircraft.
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>>> United Technologies nears deal to merge aerospace unit with Raytheon: source
Reuters
Greg Roumeliotis, Harry Brumpton
6-8-19
https://www.reuters.com/article/us-utc-m-a-raytheon/united-technologies-nears-deal-to-merge-aerospace-unit-with-raytheon-source-idUSKCN1T90T0
(Reuters) - United Technologies Corp is nearing a deal to merge its aerospace business with U.S. defense contractor Raytheon Co and form a new company worth well over $100 billion, a person familiar with the matter said on Saturday.
United Technologies and Raytheon are seeking to pool resources through what would be the biggest merger in the aerospace and defense sectors.
United Technologies provides primarily commercial plane makers with equipment such as electronics and communications equipment, whereas Raytheon is a vendor mainly to the U.S. government for equipment in military aircraft and missiles.
The deal would be structured as an all-stock merger of equals because United Technologies would separately spin off its Carrier air conditioning business and Otis elevator division, as it has previously announced it would do, the source said.
If the negotiations between United Technologies and Raytheon are completed successfully, a deal could be announced as early as Monday, the source added, asking not to be identified because the matter is confidential.
United Technologies declined to comment, while Raytheon did not immediately respond to a request for comment.
United Technologies has a market capitalization of $114 billion, but without Carrier and Otis, its value could be less than $60 billion, bringing it closer to Raytheon’s market capitalization of $52 billion.
The Wall Street Journal first reported on the potential deal, stating that United Technologies Chief Executive Greg Hayes is expected to lead the newly created company, while Raytheon CEO Thomas Kennedy would be chairman.
Raytheon, maker of the Tomahawk and the Patriot missile systems, and other U.S. military contractors are expected to benefit from strong global demand for fighter jets and munitions as well as higher U.S. defense spending in fiscal 2020, a lot of it driven by U.S. President Donald Trump’s administration.
However, Pentagon spending is projected to slow down after an initial boost under Trump. A deal with United Technologies would allow Raytheon to expand into commercial aviation, which does not rely on government spending like the defense sector.
Conversely, United Technologies could benefit from reducing its exposure to commercial aerospace clients amid concerns over the rise of protectionism in international trade. The International Air Transport Association, which represents about 290 carriers accounting for more than 80% of global air traffic, cited these concerns earlier this month, when it said that the industry is expected to post a $28 billion profit in 2019, down from a December forecast of $35.5 billion.
United Technologies has said it is on track to separate Carrier and Otis in the first half of 2020, leaving the company focused on its aerospace business through its $23 billion acquisition of Rockwell Collins, which was completed in 2018, and the Pratt & Whitney engines business.
CHINESE SCRUTINY
Chinese authorities scrutinized United Technologies’ Rockwell Collins acquisition heavily, given its footprint in that country’s market. This resulted in the deal closing in November 2018, as opposed to the third quarter of that year, which the companies initially targeted.
Trade tensions between the United States and China were blamed at least partly by analysts for that delay, and it is not clear whether the deteriorating relations between the world’s two largest economies could also weigh on the Raytheon deal.
United Technologies and Raytheon appear to have little overlap in their businesses, an argument the companies could make once U.S. antitrust regulators start scrutinizing their merger. However, major commercial aerospace companies, such as Boeing Co and Airbus SE, as well as the U.S. Department of Defense, have been known to use their significant purchasing power to seek concessions from their suppliers.
The deal with Raytheon could put pressure on General Electric Co, which also competes with United Technologies for commercial aerospace clients, to seek scale. It could also push other defense contractors, such as Lockheed Martin Corp, to explore expanding their commercial businesses.
Last year, military communication equipment providers Harris Corp and L3 Technologies Inc announced an all-stock merger that, once completed this summer, will create the sixth-largest U.S. defense contractor.
United Technologies was previously a bigger player in the defense sector. But in 2015, it agreed to sell Sikorsky, the maker of military helicopter Black Hawk, to Lockheed Martin for $9 billion.
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>>> DuPont Jumps on Morgan Stanley Initiation Following Separation
TheStreet
Tony Owusu
Jun 3, 2019
https://www.thestreet.com/investing/stocks/dupont-jumps-on-morgan-stanley-initiation-following-separation-14979186
Analysts at Morgan Stanley are bullish on the newly independent DuPont (DD) following its separation from DowDuPont, initiating coverage on the company with an overweight rating and $78 price target.
DuPont is now an independent company after DowDuPont completed a three-way split that became official on June 1. Morgan Stanley analyst Vincent Andrews believes that the company compares well to fellow industrial company 3M (MMM - Get Report) .
"DuPont and 3M have meaningful overlap across DuPont's segments, as well as a similar geographic and end market mix. We forecast revenue growth profiles for both companies at global GDP plus rates (~3.5%)," Andrews wrote. "We expect all of DuPont's metrics to improve both organically (through existing cost out / synergy programs) and inorganically (as the company shifts $2B of presumably below company average EBIT margin sales into a "noncore" segment while it seeks buyers for those assets)."
Separately, DuPont celebrated its new independence by announcing a $2 billion share buyback program that expires on June 1, 2021.
DowDuPont completed a merger in 2017, but now the company has been broken into three different entities consisting of Dow Inc. (DOW), DuPont, and Corteva Agriscience.
DuPont shares were rising 9.1% on Monday while Dow shares climbed 1.56%. Corteva
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>>> EnWave Corporation (NWVCF) licenses, builds, and installs commercial-scale dehydration platforms for applications in the food, pharmaceutical, and industrial sectors to manufacturing companies in Canada. The company offers radiant energy vacuum (REV) dehydration platforms for food industry, such as nutraREV and quantaREV to dehydrate fruits and vegetables, cheese products, yogurt products, meat products, and snacks. It also provides REV platforms for pharmaceutical industry, including powderREV for the bulk dehydration of temperature-sensitive biomaterials, such as probiotics and enzymes; and freezeREV for the dehydration of biomaterial and pharmaceutical products. The company has a research and development license agreement with the College of Agriculture and Life Sciences at Cornell University. EnWave Corporation is headquartered in Delta, Canada. <<<
>>> GE’s Health-Care Split Should Put Creditors First
There may be better ways to leverage the business than IPO’ing a 20 percent stake.
By Brooke Sutherland
December 19, 2018
https://www.bloomberg.com/opinion/articles/2018-12-19/ge-health-care-split-must-prioritize-debt
General Electric Co. CEO Larry Culp is honoring his promise to urgently address the company’s massive debt load. The best options to do so may be the ones that also give him the most flexibility.
The industrial conglomerate has reportedly filed confidentially for an initial public offering of its health-care unit, which sells MRI machines as well as cell-therapy technologies. This isn’t too surprising: Culp said in October that he agreed with the general thrust of former CEO John Flannery’s plan to make the health-care business an independent entity. But there was always the possibility he might change his mind, much like he did on the prospect of an equity raise, having first ruled it out before later indicating he might consider selling shares “as conditions change in the future.”
Breaking Up Comes at a Cost
GE's health-care unit is one of its most profitable and throws off a lot of cash
Some investors had hoped health care would stay in the fold. An IPO of the unit is essentially an equity raise by another name, but in that case, GE would be divesting its best cash-generating unit. The capital-intensive aerospace, power and renewables combination that will remain looks even more risky as recession signals flash yellow. Late Tuesday, FedEx Corp. cut its fiscal 2019 earnings guidance just three months after raising it in one of the strongest signs yet that global growth — and the profit gains that go with it — may have peaked. Industrial CEOs generally sounded optimistic on third-quarter earnings calls, but the rapid deterioration of FedEx’s economic outlook is a reminder of how quickly the tide can turn.
The alternative to divesting the health-care business is a more traditional stock sale, whereby GE would essentially be offering shares in the downtrodden power business and liability-ridden financial arm that have dictated its valuation of late. While Culp is now seemingly not not going to consider an equity raise, he still appears reluctant to do so, for some reason. His re-opening of the door to an equity sale struck me as more about realizing he never should have taken it off the table in the first place, as opposed to a sudden warming to the idea.
This is puzzling to me because an equity raise would seem to be a valuable arrow in Culp’s quiver. Yes, he would inevitably have to sell shares at a discount to a stock price that’s already bumping up against financial-crisis lows. But doing so would give GE resources to offset the many elastic liabilities at GE Capital, while easing the leverage concerns that are largely responsible for driving that share price so low in the first place. If Culp can mitigate GE’s debt problem, plenty of investors would be excited for the opportunity to bet on a comeback. The over-enthusiastic pops in GE shares after even the slightest inklings of good news is a testament to that.
Balancing the Scales
GE's current breakup plan calls for an IPO and partial sale of its health-care unit and selling down its Baker Hughes stake. These moves will raise funds but dilute future free cash flow.
But if he’s not willing to go down that path, Culp likely will need to modify Flannery’s plan to sell a 20 percent stake in the health-care business and spin off the rest to shareholders. Most of the leverage reduction from that proposal comes via offloading about $18 billion in debt and pension liabilities onto the new entity. What GE really needs, though, is cash. Culp has already alluded to the possibility of selling as much as a 49.9 percent stake in GE Healthcare, which would buy him significantly more breathing room. But the other question to think about is why GE needs to spin any piece of the health-care business off to shareholders at all.
Flannery was very concerned about balancing the interests of bondholders with those of GE’s aggrieved shareholders; the idea behind the spinoff was to echo the company’s merger of its transportation unit with Wabtec Corp. and give investors the ability to participate in the future growth of the health-care business. But the upside potential for GE’s core shares is likely range-bound until the company can get a handle on its liabilities, and there may be a better way to leverage health care to do that. The most obvious comparison is Siemens AG’s separation of its Healthineers arm, which competes with GE in medical imaging. Siemens IPO’d a piece of that business, but it retains an 85 percent stake, which it could conceivably sell over time to raise cash — and likely at a premium to the IPO price, given Healthineers’ stock-price appreciation. GE is already treating the health-care unit like a piggy bank; why not consider a similar structure that would give it additional resources should the need arise?
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>>> Honeywell International Inc. (HON) operates as a diversified technology and manufacturing company worldwide. It operates through four segments: Aerospace; Home and Building Technologies; Performance Materials and Technologies; and Safety and Productivity Solutions. The Aerospace segment supplies products, software, and services for aircraft and vehicles that it sells to original equipment manufacturers and other customers in various markets, including air transport, regional, business and general aviation aircraft, airlines, aircraft operators, defense and space contractors, and automotive and truck manufacturers. The Home and Building Technologies segment provides products, software, solutions, and technologies that help homes owners, commercial building owners, and occupants. The Performance Materials and Technologies segment develops and manufactures advanced materials, process technologies, and automation solutions. The Safety and Productivity Solutions segment provides products, software, and connected solutions to customers that enhance productivity, workplace safety, and asset performance. Honeywell International Inc. was founded in 1920 and is headquartered in Morris Plains, New Jersey. <<<
>>> United Technologies Offers Air Cover Amid Slowdown Worries
Aerospace still has a comfortable runway, and that helps justify the conglomerate’s breakup plan.
By Brooke Sutherland
January 23, 2019
https://www.bloomberg.com/opinion/articles/2019-01-23/united-technologies-offers-air-cover-amid-slowdown-worries
United Technologies Corp.’s latest results suggest aerospace is still a safe place as worries mount about a slowdown in global growth.
The $96 billion conglomerate that’s planning on splitting itself into three reported a staggering 11 percent gain in revenue excluding the impact of M&A and currency swings for the final months of 2018. That was the first time quarterly organic growth stretched into the double digits since 2007, according to Bloomberg Intelligence. The increase was driven primarily by United Technologies’ Pratt & Whitney unit, where sales of its new geared turbofan jet engine drove a 22 percent surge in organic growth. The Collins Aerospace Systems segment — recently dubbed as such following the November close of the company’s $30 billion takeover of Rockwell Collins Inc. — posted a 9 percent gain in revenue excluding the impact of that acquisition.
Blockbuster Quarter
All of United Technologies' businesses reported strong sales growth but the standouts were its aerospace divisions
United Technologies’ strong showing won’t mitigate concerns that the best growth is behind industrial companies. The company predicted global GDP growth would slow to 2.9 percent in 2019, compared with 3.2 percent in 2018, the latter of which was revised down from a 3.3 percent outlook this time last year. Its own blistering pace isn’t expected to last, either: United Technologies forecasts organic sales growth of 3 percent to 5 percent in 2019, compared with 8 percent for the full year in 2018. But that’s still a comfortable gain and likely veers toward conservatism as management plays it safe in an increasingly uncertain world. Contrast that with 3M Co.’s prediction of 2 percent to 4 percent organic sales growth in 2019, an outlook analysts already think is too optimistic.
What this suggests is that even though sales may have peaked, those companies with significant aerospace exposure still have room for positive surprises. Despite its more subdued economic forecast, United Technologies expects demand for air travel to remain strong, with revenue passenger miles climbing 6 percent in 2019, compared with 6.5 percent growth in 2018. This bodes well for Honeywell International Inc. and Boeing Co.’s results next week.
Ready for Takeoff
Aerospace and defense companies have underperformed the S&P 500 Industrial benchmark since the end of the third quarter, despite being better positioned for 2019
For United Technologies specifically, its latest results also reinforce the logic of its plan to separate out its Otis elevator and Carrier climate-control businesses to focus on its aerospace operations. In contrast to the ballooning sales at the Pratt & Whitney and Collins divisions, orders for new Otis equipment were flat organically in the fourth quarter relative to the prior year, while orders at Carrier were up 3 percent.
The breakup has been under scrutiny as investors grumble about the 18-month to two-year timeline United Technologies has laid out for executing a split, and question the wisdom of spinning out two major companies in what may end up being a softening economy. These are fair questions. It will help that the company laid out a more specific breakup schedule as part of its earnings presentation on Wednesday. United Technologies said it would be operationally ready to carve out the Otis and Carrier units by the end of 2019. After that, its timing would be dictated by the obtainment of tax rulings. United Technologies also spelled out its free-cash-flow outlook in laborious detail. This should ease concerns about its weaker-than-expected cash-flow forecast for the Rockwell Collins business upon the deal’s closing. The shortfall was more a reflection of integration costs and higher interest expenses than any meaningful deterioration in the business.
At the end of the day, United Technologies’ conglomerate structure hasn’t made sense for a while and its businesses’ contrasting growth and margin profiles have long muddied up its earnings picture. This recent quarter is giving investors a sneak peak at what an aerospace-focused United Technologies would look like, and there’s good reason to like what they’re seeing.
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>>> General Electric Shares Surge After Rare JPMorgan Upgrade
General Electric GE shares surged the most in more than five years in pre-market trading Thursday after JPMorgan analyst Stepehen Tusa changed his rating on the beaten-down stock for the first time in two and a half years.
The Street
Martin Baccardax
Dec 13, 2018
https://www.thestreet.com/investing/stocks/general-electric-shares-surge-after-rare-jpmorgan-upgrade-14809623?puc=yahoo&cm_ven=YAHOO&yptr=yahoo
General Electric (GE - Get Report) shares surged the most in more than five years in pre-market trading Thursday after JPMorgan analyst Stepehen Tusa changed his rating on the beaten-down stock for the first time in two and a half years.
Tusa lifted his rating to "neutral" from "underweight", a view he had held since May of 2016, and although he maintained an $8 price target on the stock, he said the ""known unknowns" surrounding the company are now easier to quantify.
"Key to the story, in our view, is the outcome of 'known unknowns' in near term, which are better understood and around which debate is more balanced, as opposed to being overlooked by most bulls in the past," Tusa said. "We now believe a more negative outcome one these liabilities (equity dilution is one) is at least partially discounted, and it's possible the company can execute its way through an elongated workout that limits near-term downside."
GE shares were marked 10.28% higher in the opening minutes of trading in New York and changing hands at $7.42 each. The move would be the biggest single-day gain in more than five years and would trim the stock's year-to-date decline to around 56% if it holds until the end of the session.
TheStreet's technical expert, Bruce Kamich, noted earlier this week that his charts were showing a "bullish divergence", but was doubtful the stock could produce a "meaningful advance" on its own.
Separately, GE said Thursday that it was launching a $1.2 billion "internet of things" software company and selling a majority stake in its ServiceMax, a field service management software division, to private equity group Silver Lake.
"As an early leader in IIoT, GE has built a strong business with its industrial customers thanks to deep domain knowledge and software expertise," said CEO Larry Culp. "As an independently operated company, our digital business will be best positioned to advance our strategy to focus on our core verticals to deliver greater value for our customers, and generate new value for shareholders."
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>>> GE raises $1.5 billion as pressure mounts to fix balance sheet
By Matt Egan
CNN Business
November 16, 2018
https://www.cnn.com/2018/11/16/business/ge-capital-debt/index.html
GE changed our lives. Why is it struggling?
New York (CNN Business)General Electric boss Larry Culp is making good on his promise to swiftly unload assets to pay down the company's mountain of debt.
In the second major deal this week, GE (GE) said on Friday it's raising $1.5 billion by selling a GE Capital portfolio of healthcare equipment leases and loans to TIAA Bank.
The transaction, combined with a plan announced on Tuesday to sell a $4 billion stake in oil-and-gas giant Baker Hughes (BHGE), underscores GE's scramble to raise cash that can be used to repair the balance sheet. Last month Culp also slashed GE's cherished dividend to a penny.
Years of poorly-timed deals and shrinking cash flow have sparked a cash crunch at GE, which makes everything from light bulbs and jet engines to MRI machines and wind turbines. GE's stock price has been cut in half this year, on track for its worst performance since 2008.
Culp, who became CEO on October 1, vowed to move with a "sense of urgency" to repair GE's finances. "This is the challenge of a lifetime given where we find the company today," Culp told CNBC.
Prior to 2008, GE Capital was a major growth engine at the company. It provided affordable financing that allowed customers go out and purchase GE's industrial products. But GE Capital came under enormous pressure during the financial crisis, nearly taking down the entire company. And its problems are still haunting GE.
GE Capital's long-term care insurance business took a $6 billion charge earlier this year. And the company faces a potentially-costly settlement with the Justice Department over WMC, the subprime mortgage lender acquired in 2004.
Jeff Immelt, the widely-criticized former CEO of GE, said on Thursday he wishes he'd been able to get rid of GE Capital more quickly. "Believe me, it wasn't for a lack of trying," Immelt said from the World Business Forum in New York. "It was just hard to do."
GE Capital provides financing used by hospitals to purchase CT scan and other equipment made by the health care division.
Now under Culp, GE Capital is unloading this $1.5 billion healthcare portfolio of loans and leases that financed purchases of medical equipment by 1,100 hospitals and 3,600 physician practices and medical centers across the United States. The equipment includes everything from ultrasound and respiratory machines to surgical and lab materials.
As part of the deal, GE and TIAA Bank entered into a five-year vendor financing agreement for GE Healthcare's US customers. GE said that the leadership and sales force of the healthcare equipment finance team will integrated into GE Healthcare in 2019. GE plans to spin off the profitable health care division in a bid to raise more cash.
Jacksonville, Florida, based TIAA Bank is part of TIAA, the retirement giant that was founded by steel magnate Andrew Carnegie in 1918. Today, TIAA manages around $1 trillion of assets.
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>>> The dismantling of GE continues: It is selling yet another business
By Matt Egan
CNN Business
November 6, 2018
https://www.cnn.com/2018/11/06/business/general-electric-current-sale-lighting/index.html
New York (CNN Business)General Electric's slow-motion breakup with the lighting industry it pioneered continues.
GE announced on Tuesday it's selling commercial LED maker Current to private-equity firm American Industrial Partners.
It's the latest business that GE is saying goodbye to as it races to pay down debt by raising cash and cutting costs. GE's (GE) debt-riddled balance sheet forced the company to slash its dividend to just a penny last week.
GE did not disclose a sale price for Current. Analysts said that suggests the unit, which was put up for sale a year ago, fetched an insignificant sum. The deal marks an unceremonious ending for a business that GE launched just three years ago as a next-generation energy efficiency solution for companies.
LED pricing has come under heavy pressure and Current generated just $900 million of sales during the first nine months of 2018. In addition to LED technology, Current makes sensors, controls and software for customers that include Walmart (WMT) and JPMorgan Chase (JPM). As part of the proposed sale, Current will keep using the iconic GE brand under a licensing agreement.
Current's new home will be American Industrial Partners, a New York-based private equity firm focused on improving industrial companies.
"The firm's deep expertise in operations and engineering, combined with its highly successful track record of industrial business investments, would help us accelerate Current's growth," Current CEO Maryrose Sylvester said in a statement.
GE is still trying to find a buyer for its famous consumer light bulb business, which was not included in the Current sale. GE first announced plans to sell the lighting unit in mid-2017.
"GE remains actively engaged in the process to sell this business," the company said in a statement.
GE's financial problems -- debt is too high and earnings are shrinking -- have forced the conglomerate to dismantle itself in a bid to raise $20 billion.
In recent months, GE has agreed to sell its century-old locomotive division and announced plans to spin off GE Healthcare, which makes MRI machines. GE also reiterated plans last week to eventually exit its majority stake in the oil-and-gas giant Baker Hughes.
And on Tuesday, GE finalized the $3.25 billion sale of its distributed power business to private equity firm Advent International. The sale of the unit, which makes gas engines that are used to generate electricity in remote places, was first announced in June.
The flurry of dealmaking is a sign that new CEO Larry Culp is working hard to repair GE's balance sheet.
Wall Street has grown frustrated with the speed of GE's turnaround, which began under former CEO John Flannery. The stock, trading near nine-year lows, has declined nine straight days. GE has lost 45% of its value this year. That's the third-worst performance in the entire S&P 500 and mirrors GE's 2017 loss.
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>>> GE slashes 119-year old dividend to a penny
By Matt Egan
CNN Business
October 30, 2018
https://www.cnn.com/2018/10/30/investing/ge-dividend-cut-earnings-culp/index.html
New York (CNN Business)General Electric is under such financial stress that new CEO Larry Culp is slashing the troubled conglomerate's 119-year-old dividend to just a penny a share.
GE revealed on Tuesday worse-than-expected results and a $22 billion accounting writedown for its beleaguered power division. Culp plans to split up the power division to accelerate a turnaround.
In a bid to fix GE's debt-riddled balance sheet, Culp announced the company will cut its quarterly dividend from 12 cents a share starting in 2019. By paying just a token dividend, GE (GE) will save about $3.9 billion of cash per year.
Analysts had been anticipating a potential dividend cut, though not one of this magnitude.
It's an especially painful move for a company that long viewed its stable dividend as a source of pride. But years of bad decisions forced GE to halve its dividend last November for just the second time since the Great Depression. The dividend cuts deal a blow to the many GE retirees and mom-and-pop shareholders who long relied on the cherished payouts.
"We are on the right path to create a more focused portfolio and strengthen our balance sheet," Culp said in a statement.
Culp, who was suddenly named CEO on October 1, promised to move "with speed to improve our financial position."
Dividend cuts are very rare these days, because the US economy is booming. Most companies, flush with cash from tax cuts, are ramping up their dividends. At least 291 S&P 500 companies have hiked their dividend so far this year, according to Howard Silverblatt of S&P Dow Jones Indices. Just two S&P 500 companies had cut their dividend as of early October, Silverblatt said.
GE's power division remains the biggest source of trouble at the company. Revenue tumbled 33% last quarter due to "continued market and execution challenges." GE Power swung to a loss of $631 million, compared with a profit of $464 million the year before.
GE Power, which makes turbines for power plants, has been caught badly off guard by the shift away from coal and gas in favor of renewable energy. Under former CEO Jeff Immelt, GE doubled down on fossil fuels by spending $9.5 billion in 2015 to acquire Alstom's power business. The deal turned out to be a disaster, underscored by the $22 billion goodwill impairment charge recorded last quarter.
GE said on Tuesday it will reorganize the power business by creating two units, one focused on natural gas and the other holding the steam, nuclear and other assets. And Culp, who was known for running a tight ship at Danaher, plans to "consolidate" GE Power's headquarters structure.
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PPG - >>> Shares of this proxy for the economy plunge the most in 9 years on rising costs, weak China demand
PPG shares plummeted more than 10 percent for their biggest drop in nine years after the company said it expects to report weaker-than-expected third quarter earnings.
The industrial coatings manufacturer could be seen as a corporate barometer for the health and direction of the global economy because of the many markets it serves.
In the most recent quarter, PPG "experienced the highest level of cost inflation since the cycle began two years ago," CEO Michael McGarry says.
Oct 9, 2018
Michael Sheetz
CNBC.com
https://www.cnbc.com/2018/10/09/economic-proxy-ppg-shares-plunge-on-weaker-demand-higher-costs.html
PPG shares plummeted more than 10 percent Tuesday, a day after the industrial coating manufacturer warned that it is getting hurt by rising costs from raw materials and oil.
PPG's guidance for its upcoming third quarter earnings report was about 10 cents a share weaker than expected, according Wall Street analysts polled by Thomson Reuters.
The 135-year-old PPG is one of the world's largest manufacturers and distributors of coatings and specialty materials, with a market capitalization of about $26 billion. Due to PPG's size and the breadth of other sectors it supports, the company is seen as a corporate barometer for the health and direction of the global economy.
"During the quarter, we saw overall demand in China soften, and we experienced weaker automotive refinish sales as several of our U.S. and European customers are carrying high inventory levels due to lower end-use market demand," Chairman and CEO Michael McGarry said in a statement Monday.
The plunge in share prices Tuesday was the biggest in nine years.
McGarry said PPG is "disappointed with the third quarter earnings results," which the company now expects to be in the range of $1.47 a share to $1.51 a share. PPG is expected to report its final third-quarter earnings on Oct. 18.
Rising materials, freight and oil costs were listed as contributing factors for PPG's weak quarter.
"We experienced the highest level of cost inflation since the cycle began two years ago," McGarry said.
PPG expects to increase the average global price by 10 percent on products it sells to automotive equipment manufactures, beginning Nov. 1. The company said this price change is a response to the rising costs.
<<<
>>> Linde, Praxair eye merger close this year after European sale
Reuters
July 05, 201
TOKYO/BERLIN (Reuters) - German industrial gases company Linde and peer Praxis are hoping to seal their merger this year, after agreeing to sell Praxair's European gases business to Japanese rival Taiyo Nippon Sanso Corp.
Linde and Praxair need to sell assets to get regulatory approval for their $83 billion all-share merger of equals that will create a global leader in gas distribution, with revenues of almost $29 billion and 88,000 staff.
"We are taking a constructive approach to address regulatory concerns with the merger in the European Economic Area," Praxair CEO Steve Angel said in a statement on Thursday.
Linde shares rose 4.2 percent after the Taiyo Nippon Sanso deal was announced, and were among top gainers on the DAX index of leading German shares.
Taiyo Nippon Sanso will pay 5 billion euros ($5.9 billion) for the Praxair European assets, which generated annual sales of approximately 1.3 billion euros in 2017, in a move aimed at boosting its global competitiveness.
"With this acquisition, we are seizing a unique opportunity to enter the European market and establish a truly global footprint through the purchase of highly attractive assets in all the key geographies in the European Union," Taiyo Nippon Sanso President CEO Yujiro Ichihara said.
Sources previously told Reuters that Taiyo Nippon Sanso would likely buy the European assets that the two groups were trying to unload to satisfy regulators. Private equity firm Carlyle Group LP was in the running to buy their U.S. assets worth about $3.3 billion, they said.
Linde said in a statement that more disposals were planned in a bid to complete the Praxair merger this year.
"Linde and Praxair are in discussions with the competent authorities and in negotiations with potential bidders with the objective of completing the business combination in the second half of 2018," it said in a statement on Thursday.
A combined Linde and Praxair would have the size to overtake France's Air Liquide SA in the supply of gases such as oxygen and helium to industries worldwide.
Praxair said the assets to be sold include its industrial gases businesses in Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and Britain, and include approximately 2,500 employees.
Taiyo Nippon Sanso said the deal depends on the planned Praxair-Linde merger going through.
It said it would pay for the acquisition with cash on hand and loans, and had no plans to conduct equity financing.
Credit Suisse Securities acted as financial advisors to Praxair and McDermott Will & Emery UK LLP as legal advisors. Mizuho Securities acted as primary financial advisors to Taiyo Nippon Sanso and Greenberg Traurig LLP as legal advisors.
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GE, Wabtec - >>> GE to Merge Rail Division With Wabtec in $11 Billion Deal
Deal is the first major portfolio move in new GE CEO John Flannery’s attempt to revamp the struggling conglomerate
By Thomas Gryta
May 21, 2018
Wall Street Journal
https://www.wsj.com/articles/ge-to-merge-rail-division-with-wabtec-in-11-billion-deal-1526904626
General Electric agreed to merge its railroad business with Wabtec in a deal valued at about $11 billion, letting GE raise some cash to fund its turnaround and shed one of its oldest operations.
The transaction is the first major portfolio move in new GE Chief Executive John Flannery’s attempt to revamp the struggling conglomerate. Wabtec, formerly known as Westinghouse Air Brake Technologies Corp., makes equipment for transit systems and freight railroads and has a market value of about $9 billion, based on Friday’s closing price.
GE will receive $2.9 billion in cash at closing. GE shareholders will own 40.2% of the combined company, with GE owning about 9.9% after the deal, the companies said Monday.
Wabtec shareholders will retain 49.9% of the combined company. Wabtec’s current chairman and CEO will retain their positions after the deal, which is expected to close in early 2019.
GE has been looking at options for the transportation division since at least last fall. The segment mainly produces freight locomotives, which sell for millions of dollars apiece, along with mining equipment and marine motors.
Although GE is one of the world’s biggest makers of freight locomotives, the business is cyclical and has been suffering lately from slack demand. In 2017, the unit’s revenue slipped 11% and profit fell 23%. The division accounted for $4.2 billion of GE’s total 2017 revenue of $122.1 billion.
The transportation unit is one of the smaller of GE’s seven major business lines. The division had about 8,000 employees at the start of the year, down 2,000 from a year earlier, and compares with 313,000 at GE in total.
GE’s diesel locomotives are primarily assembled in Fort Worth, Texas, and western Pennsylvania.
In the first quarter, margins and orders rose at GE’s transportation business but executives said the market for new locomotives remained slow.
GE and Wabtec said they expect the combination to eventually generate about $250 million in annual savings as well as tax benefits currently worth about $1.1 billion. GE will nominate three directors to the combined company’s board.
Wabtec, which said it will keep its headquarters in Wilmerding, Pa., had revenue of $3.9 billion last year, or about the same as GE’s transportation division. Wabtec employs about 18,000 people, or twice as many as GE’s transportation division.
Rather than a straight sale, the deal was structured in a way that would leave GE shareholders with a stake in a public company and avoid a big tax bill. It gives GE shareholders a chance to participate in the turnaround of the struggling business or cash out if they wish.
Mr. Flannery took over as CEO of GE last summer, intent on making major changes that resulted in a dividend cut, slashed financial projections and the overhauling of the board. GE is expected to reveal more about its portfolio plans soon, as Mr. Flannery is considering all options, including potentially breaking apart its three major units—aviation, health care and power.
In October, Mr. Flannery promised to sell $20 billion worth of assets. Before the Wabtec deal, GE had announced a handful of deals totaling less than $4 billion. The company’s century-old GE Lighting division has been on the auction block for more than a year.
<<<
>>> Danaher Corporation (Danaher) designs, manufactures and markets professional, medical, industrial and commercial products and services. The Company operates through four segments: Life Sciences, which offers a range of research tools that scientists use to study the basic building blocks of life, including genes, proteins, metabolites and cells, in order to understand the causes of disease, identify new therapies and test new drugs and vaccines; Diagnostics; which offers analytical instruments, reagents, consumables, software and services; Dental, which provides products that are used to diagnose, treat and prevent disease and ailments of the teeth, gums and supporting bone, and Environmental & Applied Solutions, which consists of various lines of business, including water quality and product identification. As of December 31, 2016, Danaher's research and development, manufacturing, sales, distribution, service and administrative facilities were located in over 60 countries. <<<
>>> GE shares tumble 5% after CEO's pledge for 'more focused' company fails to sway investors
CNBC
11-13-17
https://www.cnbc.com/2017/11/13/ge-announces-broad-restructuring-to-keep-health-care-aviation-and-energy-units.html
•General Electric announces it will cut its dividend in half as part of a broader corporate restructuring.
•It plans a renewed focus on health care, aviation and energy.
•CEO John Flannery apologizes on investor day for the company's performance and says GE would be "more focused."
General Electric set forth a new agenda on Monday as it tries to restructure its way back to stronger growth, with earnings estimates lower than Wall Street forecasts, a reduced dividend and an aggressive corporate restructuring.
The Boston-based 125-year-old industrial conglomerate also said it was cutting the number of seats on its board as part of what its chief executive called "a reset year" in 2018. GE also will be slicing 25 percent of staff from the home office.
Investors recoiled at the news about the dividend and restructuring, sending shares down nearly 6 percent in heavy trading.
"The GE of the future is going to be a more focused industrial company," CEO John Flannery said during his presentation at the company's investor day Monday. "It will leverage a lot of game-changing capabilities."
The event happened amid a plunging share price and as Flannery announced an "extremely painful" halving of the quarterly dividend to 12 cents a share. The restructuring plan said the dividend was set "with a path to grow going forward" but marks the largest cut by an S&P 500 during an nonfinancial crisis year.
"This is the opportunity really of a lifetime to reinvent an iconic company," Flannery added.
There will be a renewed focus on health care, aviation and energy, according to a presentation released for investors prior to the meeting. That's in contrast to the current wide-ranging set of interests that also includes media, railroads, chemicals, marine engines and banking.
For Flannery, it also represents a divergence in management style away from the high-flying aggressiveness of Jeff Immelt and Jack Welch.
"I was forced to confront a lot of the sort of deeper questions about the company," Flannery said. "What's the essence of the company I love so much?"
The company now sees adjusted earnings for the year ahead of $1 to $1.07 a share and free cash flow still at significantly reduced levels of $6 billion to $7 billion, which it pledged to improve. As expected, GE said it is looking to exit more than $20 billion of assets as it tries to sharpen its focus on "what makes a 'GE' business."
In addition, the company said it will "address overcapacity" and simplify its portfolio. While it slashed its dividend in half, the company also set a $3 billion share buyback priority. Addressing its pension plan shortfalls, Flannery said the company will borrow $6 billion to take advantage of the current rate environment.
The board of directors will be reduced from 18 to 12, with three new members slated "with relevant industry experience." Directors will have 15-year term limits.
"We have not performed well for our owners," Flannery said. "This is unacceptable, and the management team is completely devoted to doing what it takes to correct that."
Employee bonuses also will be restructured, with elimination of the three-year cash long-term performance awards and a switch to a program that conforms to "market norms."
The dividend allocation will be $4.2 billion for 2018, pushing it from above 100 percent of free cash flow to 60 percent to 70 percent, and the dividend yield from 4.7 percent to 2.3 percent. The yield had been the highest in 30 years not counting the financial crisis.
<<<
>>> At GE, a new urgency to return to industrial roots
Associated Press
October 20, 2017
http://www.mercurynews.com/2017/10/20/at-ge-a-new-urgency-to-return-to-industrial-roots/
NEW YORK (AP) — General Electric’s new CEO is starting to lay out bold plans to return the conglomerate to its industrial roots by slashing costs and streamlining its operations.
John Flannery said Friday that the company will shed business units worth more than $20 billion over the next year or two.
Flannery, who has been on the job less than three months, is expected to provide more details next month on how he will put his own stamp on the Boston-based manufacturing giant. But he offered plenty of hints after GE’s latest disappointing financial results.
GE drastically cut expectations for the full year after its third-quarter profit fell more sharply than expected due to large restructuring charges. Flannery called the results unacceptable.
“It’s also clear from our current results that we need to make some major changes with urgency and a depth of purpose,” he said on a conference call with analysts.
The company’s shares slid 6 percent in morning trading but recovered throughout the day. They ended regular trading up 25 cents at $23.83.
Flannery led GE’s health care unit until becoming CEO in August. He replaced Jeff Immelt, who had reshaped GE after taking over from legendary CEO Jack Welch but couldn’t reverse a slump in the company’s stock while the overall market boomed. GE shares are down 25 percent this year, the worst performer in the Dow Jones industrial average.
Immelt also came under fire for executive perks. GE acknowledged that on occasions an empty plane followed the CEO’s jet on trips, and one of Flannery’s first moves was grounding GE’s fleet of six corporate jets. Flannery has replaced several top executives.
On Friday, Flannery did not mention Immelt by name but said he was focusing on fixing GE’s “culture,” which he said “needs to be driven by mutual candor and intense execution, and the accountability that must come with that.” He mentioned the overhaul of the top executive ranks and the addition to the board of a representative from activist investor Trian Fund Management.
“Things will not stay the same at GE,” Flannery vowed.
The CEO promised more details on GE’s transformation at a Nov. 13 meeting, but he talked Friday about major cost cuts across the board and the exit from a slew of businesses.
General Electric Co. has been paring businesses for well over a decade now.
The drive to get lean has come with a big price tag.
During the quarter, profit fell 9 percent to $1.84 billion, or 21 cents per share. Earnings, adjusted for non-recurring costs and to account for discontinued operations, came to 29 cents per share, but that’s still far from the per-share earnings of 49 cents that Wall Street had expected, according to a survey by Zacks Investment Research.
Revenue jumped 14 percent to $33.5 billion, exceeding the $31.92 billion analysts had expected. Sales in the power unit, GE’s biggest source of revenue, fell 4 percent and the unit’s profitability fell by half. Sales and earnings in the transportation division were off by double-digit percentages.
But other parts of GE are growing including aviation, the company’s second-biggest business — GE makes jet engines — and health care. Revenue from the oil and gas division nearly doubled on the acquisition of Baker Hughes, which closed in July.
The company has already surpassed its goal of cutting $1 billion in industrial costs this year. It plans more than $2 billion in cuts next year, double the original target, to go with at least $20 billion in divestments over the next year or two, Flannery said.
GE has many strong areas “but a number of other businesses which drain investment and management resources without the prospects for a substantial reward,” Flannery said. “We will have a simpler, more focused portfolio.”
The company cut its full-year outlook to between $1.05 and $1.10 per share. That’s well down from a previous per-share outlook of $1.60 to 1.70, and far off the $1.54 per share analysts that had been looking for, according to a poll by FactSet.
“As bad as earnings undeniably are, the focus remains on cash,” said Morgan Stanley analyst Nigel Coe.
Flannery’s focus was also on cash flow in an August letter, and was a big driver in the sell-off early Friday.
Industrial operating cash flow was $1.7 billion during the quarter, more than a billion short of projections from Morgan Stanley.
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General Electric - >>> Buffett's Berkshire sells entire stake in General Electric
CNBC
Liz Moyer
8-14-17
http://www.msn.com/en-us/money/companies/buffetts-berkshire-sells-entire-stake-in-general-electric/ar-AAq5sn7?li=BBnb7Kz&ocid=mailsignout
Warren Buffett's Berkshire Hathaway sold its stake in General Electric as of the end of June, according to a regulatory filing on Monday.
The conglomerate had previously held 10.6 million shares of the company, according to its regulatory disclosure in May. General Electric announced in June that its CEO, Jeff Immelt, is stepping down later this year, to be succeeded by GE Healthcare's John Flannery.
But Berkshire appears to be keeping its hand in a legacy part of GE. It reported a 17.5 million share stake in Synchrony Financial, the financing arm of GE that was spun out in a 2014 initial public offering. Shares of Synchrony are down 18.3 percent this year.
Berkshire's GE holdings were just 0.12 percent of the outstanding shares.
Buffett struck a deal during the financial crisis to invest $3 billion GE and later converted warrants to common shares in the blue chip company in a deal similar to those he struck with Goldman Sachs and Bank of America
<<<
>>> General Electric Company operates as an infrastructure and technology company worldwide. Its Power segment offers gas and steam power systems; maintenance, service, and upgrade solutions; distributed power gas engines; water treatment, wastewater treatment, and process system solutions; and nuclear reactors, fuels, and support services. The company?s Renewable Energy segment provides wind turbine platforms, and hardware and software; onshore and offshore wind turbines; and solutions, products, and services to hydropower industry. Its Oil & Gas segment offers surface and subsea drilling and production systems, and equipment for floating production platforms; and compressors, turbines, turboexpanders, reactors, industrial power generation, and auxiliary equipment. The company?s Aviation segment designs and produces commercial and military aircraft engines, integrated digital components, and electric power and mechanical aircraft systems; and provides aftermarket services. Its Healthcare segment offers diagnostic imaging and clinical systems; products for drug discovery, biopharmaceutical manufacturing, and cellular technologies; and medical technologies, software, analytics, cloud solutions, and implementation services. The company?s Transportation segment provides freight and passenger locomotives, and rail and support advisory services; and parts, integrated software solutions and data analytics, software-enabled solutions, mining equipment and services, and marine diesel and stationary power diesel engines and motors, as well as overhaul, repair and upgrade, and wreck repair services. Its Energy Connections & Lighting segment offers industrial, grid, power conversion, automation and control, lighting, and current solutions. The company?s Capital segment provides industrial and energy financial services; and commercial aircraft leasing, financing, and consulting services. General Electric Company was founded in 1892 and is based in Boston, Massachusetts. <<<
>>> Parker-Hannifin Corporation manufactures and sells motion and control technologies and systems for various mobile, industrial, and aerospace markets worldwide. The company operates in two segments, Diversified Industrial and Aerospace Systems. The Diversified Industrial segment provides pneumatic, fluidic, and electromechanical components and systems; static and dynamic sealing devices; filters, systems, and diagnostics solutions to monitor and remove contaminants from fuel, air, oil, water, and other liquids and gases; connectors, which control, transmit, and contain fluid; hydraulic components and systems for builders and users of industrial and mobile machinery and equipment; and critical flow components for process instrumentation, healthcare, and ultra-high-purity applications, as well as components for use in refrigeration and air conditioning systems, and in fluid control applications for processing, fuel dispensing, beverage dispensing, and mobile emissions. This segment sells its products to original equipment manufacturers and their replacement markets in manufacturing, packaging, processing, transportation, mobile construction, refrigeration and air conditioning, agricultural, and military machinery and equipment industries. The Aerospace Systems segment offers products for use in commercial and military airframe and engine programs, including control actuation systems and components, engine systems and components, fluid conveyance systems and components, fuel systems and components, fuel tank inserting systems, hydraulic systems and components, lubrication components, power conditioning and management systems, thermal management, and wheels and brakes. This segment markets its products directly to original equipment manufacturers and end users. The company markets its products through direct-sales employees, independent distributors, and sales representatives. Parker-Hannifin Corporation was formerly known as Parker Appliance Company and changed its name to Parker-Hannifin Corporation in 1957. Parker-Hannifin Corporation was founded in 1917 and is based in Cleveland, Ohio. <<<
Clarcor - >>> Parker to Acquire Filtration Company CLARCOR in a Strategic Portfolio Transaction
December 01, 2016
https://globenewswire.com/news-release/2016/12/01/894258/0/en/Parker-to-Acquire-Filtration-Company-CLARCOR-in-a-Strategic-Portfolio-Transaction.html
•Strengthens Parker’s Filtration Business with Addition of Complementary Product Lines and Markets
•Expected to Be Accretive to Cash Flow, EPS, and EBITDA Margins – Excluding One-time Costs
•Significantly Increases Presence in Filtration, Adding Resilient, Growth Business
•Strong Recurring Revenue – Approximately 80% of Sales Are Aftermarket
•Enhances Total Parker Systems Solutions
•Parker to Host Conference Call Today at 7:30 AM CT / 8:30 AM ET
CLEVELAND and FRANKLIN, Tenn., Dec. 01, 2016 (GLOBE NEWSWIRE) -- Parker Hannifin Corporation (NYSE:PH) (“Parker”) and CLARCOR Inc. (NYSE:CLC) (“CLARCOR”), today announced that the companies have entered into a definitive agreement under which Parker will acquire CLARCOR for approximately $4.3 billion in cash, including the assumption of net debt.
Under the terms of the agreement, Parker will purchase all of the outstanding shares of CLARCOR for $83.00 per share in cash. This represents a premium of approximately 17.8 percent to CLARCOR’s closing share price on November 30, 2016 and a premium of approximately 29.2 percent to CLARCOR’s volume weighted average share price over 90 days and a premium of approximately 17.1 percent to CLARCOR’s all-time and 52-week high. The transaction has been unanimously approved by the Board of Directors of each company.
CLARCOR, headquartered in Franklin, TN, is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products with annual sales of approximately $1.4 billion and 6,000 employees worldwide. CLARCOR adds a broad array of industrial air and liquid filtration products and technologies to Parker’s filtration portfolio.
“This strategic transaction is consistent with our stated objective to invest in businesses that accelerate Parker towards our goal of top quartile financial performance,” said Tom Williams, Chairman and Chief Executive Officer of Parker. “The combination of Parker and CLARCOR is highly complementary and offers a great opportunity to combine our strength in international markets and OEMs with CLARCOR’s strong U.S. presence and high percentage of recurring sales in the aftermarket.”
Williams added, “We also believe our cultures and values are an excellent match. CLARCOR, like Parker, prides itself on a long and successful history that reinforces entrepreneurialism and innovation. We’re confident that the goals and measures outlined in the Win Strategy™ will guide a seamless integration and generate significant synergies. This transaction delivers immediate cash value to CLARCOR shareholders and is expected to create sustained value for Parker shareholders. Together, Parker and CLARCOR will advance our commitment to engineer the success of our customers and team members and enhance shareholder value.”
“Joining Parker provides a terrific opportunity to accelerate our mission of making our world cleaner and safer while delivering an immediate and substantial cash premium to our shareholders and bolstering the confidence of our customers,” said Chris Conway, Chairman, President and Chief Executive Officer of CLARCOR. “We believe Parker is an ideal fit for CLARCOR as it shares both our culture and our passion for developing solutions to our customers’ complex filtration challenges. Becoming part of Parker, with its significant systems expertise and stellar reputation for quality and innovation, should only enhance and accelerate our strategic initiatives and technology development efforts, expand our growth plans and provide new opportunities for many of our employees. We are looking forward to working together with the Parker team to ensure a smooth combination of our businesses and operations and bring these goals to fruition.”
Compelling Financial and Strategic Benefits
•Significant Operating Synergies: Parker expects to realize annual run rate cost synergies of approximately $140 million three years after closing through a variety of initiatives, including the consolidation of the companies’ supply chains and a successful implementation of Parker’s Win Strategy™ throughout CLARCOR’s operations.
•Accretive to Parker’s Cash Flow, EPS and EBITDA Margin: The transaction is expected to be accretive to Parker’s Cash Flow, EPS and EBITDA margins, after adjusting for one-time costs.
•Significantly Enhances Parker’s Filtration Group: The combination of the companies’ complementary filtration offerings strengthens Parker’s position in a growing and resilient business.
•Strong Recurring Revenue Opportunities: Parker expects to benefit from increased recurring revenue streams as approximately 80 percent of CLARCOR’s revenue is generated through aftermarket sales. The addition of CLARCOR is expected to significantly increase recurring revenue in Parker’s Filtration Group.
•Enhances Parker’s Product Portfolio with Leading Brands: With the addition of CLARCOR’s leading and respected brands, including CLARCOR, Baldwin, Fuel Manager®, PECOFacet, Airguard, Altair, BHA®, Clearcurrent®, Clark Filter, Hastings, United Air Specialists, Keddeg and Purolator, Parker expects to be better positioned to deliver enhanced and expanded filtration solutions to its customers. In addition, this transaction strengthens Parker’s systems capabilities and enhances the rest of Parker’s technologies, enabling the company to provide even better motion and control systems solutions to customers.
•Complementary Products, Markets and Geographic Presence: Parker expects to be able to leverage both companies’ complementary filtration technologies to further accelerate growth.
Organization and Leadership
Upon closing of the transaction, CLARCOR will be combined with Parker’s Filtration Group to form a leading and diverse global filtration business. Williams added, “We look forward to working collaboratively with CLARCOR team members to jointly build on CLARCOR’s great history. CLARCOR is a premier filtration company due to strong leadership, a great culture that is highly complementary to Parker’s, and an impressive breadth of products and technologies with talented team members contributing daily to its success.”
Financing and Dividend
Parker plans to finance the transaction using cash and new debt. Following completion of the transaction, Parker expects to maintain a high investment grade credit profile. Parker intends to make debt reduction a priority in the near term.
The transaction is not expected to impact Parker’s dividend payout target of approximately 30 percent of net income, while maintaining its record of annual dividend increases.
Approvals and Time to Closing
The transaction is expected to be completed by or during the first quarter of Parker’s fiscal year 2018 and is subject to customary closing conditions, including approval by CLARCOR's shareholders and receipt of applicable regulatory approvals.
Advisors
Morgan Stanley & Co. LLC is acting as financial advisor to Parker and Jones Day and Thompson Hine, LLP are acting as legal advisors. Goldman, Sachs & Co. is acting as financial advisor to CLARCOR and Bass, Berry & Sims PLC and Baker & McKenzie LLP are acting as legal advisors.
Conference Call
Parker will host a conference call today, Thursday, December 1, 2016 at 8:30 AM Eastern Time to discuss the transaction. Interested parties are invited to listen to the webcast of the conference call, which can be accessed by visiting the Investor Relations section of Parker’s website at www.phstock.com.
A webcast replay will also be available on Parker's website in the Investor Relations section.
About Parker Hannifin
With annual sales of $11 billion in fiscal year 2016, Parker Hannifin is the world's leading diversified manufacturer of motion and control technologies and systems, providing precision-engineered solutions for a wide variety of mobile, industrial and aerospace markets. The company has operations in 50 countries around the world. Parker has increased its annual dividends paid to shareholders for 60 consecutive fiscal years, among the top five longest-running dividend-increase records in the S&P 500 index. For more information, visit the company's website at www.parker.com, or its investor information website at www.phstock.com.
About CLARCOR
CLARCOR is based in Franklin, Tennessee and is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products sold in domestic and international markets. Common shares of CLARCOR are traded on the New York Stock Exchange under the symbol CLC. Further information on CLARCOR can be found at www.clarcor.com.
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>>> General Electric ($523 Billion Market Cap in 1999)
https://www.thestreet.com/slideshow/13648157/2/microsoft-and-1999-rsquo-s-other-stock-market-darlings-where-are-they-now.html
Since 1999, General Electric (GE) has appointed a new CEO, Jeff Immelt, who reshaped the sprawling conglomerate he inherited from Jack Welch into a leaner industrial company focused on digital manufacturing. Immelt also steered the company through the 9/11 terrorist attacks, which occurred days after he took over, and the global financial crisis seven years later, both of which hammered GE's stock.
The company was among the insurers on New York's World Trade Center, which was targeted on 9/11, and its massive lending business was funded heavily by commercial paper, a market that froze during the 2008 crisis. Immelt was subsequently forced to cut GE's dividend for the first time, and the company lost its top credit ratings from Standard & Poor's and Moody's.
In the years afterward, Immelt sold the NBC Universal entertainment business and pared most of GE Capital's commercial and consumer lending businesses while also expanding into the industrial Internet of Things. Today, GE, which has lost 37% of its market value since the end of 1999, is still the ninth-largest company in the U.S. by market cap with a $301 billion valuation.
<<<
>>> Airgas merger shows how patience pays off
Nov 19, 2015
Phila Business Journal
http://www.bizjournals.com/philadelphia/news/2015/11/19/radnor-airgas-merger-air-liquide-mccausland.html?ana=yahoo
In 2010, Airgas Inc. was on the defensive and trying to fend off a hostile take over by Air Products & Chemicals Inc. located up the Northeast Extension in Allentown, Pa.
At the time, Air Products (NYSE: APD) offered to buy Airgas (NYSE:ARG) for $70 a share in cash in a $5.9 billion transaction. But the Airgas board wasn’t biting. It had concluded the $70 per share evaluation was clearly inadequate and the company was valued at least $78 a share.
Airgas is headquartered in Radnor, Pa.
Airgas, which rejected Air Products’ offers three times, also deployed a poison pill, and by February 2011, Air Products withdrew its bid.
How four short years can change things.
Air Liquide announced Tuesday a $13.4 billion deal to buy Airgas, a leading distributor of specialty gases and welding equipment, for $143 a share in cash. It’s a significant milestone for the Radnor, Pa., company and its founder.
Peter McCausland formed Airgas Inc. in 1982 as a single company and stands to reap nearly $1 billion from the sale. He grew Airgas from a small distributor of industrial gases to a billion-dollar heavyweight in the industrial gas distribution business.
McCausland started the company after he had looked at Connecticut Oxygen Corp. as a possible acquisition for a German industrial gas company for which he was working. When his boss said no, McCausland, then 32 years old, set out on his own to raise more than $5.3 million to buy the Connecticut Oxygen. By 1986, sales had grown to $25 million, thanks to acquisitions. That same year, the company merged with Werco, a private Wilmington, Del., concern twice the size of Airgas that made protective gear and steel cylinders.
?Grasso to develop Rivage site in East Falls
McClausland was committed to and saw the value in rolling up small and big competitors across the country that provided specialty gases and other equipment to companies. Through that strategy, Airgas has grown over the years through more than 300 acquisitions, which strengthened its national network by giving it a presence in several key areas where it lacked market share.
Sometimes the company’s rapid growth led to inefficiencies in operations, but it always worked through them – implementing restructuring programs and other maneuvers to keep things tight. For example, in March, the company saw its growth prospects hindered by the decline in oil prices and the strong dollar and a tough winter that hampered sales. Disappointed by organic sales growth, the company began to look for ways to improve business.
Airgas and Air Liquide have known and worked with each other for a long time. Over the last six months of so, the two companies were in discussions over several potential transactions and distribution agreements, according to a person familiar with the matter. More recently, those talks took a turn when an opportunity presented itself to combine as a way to create one of the largest gas companies. A deal was struck.
?Local firm creates new credit card
“This transaction is compelling for our shareholders, arising from the persistent execution of our business strategy for more than three decades,” McClausland said in a statement when the deal was announced. “Airgas customers and employees will benefit from Air Liquide’s unrivaled global footprint and strength in technology, innovation and operational efficiency, while Airgas is ready to bring the entrepreneurial culture and packaged gas excellence that have driven our success to date.”
It’s the biggest industrial deal to be struck in nine years though there has been consolidation in the sector, according to Bloomberg. For example: Praxair Inc., Airgas’s largest domestic rival, bought two years ago NuCO2, which provides carbonation for beverages for restaurants, for $1.1 billion; Linde acquired in 2012 Lincare Holding Inc. for $4.4 billion; and Linde bought in 2006 BOC Group for $14.1 billion.
In 2012, McCausland relinquished his duties as president and chief executive officer of the company. This was at a time when the company was at a high point and reporting record earnings. McCausland continued to be involved with the company and served in the role of executive chairman of the board and is expected to remain involved in the combined companies.
For now, there are no immediate plans for Airgas’ Radnor headquarters, according to someone familiar with the situation. Airgas has housed its operations at Radnor Court at 259 N. Radnor Chester Road for years. The primary focus now is to integrate the two companies.
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>>> The Teflon Toxin
DuPont and the Chemistry of Deception
Sharon Lerner
Aug. 11 2015
https://firstlook.org/theintercept/2015/08/11/dupont-chemistry-deception/
KEN WAMSLEY SOMETIMES DREAMS that he’s playing softball again. He’ll be at center field, just like when he played slow pitch back in his teens, or pounding the ball over the fence as the crowd goes wild. Other times, he’s somehow inexplicably back at work in the lab. Wamsley calls them nightmares, these stories that play out in his sleep, but really the only scary part is the end, when “I wake up and I have no rectum anymore.”
Wamsley is 73. After developing rectal cancer and having surgery to treat it in 2002, he walks slowly and gets up from the bench in his small backyard slowly. His voice, which has a gentle Appalachian lilt, is still animated, though, especially when he talks about his happier days. There were many. While Wamsley knew plenty of people in Parkersburg, West Virginia, who struggled to stay employed, he made an enviable wage for almost four decades at the DuPont plant here. The company was generous, helping him pay for college courses and training him to become a lab analyst in the Teflon division.
He enjoyed the work, particularly the precision and care it required. For years, he measured levels of a chemical called C8 in various products. The chemical “was everywhere,” as Wamsley remembers it, bubbling out of the glass flasks he used to transport it, wafting into a smelly vapor that formed when he heated it. A fine powder, possibly C8, dusted the laboratory drawers and floated in the hazy lab air.
At the time, Wamsley and his coworkers weren’t particularly concerned about the strange stuff. “We never thought about it, never worried about it,” he said recently. He believed it was harmless, “like a soap. Wash your hands [with it], your face, take a bath.”
Today Wamsley suffers from ulcerative colitis, a bowel condition that causes him sudden bouts of diarrhea. The disease also can — and his case, did — lead to rectal cancer. Between the surgery, which left him reliant on plastic pouches that collect his waste outside his body and have to be changed regularly, and his ongoing digestive problems, Wamsley finds it difficult to be away from his home for long.
Sometimes, between napping or watching baseball on TV, Wamsley’s mind drifts back to his DuPont days and he wonders not just about the dust that coated his old workplace but also about his bosses who offered their casual assurances about the chemical years ago.
“Who knew?” he asked. “When did they know? Did they lie?”
The Washington Works DuPont plant in Parkersburg, WV on Wednesday, August 5, 2015.
The Washington Works DuPont plant in Parkersburg, West Virginia, on Wednesday, August 5, 2015.
Photo: Maddie McGarvey for The Intercept/Investigative Fund
UNTIL RECENTLY, FEW PEOPLE had heard much about chemicals like C8. One of tens of thousands of unregulated industrial chemicals, perfluorooctanoic acid, or PFOA — also called C8 because of the eight-carbon chain that makes up its chemical backbone — had gone unnoticed for most of its eight or so decades on earth, even as it helped cement the success of one of the world’s largest corporations.
Several blockbuster discoveries, including nylon, Lycra, and Tyvek, helped transform the E. I. du Pont de Nemours company from a 19th-century gunpowder mill into “one of the most successful and sustained industrial enterprises in the world,” as its corporate website puts it. Indeed, in 2014, the company reaped more than $95 million in sales each day. Perhaps no product is as responsible for its dominance as Teflon, which was introduced in 1946, and for more than 60 years C8 was an essential ingredient of Teflon.
Called a “surfactant” because it reduces the surface tension of water, the slippery, stable compound was eventually used in hundreds of products, including Gore-Tex and other waterproof clothing; coatings for eye glasses and tennis rackets; stain-proof coatings for carpets and furniture; fire-fighting foam; fast food wrappers; microwave popcorn bags; bicycle lubricants; satellite components; ski wax; communications cables; and pizza boxes.
Concerns about the safety of Teflon, C8, and other long-chain perfluorinated chemicals first came to wide public attention more than a decade ago, but the story of DuPont’s long involvement with C8 has never been fully told. Over the past 15 years, as lawyers have been waging an epic legal battle — culminating as the first of approximately 3,500 personal injury claims comes to trial in September — a long trail of documents has emerged that casts new light on C8, DuPont, and the fitful attempts of the Environmental Protection Agency to deal with a threat to public health.
This story is based on many of those documents, which until they were entered into evidence for these trials had been hidden away in DuPont’s files. Among them are write-ups of experiments on rats, dogs, and rabbits showing that C8 was associated with a wide range of health problems that sometimes killed the lab animals. Many thousands of pages of expert testimony and depositions have been prepared by attorneys for the plaintiffs. And through the process of legal discovery they have uncovered hundreds of internal communications revealing that DuPont employees for many years suspected that C8 was harmful and yet continued to use it, putting the company’s workers and the people who lived near its plants at risk.
Ken Wamsley, 72, stands outside of his home in Parkersburg, WV on Tuesday, August 4, 2015. Wamsley suffered from ulcerative colitis and rectal cancer after working at DuPont measuring levels of C8 in various products.
Ken Wamsley, 73, stands outside of his home in Parkersburg, West Virginia, on Tuesday, August 4, 2015.
Photo: Maddie McGarvey for The Intercept/Investigative Fund
The best evidence of how C8 affects humans has also come out through the legal battle over the chemical, though in a more public form. As part of a 2005 settlement over contamination around the West Virginia plant where Wamsley worked, lawyers for both DuPont and the plaintiffs approved a team of three scientists, who were charged with determining if and how the chemical affects people.
In 2011 and 2012, after seven years of research, the science panel found that C8 was “more likely than not” linked to ulcerative colitis — Wamsley’s condition — as well as to high cholesterol; pregnancy-induced hypertension; thyroid disease; testicular cancer; and kidney cancer. The scientists’ findings, published in more than three dozen peer-reviewed articles, were striking, because the chemical’s effects were so widespread throughout the body and because even very low exposure levels were associated with health effects.
We know, too, from internal DuPont documents that emerged through the lawsuit, that Wamsley’s fears of being lied to are well-founded. DuPont scientists had closely studied the chemical for decades and through their own research knew about some of the dangers it posed. Yet rather than inform workers, people living near the plant, the general public, or government agencies responsible for regulating chemicals, DuPont repeatedly kept its knowledge secret.
Another revelation about C8 makes all of this more disturbing and gives the upcoming trials, the first of which will be held this fall in Columbus, Ohio, global significance: This deadly chemical that DuPont continued to use well after it knew it was linked to health problems is now practically everywhere.
A man-made compound that didn’t exist a century ago, C8 is in the blood of 99.7 percent of Americans, according to a 2007 analysis of data from the Centers for Disease Control, as well as in newborn human babies, breast milk, and umbilical cord blood. A growing group of scientists have been tracking the chemical’s spread through the environment, documenting its presence in a wide range of wildlife, including Loggerhead sea turtles, bottlenose dolphins, harbor seals, polar bears, caribou, walruses, bald eagles, lions, tigers, and arctic birds. Although DuPont no longer uses C8, fully removing the chemical from all the bodies of water and bloodstreams it pollutes is now impossible. And, because it is so chemically stable — in fact, as far as scientists can determine, it never breaks down — C8 is expected to remain on the planet well after humans are gone from it.
In some ways, C8 already is the tobacco of the chemical industry — a substance whose health effects were the subject of a decades-long corporate cover-up.
Eight companies are responsible for C8 contamination in the U.S. (In addition to DuPont, the leader by far in terms of both use and emissions, seven others had a role, including 3M, which produced C8 and sold it to DuPont for years.) If these polluters were ever forced to clean up the chemical, which has been detected by the EPA 716 times across water systems in 29 states, and in some areas may be present at dangerous levels, the costs could be astronomical — and C8 cases could enter the storied realm of tobacco litigation, forever changing how the public thinks about these products and how a powerful industry does business.
In some ways, C8 already is the tobacco of the chemical industry — a substance whose health effects were the subject of a decades-long corporate cover-up. As with tobacco, public health organizations have taken up the cause — and numerous reporters have dived into the mammoth story. Like the tobacco litigation, the lawsuits around C8 also involve huge amounts of money. And, like tobacco, C8 is a symbol of how difficult it is to hold companies responsible, even when mounting scientific evidence links their products to cancer and other diseases.
There is at least one sense in which the tobacco analogy fails. Exposure to tobacco usually contains an element of volition, and most people who smoked it in the past half century knew about some of the risks involved. But the vast majority of Americans — along with most people on the planet — now have C8 in their bodies. And we’ve had no choice in the matter.
FOR ITS FIRST HUNDRED YEARS, DuPont mostly made explosives, which, while hazardous, were at least well understood. But by the 1930s, the company had expanded into new products that brought new mysterious health problems. Leaded gasoline, which DuPont made in its New Jersey plant, for instance, wound up causing madness and violent deaths and life-long institutionalization of workers. And certain rubber and industrial chemicals inexplicably turned the skin of exposed workers blue.
Perhaps most troubling, at least to a DuPont doctor named George Gehrmann, was a number of bladder cancers that had recently begun to crop up among many dye workers. Worried over “the tendency to believe [chemicals] are harmless until proven otherwise,” Gehrmann pushed DuPont to create Haskell Laboratories in 1935. Haskell was one of the first in-house toxicology facilities and its first project was to address the bladder cancers. But the inherent problems of assigning staff scientists to study a company’s own employees and products became clear from the outset.
One of Haskell’s first employees, a pathologist named Wilhelm Hueper, helped crack the bladder cancer case by developing a model of how the dye chemicals led to disease. But the company forbade him from publishing some of his research and, according to epidemiologist and public health scholar David Michaels, fired him in 1937 before going on to use the chemicals in question for decades.
DuPont elected not to disclose its findings to regulators.
C8 would prove to be arguably even more ethically and scientifically challenging for Haskell. From the beginning, DuPont scientists approached the chemical’s potential dangers with rigor. In 1954, the very year a French engineer first applied the slick coating to a frying pan, a DuPont employee named R. A. Dickison noted that he had received an inquiry regarding C8’s “possible toxicity.” In 1961, just seven years later, in-house researchers already had the short answer to Dickison’s question: C8 was indeed toxic and should be “handled with extreme care,” according to a report filed by plaintiffs. By the next year experiments had honed these broad concerns into clear, bright red flags that pointed to specific organs: C8 exposure was linked to the enlargement of rats’ testes, adrenal glands, and kidneys. In 1965, 14 employees, including Haskell’s then-director, John Zapp, received a memo describing preliminary studies that showed that even low doses of a related surfactant could increase the size of rats’ livers, a classic response to exposure to a poison.
The company even conducted a human C8 experiment, a deposition revealed. In 1962, DuPont scientists asked volunteers to smoke cigarettes laced with the chemical and observed that “Nine out of ten people in the highest-dosed group were noticeably ill for an average of nine hours with flu-like symptoms that included chills, backache, fever, and coughing.”
Because of its toxicity, C8 disposal presented a problem. In the early 1960s, the company buried about 200 drums of the chemical on the banks of the Ohio River near the plant. An internal DuPont document from 1975 about “Teflon Waste Disposal” detailed how the company began packing the waste in drums, shipping the drums on barges out to sea, and dumping them into the ocean, adding stones to make the drums sink. Though the practice resulted in a moment of unfavorable publicity when a fisherman caught one of the drums in his net, no one outside the company realized the danger the chemical presented. At some point before 1965, ocean dumping ceased, and DuPont began disposing of its Teflon waste in landfills instead.
A view of Parkersburg, WV from Fort Boreman Park on Wednesday, August 5, 2015.
A view of Parkersburg, West Virginia, from Fort Boreman Park on Wednesday, August 5, 2015.
Photo: Maddie McGarvey for The Intercept/Investigative Fund
IN 1978, BRUCE KARRH, DuPont’s corporate medical director, was outspoken about the company’s duty “to discover and reveal the unvarnished facts about health hazards,” as he wrote in the Bulletin of the New York Academy of Medicine at the time. When deposed in 2004, Karrh emphasized that DuPont’s internal health and safety rules often went further than the government’s and that the company’s policy was to comply with either laws or the company’s internal health and safety standards, “whichever was the more strict.” In his 1978 article, Karrh also insisted that a company “should be candid, and lay all the facts on the table. This is the only responsible and ethical way to go.”
Yet DuPont only laid out some of its facts. In 1978, for instance, DuPont alerted workers to the results of a study done by 3M showing that its employees were accumulating C8 in their blood. Later that year, Karrh and his colleagues began reviewing employee medical records and measuring the level of C8 in the blood of the company’s own workers in Parkersburg, as well as at another DuPont plant in Deepwater, New Jersey, where the company had been using C8 and related chemicals since the 1950s. They found that exposed workers at the New Jersey plant had increased rates of endocrine disorders. Another notable pattern was that, like dogs and rats, people employed at the DuPont plants more frequently had abnormal liver function tests after C8 exposure.
DuPont elected not to disclose its findings to regulators. The reasoning, according to Karrh, was that the abnormal test results weren’t proven to be adverse health effects related to C8. When asked about the decision in deposition, Karrh said that “at that point in time, we saw no substantial risk, so therefore we saw no obligation to report.”
Not long after the decision was made not to alert the EPA, in 1981, another study of DuPont workers by a staff epidemiologist declared that liver test data collected in Parkersburg lacked “conclusive evidence of an occupationally related health problem among workers exposed to C-8.” Yet the research might have reasonably led to more testing. An assistant medical director named Vann Brewster suggested that an early draft of the study be edited to state that DuPont should conduct further liver test monitoring. Years later, a proposal for a follow-up study was rejected.
If the health effects on humans could still be debated in 1979, C8’s effects on animals continued to be apparent. A report prepared for plaintiffs stated that by then, DuPont was aware of studies showing that exposed beagles had abnormal enzyme levels “indicative of cellular damage.” Given enough of the stuff, the dogs died.
DuPont employees knew in 1979 about a recent 3M study showing that some rhesus monkeys also died when exposed to C8, according to documents submitted by plaintiffs. Scientists divided the primates into five groups and exposed them to different amounts of C8 over 90 days. Those given the highest dose all died within five weeks. More notable was that three of the monkeys who received less than half that amount also died, their faces and gums growing pale and their eyes swelling before they wasted away. Some of the monkeys given the lower dose began losing weight in the first week it was administered. C8 also appeared to affect some monkeys’ kidneys.
Of course, enough of anything can be deadly. Even a certain amount of table salt would kill a lab animal, a DuPont employee named C. E. Steiner noted in a confidential 1980 communications meeting. For C8, the lethal oral dose was listed as one ounce per 150 pounds, although the document stated that the chemical was most toxic when inhaled. The harder question was to determine a maximum safe dosage. How much could an animal — or a person — be exposed to without having any effects at all? The 1965 DuPont study of rats suggested that even a single dose of a similar surfactant could have a prolonged effect. Nearly two months after being exposed, the rats’ livers were still three times larger than normal.
Steiner declared that there was no “conclusive evidence” that C8 harmed workers, yet he also stated that “continued exposure is not tolerable.” Because C8 accumulated in bodies, the potential for harm was there, and Steiner predicted the company would continue medical and toxicological monitoring and described plans to supply workers who were directly exposed to the chemical with protective clothing.
Two years after DuPont learned of the monkey study, in 1981, 3M shared the results of another study it had done, this one on pregnant rats, whose unborn pups were more likely to have eye defects after they were exposed to C8. The EPA was also informed of the results. After 3M’s rat study came out, DuPont transferred all women out of work assignments with potential for exposure to C8. DuPont doctors then began tracking a small group of women who had been exposed to C8 and had recently been pregnant. If even one in five women gave birth to children who had craniofacial deformities, a DuPont epidemiologist named Fayerweather warned, the results should be considered significant enough to suggest that C8 exposure caused the problems.
Photos of Bucky Bailey as a baby as well as article clippings that his mother Sue saved over the years sit on the table at their home in Bluemont, VA. Sue worked in Teflon while pregnant with Bucky, who was born with facial deformities.
Photos of Bucky Bailey as a baby, as well as article clippings his mother, Sue, saved over the years.
Photo: Maddie McGarvey for The Intercept/Investigative Fund
As it turned out, at least one of eight babies born to women who worked in the Teflon division did have birth defects. A little boy named Bucky Bailey, whose mother, Sue, had worked in Teflon early in her pregnancy, was born with tear duct deformities, only one nostril, an eyelid that started down by his nose, and a condition known as “keyhole pupil,” which looked like a tear in his iris. Another child, who was two years old when the rat study was published in 1981, had an “unconfirmed eye and tear duct defect,” according to a DuPont document that was marked confidential.
Like Wamsley, Sue Bailey, one of the plaintiffs whose personal injury suits are scheduled to come to trial in the fall, remembers having plenty of contact with C8. When she started at DuPont in 1978, she worked first in the Nylon division and then in Lucite, she told me in an interview. But in 1980, when she was in the first trimester of her pregnancy with Bucky, she moved to Teflon, where she often sat watch over a large pipe that periodically filled up with liquid, which she had to pump to a pond in back of the plant. Occasionally some of the bubbly stuff would overflow from a nearby holding tank, and her supervisor taught her how to squeegee the excess into a drain.
Soon after Bucky was born, Bailey received a call from a DuPont doctor. “I thought it was just a compassion call, you know: can we do anything or do you need anything?” Bailey recalled. “Shoot. I should have known better.” In fact, the doctor didn’t express his sympathies, Bailey said, and instead asked her whether her child had any birth defects, explaining that it was standard to record such problems in employees’ newborns.
While Bailey was still on maternity leave, she learned that the company was removing its female workers from the Teflon division. She remembers the moment — and that it made her feel deceived. “It sure was a big eye-opener,” said Bailey, who still lives in West Virginia but left DuPont a few years after Bucky’s birth.
Bucky Bailey stands inside his mother's home in Bluemont, VA on Thursday, August 6, 2015. Bucky's mother, Sue, had worked in Teflon early in her pregnancy, and Bucky was born with tear duct deformities as well as a nose that had just a single nostril, an eyelid that started down by his nose, and a condition known as “keyhole pupil,” which looked like a tear in his iris.
Bucky Bailey stands inside his mother’s home in Bluemont, Virginia, on Thursday, August 6, 2015.
Photo: Maddie McGarvey for The Intercept/Investigative Fund
THE FEDERAL TOXIC SUBSTANCES Control Act requires companies that work with chemicals to report to the Environmental Protection Agency any evidence they find that shows or even suggests that they are harmful. In keeping with this requirement, 3M submitted its rat study to the EPA, and later DuPont scientists wound up discussing the study with the federal agency, saying they believed it was flawed. DuPont scientists neglected to inform the EPA about what they had found in tracking their own workers.
When DuPont began transferring women workers out of Teflon, the company did send out a flier alerting them to the results of the 3M study. When Sue Bailey saw the notice on the bench of the locker room and read about the rat study, she immediately thought of Bucky.
Yet when she went in to request a blood test, the results of which the doctor carefully noted to the thousandth decimal point, and asked if there might be a connection between Bucky’s birth defects and the rat study she had read about, Bailey recalls that Dr. Younger Lovelace Power, the plant doctor, said no. According to Karrh’s deposition, he told Karrh the same. “We went back to him and asked him to follow up on it, and he did, and came back saying that he did not think it was related.”
“I said, ‘I was in Teflon. Is this what happened to my baby?’” Bailey remembered. “And he said, ‘No, no.’” Power also told Bailey that the company had no record of her having worked in Teflon. Shortly afterward, she considered suing DuPont and even contacted a lawyer in Parkersburg, who she says wasn’t interested in taking her case against the town’s biggest employer. When contacted for his response to Bailey’s recollections, Power declined to comment.
By testing the blood of female Teflon workers who had given birth, DuPont researchers, who then reported their findings to Karrh, documented for the first time that C8 had moved across the human placenta.
In 2005, when the EPA fined the company for withholding this information, attorneys for DuPont argued that because the agency already had evidence of the connection between C8 and birth defects in rats, the evidence it had withheld was “merely confirmatory” and not of great significance, according to the agency’s consent agreement on the matter.
Ken Wamsley also remembers when his supervisor told him they had taken female workers out of Teflon. “I said, ‘Why’d you send all the women home?’ He said, ‘Well, we’re afraid, we think maybe it hurts the pregnancies in some of the women,’” recalled Wamsley. “They said, ‘Ken, it won’t hurt the men.’”
WHILE SOME DUPONT SCIENTISTS were carefully studying the chemical’s effect on the body, others were quietly tracking its steady spread into the water surrounding the Parkersburg plant. After it ceased dumping C8 in the ocean, DuPont apparently relied on disposal in unlined landfills and ponds, as well as putting C8 into the air through smokestacks and pouring waste water containing it directly into the Ohio River, as detailed in a 2007 study by Dennis Paustenbach published in the Journal of Toxicology and Environmental Health.
By 1982, Karrh had become worried about the possibility of “current or future exposure of members of the local community from emissions leaving the plant’s perimeter,” as he explained in a letter to a colleague in the plastics department. After noting that C8 stays in the blood for a long time — and might be passed to others through blood donations — and that the company had only limited knowledge of its long-term effects, Karrh recommended that “available practical steps be taken to reduce that exposure.”
To get a sense of exactly how extensive that exposure was, in March 1984 an employee was sent out to collect samples, according to a memo by a DuPont staffer named Doughty. The employee went into general stores, markets, and gas stations, in local communities as far as 79 miles downriver from the Parkersburg plant, asking to fill plastic jugs with water, which he then took back for testing. The results of those tests confirmed C8’s presence at elevated levels.
Faced with the evidence that C8 had now spread far beyond the Parkersburg plant, internal documents show, DuPont was at a crossroads. Could the company find a way to reduce emissions? Should it switch to a new surfactant? Or stop using the chemical altogether? In May 1984, DuPont convened a meeting of 10 of its corporate business managers at the company’s headquarters in Wilmington, Delaware, to tackle some of these questions. Results from an engineering study the group reviewed that day described two methods for reducing C8 emissions, including thermal destruction and a scrubbing system.
“None of the options developed are … economically attractive and would essentially put the long term viability of this business segment on the line,” someone named J. A. Schmid summarized in notes from the meeting, which are marked “personal and confidential.”
The executives considered C8 from the perspective of various divisions of the company, including the medical and legal departments, which, they predicted, “will likely take a position of total elimination,” according to Schmid’s summary. Yet the group nevertheless decided that “corporate image and corporate liability” — rather than health concerns or fears about suits — would drive their decisions about the chemical. Also, as Schmid noted, “There was a consensus that C-8, based on all the information available from within the company and 3M, does not pose a health hazard at low level chronic exposure.”
Though they already knew that it had been detected in two local drinking water systems and that moving ahead would only increase emissions, DuPont decided to keep using C8.
A DuPont lawyer referred to C8 as “the material 3M sells us that we poop to the river and into drinking water along the Ohio River.”
In fact, from that point on, DuPont increased its use and emissions of the chemical, according to Paustenbach’s 2007 study, which was based on the company’s purchasing records, interviews with employees, and historical emissions from the Parkersburg plant. According to the study, the plant put an estimated 19,000 pounds of C8 into the air in 1984, the year of the meeting. By 1999, the peak of its air emissions, the West Virginia plant put some 87,000 pounds of C8 into local air and water. That same year, the company emitted more than 25,000 pounds of the chemical into the air and water around its New Jersey plant, as noted in a confidential presentation DuPont made to the New Jersey Department of Environmental Protection in 2006. All told, according to Paustenbach’s estimate, between 1951 and 2003 the West Virginia plant eventually spread nearly 2.5 million pounds of the chemical into the area around Parkersburg.
Essentially, DuPont decided to double-down on C8, betting that somewhere down the line the company would somehow be able to “eliminate all C8 emissions in a way yet to be developed that would not economically penalize the bussiness [sic],” as Schmid wrote in his 1984 meeting notes. The executives, while conscious of probable future liability, did not act with great urgency about the potential legal predicament they faced. If they did decide to reduce emissions or stop using the chemical altogether, they still couldn’t undo the years of damage already done. As the meeting summary noted, “We are already liable for the past 32 years of operation.”
When contacted by The Intercept for comment, 3M provided the following statement. “In more than 30 years of medical surveillance we have observed no adverse health effects in our employees resulting from their exposure to PFOS or PFOA. This is very important since the level of exposure in the general population is much lower than that of production employees who worked directly with these materials,” said Dr. Carol Ley, 3M vice president and corporate medical director. “3M believes the chemical compounds in question present no harm to human health at levels they are typically found in the environment or in human blood.” In May 2000, 3M announced that it would phase out its use of C8.
DUPONT CONFRONTED ITS potential liability in part by rehearsing the media strategy it would take if word of the contamination somehow got out. In the weeks after the 1984 meeting, an internal public relations team drafted the first of several “standby press releases.” The guide for dealing with the imagined press offered assurances that only “small quantities of [C8] are discharged to the Ohio River” and that “these extremely low levels would have no adverse affects.” When a hypothetical reporter, who presumably learned that DuPont was choosing not to invest in a system to reduce emissions, asks whether the company’s decision was based on money, the document advises answering “No.”
The company went on to draft these just-in-case press releases at several difficult junctures, and even the hypothetical scenarios they play out can be uncomfortable. In one, drafted in 1989, after DuPont had bought local fields that contained wells it knew to be contaminated, the company spokesperson in the script winds up in an outright lie. Although internal documents list “the interests of protecting our plant site from public liability” as one of the reasons for the purchase, when the hypothetical reporter asks whether DuPont purchased the land because of the water contamination, the suggested answer listed in the 1989 standby release was to deny this and to state instead that “it made good business sense to do so.”
DuPont drafted another contingency press release in 1991, after it discovered that C8 was present in a landfill near the plant, which it estimated could produce an exit stream containing 100 times its internal maximum safety level. Fears about the possible health consequences were enough to spur the company to once again rehearse its media strategy. (“What would be the effect of cows drinking water from the … stream?” the agenda from a C8 review meeting that year asked.) Yet other recent and disturbing discoveries had also provoked corporate anxieties.
In 1989, DuPont employees found an elevated number of leukemia deaths at the West Virginia plant. Several months later, they measured an unexpectedly high number of kidney cancers among male workers. Both elevations were plant-wide and not specific to workers who handled C8. But, the following year, the scientists clarified how C8 might cause at least one form of cancer in humans. In 1991, it became clear not just that C8-exposed rats had elevated chances of developing testicular tumors — something 3M had also recently observed — but, worse still, that the mechanism by which they developed the tumors could apply to humans.
Nevertheless, the 1991 draft press release said that “DuPont and 3M studies show that C-8 has no known toxic or ill health effects in humans at the concentrations detected” and included this reassuring note: “As for most chemicals, exposure limits for C-8 have been established with sufficient safety factors to ensure there is no health concern.”
Yet even this prettified version of reality in Parkersburg never saw the light of day. The standby releases were only to be used to guide the company’s media response if its bad news somehow leaked to the public. It would be almost 20 years after the first standby release was drafted before anyone outside the company understood the dangers of the chemical and how far it had spread beyond the plant.
IN THE MEANTIME, fears about liability mounted along with the bad news. In 1991, DuPont researchers recommended another study of workers’ liver enzymes to follow up on the one that showed elevated levels more than a decade before. But Karrh and others decided against the project, which was predicted to cost $45,000. When asked about it in a deposition, Karrh characterized the decision as the choice to focus resources on other worthy scientific projects. But notes taken on a discussion of whether or not to carry out the proposed study included the bullet point “liability” and the hand-written suggestion: “Do the study after we are sued.”
In a 2004 deposition, Karrh denied that the notes were his and said that the company would never have endorsed such a comment. Although notes from the 1991 meeting describe the presence of someone named “Kahrr,” Karrh said that he had no idea who that person was and didn’t recall being present for the meeting. When contacted by The Intercept, Karrh declined to comment.
As the secrets mounted so too did anxiety about C8, which DuPont was by now using and emitting not just in West Virginia and New Jersey, but also in its facilities in Japan and the Netherlands. By the time a small committee drafted a “white paper” about C8 strategies and plans in 1994, the subject was considered so sensitive that each copy was numbered and tracked. The top-secret document, which was distributed to high-level DuPont employees around the world, discussed the need to “evaluate replacement of C-8 with other more environmentally safe materials” and presented evidence of toxicity, including a paper published in the Journal of Occupational Medicine that found elevated levels of prostate cancer death rates for employees who worked in jobs where they were exposed to C8. After they reviewed drafts, recipients were asked to return them for destruction.
In 1999, when a farmer suspected that DuPont had poisoned his cows (after they drank from the very C8-polluted stream DuPont employees had worried over in their draft press release eight years earlier) and filed a lawsuit seeking damages, the truth finally began to seep out. The next year, an in-house DuPont attorney named Bernard Reilly helped open an internal workshop on C8 by giving “a short summary of the right things to document and not to document.” But Reilly — whose own emails about C8 would later fuel the legal battle that eventually included thousands of people, including Ken Wamsley and Sue Bailey — didn’t heed his own advice.
Reilly clearly made the wrong choice when he used the company’s computers to write about C8, which he revealingly called the “the material 3M sells us that we poop to the river and into drinking water along the Ohio River.” But the DuPont attorney was right about two things: If C8 was proven to be harmful, Reilly predicted in 2000, “we are really in the soup because essentially everyone is exposed one way or another.” Also, as he noted in another prescient email sent 15 years ago: “This will be an interesting saga before it’s thru.”
EDITORS NOTE: DuPont, asked to respond to the allegations contained in this article, declined to comment due to pending litigation.
In previous statements and court filings, however, DuPont has consistently denied that it did anything wrong or broke any laws. In settlements reached with regulatory authorities and in a class-action suit, DuPont has made clear that those agreements were compromise settlements regarding disputed claims and that the settlements did not constitute an admission of guilt or wrongdoing. Likewise, in response to the personal injury claims of Ken Wamsley, Sue Bailey, and others, DuPont has rejected all charges of wrongdoing and maintained that their injuries were “proximately caused by acts of God and/or by intervening and/or superseding actions by others, over which DuPont had no control.” DuPont also claimed that it “neither knew, nor should have known, that any of the substances to which Plaintiff was allegedly exposed were hazardous or constituted a reasonable or foreseeable risk of physical harm by virtue of the prevailing state of the medical, scientific and/or industrial knowledge available to DuPont at all times relevant to the claims or causes of action asserted by Plaintiff.”
Coming next: Part 2, the lawsuits that revealed what DuPont knew about C8.
This article was reported in partnership with The Investigative Fund at The Nation Institute.
Alleen Brown, Hannah Gold, and Sheelagh McNeill contributed to this story.
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Precision Castparts -- >>> Why a Takeover of Precision Castparts Would Be Signature Buffett
http://blogs.wsj.com/moneybeat/2015/08/08/why-a-takeover-of-precision-castparts-would-be-signature-buffett/?mod=yahoo_hs
A Berkshire Hathaway Inc.BRKA -1.11% takeover of Precision Castparts Corp.PCP +19.08%, if it happens, would be a signature Warren Buffett deal in several respects.
For one, Berkshire, led by Mr. Buffett, has had a few years to get familiar with the Portland, Ore.-based manufacturer of components for aircrafts, power stations and oil-and-gas equipment. Berkshire began buying shares in 2012 and continued to add to its position through periods when the stock was trading above $200.
Along similar lines, Berkshire in 2010 bought the 77% of Burlington Northern Santa Fe Railroad that it didn’t already own, for $26 billion.
Also, Precision Castparts shares have fallen in recent months as the company has said it faces uncertainty in its businesses that cater to the oil and gas industry. It has reduced headcount and recorded charges tied to depressed demand from these customers. On Friday, Precision Castparts’s shares closed at about $194; they are down about 20% year to date. While such a decline might give others pause, a traditional value investor like Mr. Buffett would see that downdraft as an opportunity.
Berkshire “appears to be buying at a time when the shares are a bit out of favor, a classic Berkshire move,” Nomura analyst Clifford Gallant, who covers Berkshire, said on Saturday.
Finally, it is the kind of nuts-and-bolts industrial company that attracts Mr. Buffett, such as its BNSF railroad, utilities or grocery distributor McLane. Their job is to help other businesses succeed. Precision’s clients include some of the aerospace industry’s heaviest hitters, including Airbus Group SE, Boeing Co.BA +2.42% and General Electric Co.GE +1.26%
Even with its shares down, Precision Castparts is a pretty big company, with a market capitalization of about $27 billion. Based on average deal premiums, Berkshire would likely be paying more than $30 billion to acquire the company — making it Berkshire’s largest-ever deal.
Berkshire had $67 billion of cash on its books as of the end of the second quarter. Mr. Buffett has said he likes to keep a cushion of $20 billion. But that leaves a hefty $47 billion in the bank. Mr. Buffett doesn’t like to use Berkshire’s stock to pay for deals, so Berkshire could use a combination of its own cash and some financing to pay for Precision Castparts.
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Has anybody invested on "litigation funding"?
I have seen some reports an it seems interesting as an alternative vehicle.
Thanks
AO Smith-->>> 4 Conservative Growth Stocks Selling At Very Attractive Prices
Forbes
7-14-15
The second company to highlight is well-positioned in an area that has been a bit more challenging to find good opportunities lately, namely industrials. The industrial economy has gone through a number of fits and starts in this recovery and has not demonstrated consistency lately.
Most of our attention has been on domestic revenue-based companies that are more keyed to the U.S. recovery. We are finding opportunities in both the residential and non-residential construction markets, where we are beginning to see further strength. Housing starts are improving, as well as permits and other pertinent metrics.
In this area, A.O. Smith (NYSE: AOS) is the leader in residential and commercial water heating equipment. It holds the top market share in North America, with over 40% on the residential side and north of 50% on the commercial side.
AOS continues to be a direct beneficiary of improvement in residential and non-residential construction. In addition, we are entering a period where the replacement cycle for residential construction is perking up, which is important because about 70% of water heater sales are replacement.
The useful life of water heaters is about 12 years, and given there was a construction bulge between 2002 and 2006, we are entering the sweet spot of the replacement cycle, which should accelerate in the coming years. That increased growth, combined with some of the improvements in new housing starts provides a very good environment in the U.S. for continued improvement.
Forbes: Sounds good.
Broughton: I should mention that 25% of the company’s exposure actually is leveraged into China. This is an area that has seen very strong growth over the last ten years and should continue as such, despite recent blips in the Chinese capital markets. It has been a bit misunderstood. For a time, people have worried about the buildup of real estate across China and what it would mean for a company such as A.O. Smith. But as opposed to the way that water heaters are bought here in the U.S., in China it’s considered more of a consumer appliance often purchased by the homeowner after the home as been purchased. In the last 20 years, A.O. Smith has created one of the most recognizable brands. There are a number of different elements in the U.S. that we are enthused about, which combined with this additional opportunity in China creates a unique opportunity within the area of industrial stocks.
Margard: In keeping with our approach of looking for growth opportunities in all sectors of the market, I’m going to add a couple of stocks that are in two different sectors. Mark spoke of a health care stock and an industrial stock. I’m going to profile an energy company and a consumer discretionary company.
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General Electric -- >>> GE to sell bulk of finance unit, return up to $90 billion to investors
By Nick Carey and Lewis Krauskopf
http://news.yahoo.com/ge-close-selling-nearly-real-estate-holdings-source-094207234--sector.html
1. GE close to selling nearly all its real estate holdings: source Reuters
2. GE pares off financial unit and returns to industrial roots Associated Press
3. GE says has potential to return $90 billion to shareholders through 2018 MarketWatch
4. Wall Street climbs on GE divestment, buyback plan Reuters
5. Blackstone to buy Excel Trust for about $2 billion Reuters
(Reuters) - General Electric Co said it would shed the bulk of its finance unit and return as much as $90 billion to shareholders as it becomes a “simpler” industrial business instead of an unwieldy hybrid of banking and manufacturing.
GE shares jumped 7.5 percent on Friday after the company outlined plans for substantially shrinking its GE Capital unit. The plan includes a buyback of up to $50 billion in GE shares, the sale of about $30 billion in real estate assets over the next two years and the disposal of more GE Capital operations.
The repurchase program, which will be partly funded by $35 billion through money returned from GE Capital, is the second-biggest in history after Apple Inc's $90 billion plan. GE, which had 10.06 billion shares outstanding on Jan. 31, said it expected to reduce that by as much as 20 percent to 8 billion to 8.5 billion by 2018.
In all, GE said it planned to shed $275 billion in GE Capital assets. That includes the previously announced spinoff of its Synchrony credit card unit, the real estate transaction announced on Friday, and future sales of commercial lending and consumer banking businesses with assets of about $165 billion.
The company plans to keep $90 billion in finance assets directly related to selling its products such as jet engines, medical equipment and power generation and electrical grid gear.
GE has forecast earnings of $1.70 to $1.80 per share for this year, including 60 cents from GE Capital, but expects profit to be “substantially higher” in 2018, executives said on a conference call with analysts. Shrinking GE Capital will reduce earnings by 25 cents per share, they said, but the stock buybacks should offset that impact.
The company already had a significant number of inquiries about GE Capital units before Friday’s announcement, said Keith Sherin, the finance unit's chief.
Blackstone Group LP and Wells Fargo & Co confirmed that they were buying most of the assets of GE Capital Real Estate for about $23 billion.
This is the biggest deal in the commercial property market since Blackstone's acquisition of office landlord Equity Office Properties Trust in 2007 for $39 billion, including debt.
FOCUS ON INDUSTRIAL
The moves announced on Friday will dramatically reduce GE’s exposure to lending and other financial businesses.
GE Chief Executive Officer Jeff Immelt told investors the company would try to generate 90 percent of its profits from industrial operations by 2018. He had previously forecast that share would grow to 75 percent by 2016 from 55 percent in 2013.
“We just think the market timing is very good vis-a-vis the value of financial service assets,” Immelt said in an interview. “There have been moments in the past when there weren’t a lot of buyers. Now there are.”
Immelt and other GE executives said they planned to spend $3 billion to $5 billion a year on industrial acquisitions.
GE said it could return up to $90 billion to investors through a combination of dividends, the $50 billion in share buybacks, and completion of the spinoff of the Synchrony business planned for late this year.
Executives gave several reasons for GE's accelerated retreat from financial businesses. One is that since the financial crisis, it has become more difficult for GE to fund its lending operations.
GE funded many of its loans and leases by borrowing money from bond markets. During the financial crisis it lost access to that funding, bringing it uncomfortably close to running out of cash.
Lenders like GE Capital and CIT Group Inc, which cannot rely on bank deposits to fund their assets, have had to rethink the way they do business since the crisis. Many decided to either shed assets or become banks.
GE Capital’s size and the potential risks in its lending portfolio made it subject to government regulation as a systemically important financial institution. GE said it would apply to escape that oversight in 2016 as it reduces the financial business' size.
GE said it would take after-tax charges of about $16 billion for the restructuring in the first quarter, of which about $12 billion would be non-cash.
Shares of GE were sluggish for the past year despite previous moves to reposition itself around the industrial businesses. Still, Friday’s more dramatic move away from finance caught some analysts by surprise.
"What we did not expect was the speed with which management would move to undertake this transformation," Sanford Bernstein analyst Steven Winoker wrote. "We view today's announcement as an overwhelming positive for the company."
During the conference call, Barclays analyst Scott Davis told executives that while he had been a critic, “this is good stuff ... I guess you can keep your jobs a little longer."
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>>> Air Products and Chemicals, Inc. provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company operates in Merchant Gases, Tonnage Gases, Electronics and Performance Materials, and Equipment and Energy segments. The Merchant Gases segment sells atmospheric gases, such as oxygen, nitrogen, and argon; process gases, such as hydrogen, helium, and carbon dioxide; specialty gases; temporary gas supply services; and equipment for the metals, glass, electronics, chemical processing, food processing, healthcare, general manufacturing, and petroleum and natural gas industries. The Tonnage Gases segment offers hydrogen, carbon monoxide, nitrogen, oxygen, and syngas to the energy production and refining, chemical, and metallurgical industries. The Electronics and Performance Materials segment provides nitrogen trifluoride, arsine, phosphine, white ammonia, silicon tetrafluoride, carbon tetrafluoride, hexafluoroethane, tungsten hexafluoride, and critical etch gases; and tonnage gases, chemicals mechanical planarization slurries, specialty chemicals, services, and equipment for the manufacture of silicon and compound semiconductors and thin film transistor liquid crystal displays. This segment offers performance materials for a range of products, including coatings, inks, adhesives, civil engineering, personal care, institutional and industrial cleaning, mining, oil refining, and polyurethanes. The Equipment and Energy segment designs, manufactures, and sells cryogenic equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and helium distribution to the petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing industries. This segment also provides plant design, engineering, procurement, and construction management services. Air Products and Chemicals, Inc. was founded in 1940 and is headquartered in Allentown, Pennsylvania. <<<
>>> MSC Industrial Direct Co., Inc., together with its subsidiaries, markets and distributes metalworking, and maintenance, repair, and operations (MRO) supplies primarily in the United States. Its MRO products include cutting tools, measuring instruments, tooling components, metalworking products, fasteners, flat stock, raw materials, abrasives, machinery hand and power tools, safety and janitorial supplies, plumbing supplies, materials handling products, power transmission components, and electrical supplies. The company offers approximately 685,000 stock-keeping units (SKUs) through its master catalogs; weekly, monthly, and quarterly specialty and promotional catalogs; brochures; and the Internet, including its Websites comprising mscdirect.com, mscmetalworking.com, and use-enco.com. It serves primarily through its distribution network of 105 branch offices and 14 customer fulfillment centers. In addition, the company distributes approximately 55,000 SKUs of products, including fasteners and other consumables for customers across manufacturing, government, transportation, and natural resources end-markets. MSC Industrial Direct Co., Inc. was founded in 1941 and is headquartered in Melville, New York. <<<
Abengoa -- >>> Two Solid Water Stock Picks From Analysts
By Jon C. Ogg
June 12, 2014
http://247wallst.com/infrastructure/2014/06/12/two-solid-water-stock-picks-from-analysts/
After the American Water Works Association’s Annual Conference & Exposition was held this week in Boston, we have been looking for commentary and analysis for ideas behind the hot and secular theme of investing in water. The team at Canaccord Genuity identified several names to look at, but only two of them had Buy ratings.
John Quealy and Chip Moore’s fresh analyst report on water opportunities said that the familiar sector themes in water were in conservation, desalination, energy efficiency, regulatory dynamics, measurement technology and data analytics.
Ecolab Inc. (NYSE: ECL) was listed as having a Buy rating as well. At $109.35, it has a consensus price target of almost $119, and it just recently hit yet another all-time high of $111.83. The company’s Nalco business was at the show demonstrating its Purate on-site chlorine dioxide systems. The team said that they continue to like the company’s customer focus and use of key technologies such as 3D Trasar.
Another stock with a Buy rating was Abengoa S.A. (NASDAQ: ABGB) in Spain. The company’s Abeinsa business unit was at the show, and the analysts feel that it has a strong pipeline of potential future concession assets for the company. This includes a recently awarded desalination plant in Morocco, and the firm’s water supply and distribution operations with 16 plants, more than 14 desalination plants either completed or underway, 10 drinking water treatment plants and 14 wastewater solution plants. At $27.75, Abengoa hit a new high of $27.80 on Thursday, with a 52-week low of $10.04.
Investing in water does come with a secular theme for those investors who are looking out a decade and longer. The problem is that many companies involved in water have diversified operations in chemicals and various services around other liquids or environmental issues
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>>> Abengoa, S.A., an engineering and clean technology company, provides solutions for energy and environmental sectors worldwide. It operates in three segments: Engineering and Construction, Concession-Type Infrastructures, and Industrial Production. The Engineering and Construction segment is involved in the engineering and construction of electrical, mechanical, and instrumental infrastructures in the energy, industrial, water transport, and services sectors. This segment is engaged in the development, design, and construction of renewable energy, including solar, ethanol, biodiesel, and biomass plants; power transmission lines; conventional energy plants; and water treatment, desalination plants, other hydraulic infrastructures, and industrial installations, as well as provision of operation and maintenance services for conventional and renewable energy power plants. It also involved in the development of solar-thermal technology, water management technology, and technology businesses, such as hydrogen energy or the management of energy crops. The Concession-Type Infrastructures segment is engaged in the construction, operation, and maintenance of power transmission infrastructure, conventional and renewable energy plants, and water generation, transportation, and management facilities, including desalination, treatment and water purification plants, and water pipelines. The Industrial Production segment develops and produces biofuels for transportation, which are used as components of gasoline or for direct blending with gasoline or diesel. This segment also produces distillers, grains, and solubles; sugar; and electricity and carbon dioxide as by-products of the ethanol production process for sale to third parties. Abengoa, S.A. was founded in 1941 and is headquartered in Seville, Spain.
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>>> The Goldfield Corporation is engaged in the electrical construction operation in the United States. It constructs and maintains electric utility facilities for electric utilities and industrial customers, as well as installs fiber optic cable for fiber optic cable manufacturers, telecommunication companies, and electric utilities. The company?s electrical construction business includes the construction of transmission lines, concrete foundations, distribution systems and substations, and other electrical installation services for utility systems and industrial and. It also performs fiber optic cable installation. The Goldfield Corporation was founded in 1906 and is based in Melbourne, Florida. <<<
>>> Snap-on Incorporated manufactures and markets tools, equipment, diagnostics, and repair information and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. It offers hand tools, such as wrenches, sockets, ratchet wrenches, pliers, screwdrivers, punches and chisels, saws and cutting tools, pruning tools, torque measuring instruments, and other products; power tools comprising cordless (battery), pneumatic (air), hydraulic, and corded (electric) tools, such as impact wrenches, ratchets, chisels, drills, sanders, polishers, and other products; and tool storage products consisting of tool chests, roll cabinets, tool control systems, and other products. The company also provides handheld and PC-based diagnostic products, service and repair information products, diagnostic software solutions, electronic parts catalogs, business management systems and services, point-of-sale systems, integrated systems for vehicle service shops, OEM purchasing facilitation services, and warranty management systems and analytics. In addition, it offers solutions for the diagnosis and service of vehicles and industrial equipment. These products include wheel alignment equipment, wheel balancers, tire changers, vehicle lifts, test lane systems, collision repair equipment, air conditioning service equipment, brake service equipment, fluid exchange equipment, transmission troubleshooting equipment, safety testing equipment, battery chargers, and hoists. Further, the company provides financing programs to facilitate the sales of its products. It serves customers in industries, including aviation and aerospace, agriculture, construction, government and military, mining, natural resources, power generation, and technical education, as well as vehicle dealerships and repair centers. The company was founded in 1920 and is based in Kenosha, Wisconsin. <<<
Snap-on -- >>> 2 Growth Stocks for Your 2013 Roth IRA Contribution
By Nicole Seghetti
March 19, 2014
http://www.fool.com/investing/ira/2014/03/19/2-growth-stocks-for-your-2013-roth-ira-contributio.aspx
With less than one month to go before the tax-filing deadline, it's time to fund your Roth IRA. Here are two attractive stocks worth considering for your Roth contribution dollars. Both boast exciting growth prospects and competitive positions in their respective industries.
Snap-on (NYSE: SNA ) Primarily known for its Snap-on tools and focus on automotive repair, the Wisconsin-based company has broadened its focus to reach other industries, including aviation, agriculture, and mining. This has allowed Snap-on to diversify its revenue stream and fuel growth, which should drive earnings in the future. Beyond tools, Snap-on also sells diagnostic equipment and software, which are extremely profitable compared with Snap-on's other business segments. With an attractive margin profile and the potential for growth, this segment should help drive stronger sales and earnings growth. Snap-on is also expanding into emerging markets, specifically China and India. Only 10% of Snap-on's 2013 sales were derived from Asia, signifying a lot of growth potential.
Over the past three years, Snap-on's revenue has averaged annual growth of 5%, while earnings have averaged 22% growth. The company's recent P/E ratio has been just under 19, while the industry average P/E is close to 23. Snap-on's forward-looking P/E, based on next year's earnings, is less than 15. Snap-on's future growth prospects and enticing current valuation makes it a great candidate for your 2013 Roth IRA contribution dollars.
Stericycle (NASDAQ: SRCL ) Stericycle collects and treats regulated medical waste such as syringes and gloves. The company also provides training on medical-waste handling, manages patient communications, and offers a service to manage customer returns and recalls of pharmaceuticals or medical devices. The Illinois-based company has established itself as the market leader in medical-waste collection and disposal through its extensive collection network. The disposal of medical waste is heavily regulated. As such, hospitals and medical clinics continually outsource the handling of medical waste to experts. New regulations provide additional avenues of growth for Stericycle. The rising and aging U.S. population should also drive an increase in medical procedures and prescribed medications, which will increase the quantity of medical waste. Stericycle is well-positioned to benefit from this trend.
Over the past three years, Stericycle's revenue has averaged annual growth of 14% and earnings have also averaged 14%. The company's recent P/E ratio has been around 32, while the industry average P/E is about 46. Meanwhile, Stericycle's forward-looking P/E is 24. Be sure to consider Stericycle for your 2013 Roth IRA contribution.
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>>> Praxair Completes Purchase of Leading U.S. Packaged Gases Distributor
Praxair, Inc.
February 3, 2014
http://finance.yahoo.com/news/praxair-completes-purchase-leading-u-205900120.html
DANBURY, Conn.--(BUSINESS WIRE)--
Praxair, Inc. (PX) announced it has completed the acquisition of Praxair Distribution Mid-Atlantic, LLC (PDMA), its industrial gases distribution joint venture. Praxair previously held a majority ownership stake in the business. Terms of the agreement were not disclosed.
PDMA is the largest industrial gases distributor in the U.S. Mid-Atlantic region, operating 51 production and distribution facilities. With 2013 sales of over $225 million, the business serves approximately 39,000 customers in the healthcare, pharmaceutical, environmental, chemical, bio-technology, university research and metal fabrication industries.
“Fully integrating PDMA’s operations into our core packaged gases business will enable us to achieve further synergies,” said Scott Kaltrider, president Praxair Distribution, Inc. “This business is an attractive mix of industrial gases and welding products and supplies and has successfully been aligned with our operations over the past six years."
About Praxair
Praxair, Inc., a Fortune 250 company with 2013 sales of $12 billion, is the largest industrial gases company in North and South America and one of the largest worldwide. The company produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Praxair products, services and technologies are making our planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and many others. More information about Praxair, Inc. is available at www.praxair.com.
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>>> CLARCOR Agrees to Acquire Air Filtration Business from G.E. Power and Water
CLARCOR Inc.
November 5, 2013
http://finance.yahoo.com/news/clarcor-agrees-acquire-air-filtration-120000531.html
FRANKLIN, Tenn.--(BUSINESS WIRE)--
CLARCOR Inc. (CLC) announced that it has entered into an agreement to acquire the Air Filtration business of General Electric Company’s Power and Water division for approximately $265 million, subject to contractually agreed adjustments. With over 700 employees around the world and trailing twelve month annual revenues of approximately $230 million, the business is a leading supplier of air filtration systems and filters used in gas turbine applications, as well as industrial air filtration products and membranes. Headquartered in Overland Park, Kansas and with manufacturing operations in Missouri, the UK and China, the business will continue to supply gas turbine air inlet filtration systems and filters to GE, which has the world’s largest installed base of natural gas turbines, under a multi-year supply agreement. The transaction is expected to close by the end of 2013.
Christopher L. Conway, CLARCOR’s Chairman, President and Chief Executive Officer commented, “We are very excited about this acquisition and the multiple opportunities it offers CLARCOR. Each element of this business – gas turbine filtration, industrial air filtration, and membranes – is attractive and fits within our core strategies and competencies. This transaction creates exciting new vertical opportunities and relationships, affords us access to various new technologies, broadens our already extensive product portfolio and solidifies what we believe is our standing as the most diversified filtration company in the world.
“With this transaction, CLARCOR will become a leading designer and supplier of air inlet filtration products for natural gas turbines, a business we believe is poised for long-term growth as the world continues to shift toward natural gas as its energy source of choice. CLARCOR traditionally has had little presence in the gas turbine business, and we believe this transaction will immediately position CLARCOR as a major player in the space and provide a strong platform from which to grow, both with respect to first-fit applications as well as the aftermarket.
“The industrial air filtration piece of the business, better known as BHA – one of the industry’s most well-known and respected names – is widely recognized as having a broad offering of products as well as in-depth customer knowledge and service capabilities. For decades, BHA has been engaged in direct selling of aftermarket bag house air filters and pleated cartridges for diverse industries such as cement production, food and beverage and pharmaceuticals. This direct sales model should dovetail nicely with our TFS distribution network and allow us to better service aftermarket customers and vertical markets around the country with a significantly expanded product offering of pleated industrial air filters.
“The related membrane portion of the business not only adds attractive high-margin products to our existing product offerings, but further enhances our ability to develop performance filtration media that have potential application throughout CLARCOR. Indeed, the entire Air Filtration business comes with an abundance of patented technologies, and will approximately triple the already extensive number of patents that CLARCOR and its operating businesses hold today.
“When all is said and done, however, it is no secret that the key to any acquisition is the people on both sides and the cultural fit between organizations. It was clear to us from our first interaction with the management team and our visits to the business’ facilities in the U.S. and abroad that both of these factors are present here. We believe that management has done the right things to position the business for growth and expansion, and the workforce and culture seem closely aligned with our own. We view this acquisition as a platform for growth and one from which we can provide additional scale to our own industrial and process air businesses, and we believe that the people who will be joining us will prove themselves to be assets to CLARCOR for years to come.”
“The Air Filtration business has strengthened its operations and improved performance over the past two years to create a world-class filtration business,” said Victor Abate, President and CEO, Power Generation Products at GE Power & Water. “In the Power Generation segment, we are focused on our core gas turbine technology, and we have made the strategic decision to simplify the business to better match our core strengths. We are pleased that the transaction with CLARCOR will allow Air Filtration the opportunity to grow and thrive in the filtration industry.”
XMS Capital Partners served as exclusive financial advisor and Bass Berry & Sims PLC served as lead legal advisor to CLARCOR in connection with the transaction. Consummation of the transaction is subject to customary conditions, including the expiration or early termination of the waiting period applicable to the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
CLARCOR is based in Franklin, Tennessee, and is a diversified marketer and manufacturer of mobile, industrial and environmental filtration products and consumer and industrial packaging products sold in domestic and international markets. Common shares of the Company are traded on the New York Stock Exchange under the symbol CLC.
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Wabtec -- >>> Wabtec Acquires Longwood, A Manufacturer Of Specialty Rubber Products
Sep 24, 2013
http://finance.yahoo.com/news/wabtec-acquires-longwood-manufacturer-specialty-200700154.html
WILMERDING, Pa., Sept. 24, 2013 /PRNewswire/ -- Wabtec Corporation (WAB) has acquired Longwood Industries, Inc., a manufacturer of specialty rubber products for transportation, oil and gas, and industrial markets, with annual sales of about $70 million. Wabtec expects the transaction to be accretive in the first year.
Longwood designs and manufactures a broad line of specialty rubber products for original equipment manufacturers and aftermarket applications. The company has about 450 employees, and facilities in the U.S. and Europe, including a Research & Development Center in Texas.
Albert J. Neupaver, Wabtec's chairman and chief executive officer, said: "With its diverse end markets and technical expertise, Longwood will be a strategic complement to our existing rubber products businesses, which also serve transportation and industrial markets. We will benefit from Longwood's capabilities and market position in the oil and gas sector, and we expect to use our global presence to expand its international sales."
Longwood's products include highly specialized diaphragms and seals used in equipment such as pumps, valves and shock absorbers. The company has a particular expertise in developing and manufacturing custom solutions for bonding rubber to metal and rubber to fabric.
Wabtec Corporation is a global provider of value-added, technology-based products and services primarily for the rail and transit industry. Through its subsidiaries, the company manufactures a range of products for locomotives, freight cars and passenger transit vehicles. The company also builds new switcher and commuter locomotives, and provides aftermarket services. Wabtec has facilities located throughout the world.
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Proto Labs (PRLB) - profile -
>>> Proto Labs, Inc. produces CNC machined and injection molded plastic parts. It offers products that are made of various engineering-grade resins, such as ABS, polycarbonate, nylon, acetal, polypropylene, acrylic, PBT, HDPE, LDPE, TPE, and TPU, as well as LCP, including glass or fiber filled grades. The company was founded in 1999 and is headquartered in Maple Plain, Minnesota. It has locations in the United States, the United Kingdom, Germany, Japan, Italy, France, and Spain. <<<
Nordson - profile -
>>> Nordson Corporation engineers, manufactures, and markets products and systems for precision dispensing and processing, fluid management, testing and inspection, surface treatment, and curing. Its Adhesive Dispensing Systems segment provides equipment to apply adhesives, lotions, liquids, and fibers to disposable products; automated adhesive dispensing systems for packaged goods industries; adhesive and sealant dispensing systems to bond and seal plastics, metal, and wood products in the paper and paperboard converting industries; laminating and coating systems to manufacture continuous-roll goods in nonwovens, textile, and paper industries; and components and systems used in plastic extrusion and injection molding processes. The company?s Advanced Technology Systems segment offers automated dispensing systems for attachment, protection, and coating of fluids, and related gas plasma treatment systems for cleaning and conditioning surfaces prior to dispense; precision manual and semi-automated dispensers, plastic molded syringes, cartridges tips, and fluid connection components for applying and controlling the flow of adhesives, sealants, lubricants, and biomaterials; and bond testing and automated optical and X-ray inspection systems. It serves electronics, medical, and related industries. Its Industrial Coating Systems segment provides automated and manual dispensing systems to apply component adhesives and sealant materials; liquid paints and coatings to consumer and industrial products; and powder paints and coatings to various metal, plastic, and wood products, as well as to coat and cure containers. This segment also offers ultraviolet equipment to cure and dry operations for specialty coatings, semiconductor materials, and paints. The company markets its products in the United States and internationally through direct sales force, distributors, and sales representatives. Nordson Corporation was founded in 1935 and is headquartered in Westlake, Ohio. <<<
Valmont Industries - profile -
>>> Valmont Industries, Inc. produces and sells fabricated metal products in the United States, Australia, China, France, and internationally. It operates in four segments: Engineered Infrastructure Products, Utility Support Structures, Coatings, and Irrigation. The Engineered Infrastructure Products segment manufactures engineered metal structures and components for the lighting and traffic, wireless communication, roadway safety, and access systems applications. This segment produces steel and aluminum poles, towers, and other structures. The Utility Support Structures segment manufactures engineered steel and concrete structures for electrical transmission and distribution lines and related power distribution equipment. The Coatings segment provides galvanizing, anodizing, powder coating, and e-coating services. The Irrigation segment produces mechanical irrigation equipment and related service parts under the Valley brand for the agriculture industry. The company also manufactures forged steel grinding media for the mining industry; tubular products for industrial customers; and electrolytic manganese dioxide for disposable batteries, as well as distributes industrial fasteners. It also serves state and federal governments, contractors, utility and telecommunications companies, manufacturers of commercial lighting fixtures, and large farms, as well as the general manufacturing sectors. The company was founded in 1946 and is headquartered in Omaha, Nebraska. <<<
Donaldson -- >>> Are Purification Stocks Worth Investing In?
By Zain Abbas
April 3, 2013
http://beta.fool.com/superbanalyst/2013/04/03/are-purification-stocks-worth-investing/28617/?source=eogyholnk0000001
After reaching their 52 weeks high, the suppliers of filtration and purification technologies are not currently being recommended by the Street as well as investors. I have picked out two stocks and tried to analyze whether they still have some spice to go up or not.
Donaldson Company (NYSE: DCI)
Investment Thesis: Higher aftermarket penetration rates are likely to materialize as new technology becomes a bigger part of the installed base. Expectations have now also been reset for a slower ramp in engine OEM production.
Contrarian Idea: It is suspected that it will likely take until second half of the calendar year 2013 to see some modest improvement in OEM engine production. On the engine side, revenue declines of ~0.8% and operating margins in the ~13.8% range are expected for FY2013. However, on the positive side, the negative mix impact with higher gas turbine sales are expected to continue for the balance of the year although they should moderate slightly as incremental cost reduction actions take hold. Overall, industrial revenue is expected to be up by ~5.4% and margins are expected in the ~15.5% range in FY 2013.
Key Catalysts: A faster ramp on the engine side with better truck builds, higher aftermarket penetration and Asia improving could be a positive catalyst when the company reports earnings. Other macro data points on equipment utilization and global industrial production are also expected to produce a noticeable movement in the stock price.
Valuation: The shares of the company are currently trading at a forward multiple of 18.5 times, down from the historical average of 20x.
Pall Corporation (NYSE: PLL)
Investment Thesis: Pall’s cost restructuring is in its early innings and should help margins. Longer-term, the management will be more aggressive in using the under-levered balance sheet to drive shareowner value. Not only this, the company is coming up with newer products to keep a competitive edge. A good example can be found in the form of Gaskleen, a new purifier used for cost control and deriving benefits from economies of large scale of production of light emitting diodes. Gaskleen is expected to deliver pure ammonia which will improve the luminosity of LEDs and hence help to increase the life of purifiers. This invention was welcomed by Royal Phillips Electronics (NYSE: PHG), one of the leading manufacturers of LED based lighting and automotive lamps.
Contrarian Idea: Overall, the industrial revenue growth is expected to be down in mid-single digits in FY2013. The current destocking relates to ~1/3 of slower demand in industrial end markets. It is suspected that this process will take at least another quarter or two before production levels ramp up. 2/3's of total China sales are Industrial with the remainder Life Sciences. Food and Beverage end markets are expected to see little growth due to continued weakness in Europe.
Key Catalysts: The use of an extremely under-levered balance sheet to do accretive deals is a key catalyst for the stock. In addition, cost restructuring running ahead of plan combined with PLL’s industrial business recovering (microelectronics, process technologies) should help longer term margins.
Valuation: Pall is trading at 18.8 times FY2014 EPS, which is conservative and does not include any acquisitions. Why I say that the stock is currently cheap is because Pall historically trades closer to 21 times forward earnings.
Foolish bottom line
These filtration stocks are definitely set for some more capital appreciation given their momentum to achieve both top and bottom-line growth.
<<<
Goldfield -- >>> 5 Stocks To Watch In Power Grid Construction
December 12, 2012
by: Mike King
includes: GV, MTZ, MYRG, PIKE, PWR
http://seekingalpha.com/article/1060761-5-stocks-to-watch-in-power-grid-construction?source=yahoo
Hurricane Sandy focused the nation on the urgent problem that our outdated power grid has created. In the wake of Sandy many homeowners and businesses remained without power for weeks. The lack of electrical power also brought ground transportation to a screeching halt as many gas stations shut down due to lack of power to pump fuel which made it very difficult to obtain fuel to run a vehicle. Power grid construction companies will benefit from the added revenue that they obtain directly from fixing the damage caused by Sandy and will benefit indirectly as demand across the industry will be greatly increased and thus capacity will be strained.
While Sandy is increasing the demand in the industry, demand for power grid construction and repair was already in great demand. According to an MYR Group presentation, Electrical Power Transmission Construction Spending is anticipated to increase by 16% in 2013. Deutsche analyst Vishal Shah states that they expect a 3x increase in North American transmission spending over the next 10 years. According to Jim Cramer, 30% of our electrical infrastructure is already beyond its useful life and another 30% is approaching the end of its usefulness. Finally, according to Pike Electric Corporation, a housing recovery represents an upside.
Five stocks in the electrical grid construction business are Goldfield Corp. (GV), MasTec, Inc. (MTZ), MYR Group, Inc. (MYRG), Pike Electric Corporation (PIKE), and Quanta Services, Inc. (PWR). These companies had very good price performance in 2012 and from the looks of it are poised to perform well in 2013.
Goldfield Corp.
Goldfield is a leading provider of electrical construction and maintenance services in the energy infrastructure industry primarily in the southeastern, mid-Atlantic, and western regions of the United States. The company specializes in installing and maintaining electrical transmission lines for a wide range of electric utilities. Goldfield has been growing rapidly with revenue growth of 161% for the first 9 months of the year. Furthermore, EPS for the first nine months swung from -$0.03 in 2011 to $0.30 in 2012.
GV stated the following in the Q3'12 earnings report: "About $24.4M of the current backlog is expected to be completed in the fourth quarter of this year." That should result in the highest revenue quarter of the year and the fifth consecutive quarter of sequentially increasing revenue. However, investors are a bit skeptical as a large part of backlog is one big contract. I think that there are many reasons to be optimistic and that investors shouldn't be so skeptical. Here are the reasons for my optimism going forward:
The macro trends for the power grid industry suggest increasing revenue as identified above.
A director, Jeffrey Eberwein purchased 140,000 shares in the month of November. That is a significant sized purchase for a name of this size. Insider buying is often a sign that the stock is undervalued particularly when purchases of this size are made.
The company made a large investment of $7.9M in additional equipment in July of this year. They have steadily been investing as property, building and equipment has increased by $13.6M in the first nine months of the year to $24.1M from $10.5M. It seems highly unlikely that the company would invest this much in equipment if significant follow on orders were not expected.
The company stated the following in their Q3'12 PR: "With the strong team we have assembled, we believe we are well positioned to take advantage of future opportunities to build on our record growth." Their comment seems to indicate that they have plenty of additional growth ahead of them.
Other names in this space are expected to grow in 2013 (see commentary below).
MasTec, Inc.
MasTec, Inc., is an infrastructure construction company that engages in engineering, building, installing, maintaining, and upgrading energy, communication, and utility infrastructure in North America. While they perform services in the electrical transmission area, they also provide services in areas such as pipelines, wireless, wireline, and install-to-the-home. So, they are not a pure play in the electrical grid space. The analysts that are following them are expecting continued growth in 2013 as revenue is expected to increase from $3.70B in 2012 to $3.93B in 2013 and EPS is expected to increase from $1.50 to $1.89 from 2012 to 2013. While the growth does look good, the heavy insider selling does throw a caution flag.
MYR Group, Inc.
MYR Group Inc. operates as a specialty contractor serving the electrical infrastructure market in the United States. The company operates in two segments: Transmission and Distribution, and Commercial and Industrial. Analysts are expecting growth in 2013 as revenue is expected to increase from $1.01B to $1.07B and EPS is expected to increase from $1.57 to $1.76. MYRG does have some insider selling but they are largely sells according to rule 10b5-1 trading plans which are previously arranged and may not indicate a negative sentiment of the seller.
Pike Electric Corporation
Pike Electric Corporation is a leading provider of energy solutions to over 300 investor-owned, municipal and co-operative utilities in the United States. Their comprehensive services include facilities planning and siting, permitting, engineering, design, installation, maintenance and repair of electric and communication infrastructure, including renewable energy projects and storm-related services. Analysts are expecting fiscal 2013 revenue to increase to $901M from $685M in fiscal 2012 and EPS is expected to increase to $0.73 from $0.31. The insider transactions here are slightly bullish as there has been little insider selling despite the rise in stock price. Almost all selling was done to pay taxes on vesting of restricted stock.
Quanta Services, Inc.
Quanta Services is a leading specialized contracting services company, delivering infrastructure solutions for the electric power and natural gas and pipeline industries in North American and in certain international markets. Quanta Services is also expected to grow in 2013 as revenue is expected to increase to $6.66B from an expected $6.23B in 2012. Furthermore, EPS is expected to increase to $1.56 in 2013 from $1.36 in 2012. There is some insider selling on this name but it appears to be minor.
Conclusion
The table below shows some metrics for these five companies. As you can see from this table, GV appears to be very undervalued based upon it's tiny PE which is a mere fraction of it's peers. I believe that the skepticism shown by this PE will prove to be unfounded for the reasons identified above. Because of this low PE, I believe GV is the most undervalued in this growing field and thus is the most attractive.
Company
TTM Revenue
Backlog
Diluted EPS Last Quarter
TTM EPS
PE
Goldfield Corp.
$67.3M
$53.6M
$0.10
$0.36
5.3
MasTec, Inc.
$3.703B
$3.330B
$0.34
$0.96
24.7
MYR Group, Inc.
$0.985B
$0.491B
$0.41
$1.43
15.6
Pike Electric Corporation
$0.758B
Not Disclosed
$0.26
$0.50
19.8
Quanta Services, Inc.
$6.140B
$4.17B
$0.45
$1.29
20.9
Note: EPS numbers in the table above are GAAP whereas prior numbers for MTZ, MYRG, PIKE, and PWR may be non-GAAP.
<<<
AZZ Inc - profile -
>>> AZZ Incorporated manufactures and sells electrical equipment and components for power generation, transmission and distribution, and industrial markets primarily in the United States and Canada. It operates in two segments, Electrical and Industrial Products, and Galvanizing Services. The Electrical and Industrial Products segment produces specialty electrical products for the distribution of electrical power to and from generators, transformers, switching devices, and other electrical configurations. It also provides industrial lighting and tubular products for petro-chemical, industrial, petroleum, and food processing industries. This segment sells its products through manufacturers? representatives, distributors, agents, and internal sales force. The Galvanizing Services segment provides hot dip galvanizing to the steel fabrication industry. This segment serves fabricators or manufacturers that provide services to electrical and telecommunications, bridge and highway, petrochemical, and industrial markets, as well as original equipment manufacturers. As of February 29, 2012, this segment operated 34 hot dip-galvanizing facilities located throughout the south, Midwest, east coast, and southwest United States. AZZ incorporated was founded in 1956 and is based in Fort Worth, Texas. <<<
Goldfield -- >>> Goldfield: A 'Four-Bagger' In The Making
June 7, 2012
by: The GeoTeam |
about: GV, includes: MNTX, SMTX, TWI
http://seekingalpha.com/article/644681-goldfield-a-four-bagger-in-the-making
Thus far in 2012 we have highlighted 3 GeoBargains in Seeking Alpha articles: Manitex Intl (MNTX), SMTC Corporation (SMTX), and Titan Intl (TWI). Respectively, the maximum returns of these stocks, ensuing our commentaries and in this very uncertain and volatile period, were 98.1%, 45.7% and 51.9%, resulting in an average return of 65.2%. Please note that we removed MNTX from the GeoBargain list at $10.50 on 5/15/2012.
This brings us to Goldfield (GV). At the stock's current price near $1.60, we believe that it will easily exceed the returns of any of these companies, possibly leading to a "4 bagger", as Peter Lynch might say. Our confidence in this story is strengthened by the fact a director of GV just purchased 115 thousand shares of GV in the open market over the last few days.
Goldfield: A micro-cap stock liquid enough for institutional investors.
On 04/13/2012, we coded GV as a GeoBargain on the Radar @ $1.15.
On 5/11/2012, we coded GV as a GeoBargain @ $1.51.
Company Description: Goldfield is a leading provider of electrical construction and maintenance services in the energy infrastructure industry throughout much of the United States. The company specializes in installing and maintaining electrical transmission lines for a wide range of electric utilities.
Data As Of 6/5/2012
Price = $1.58
Fully-Taxed Trailing EPS = $0.08
GeoTeam calculated fully-taxed EPS Estimate= $0.43
P/E based on Fully-Taxed Trailing EPS = 19.75
P/E based on Fully-Taxed GeoTeam EPS Estimate= 3.7
Qualitative Reasons for Optimism
1. Renewed focus capitalizes on favorable industry trends. In recent years, Goldfield has increased its efforts to target electric utility companies. Several favorable industry trends make GV a timely growth story.
More on Less: Local governments are reducing the size of land (through imminent domain) that utility companies can occupy for the construction of utility projects.
Voltage Requirements: As the demand for more voltage at power locations increases, so to should the demand for improved technology to meet this trend.
Wind Resistance: Utilities in areas such as Florida, where the company is a large player, are being forced to build stronger utility poles.
Retrofitting: Upgrading old infrastructure to accommodate new regulatory requirements (such as reducing voltage leakage and implementing other environmentally friendly enhancements).
Cosmetic: Communities are asking utilities to construct more attractive infrastructure.
Clean Energy Push: Utility companies are being encouraged to consider the delivery of clean energy solutions.
Here are some excerpts from an article "Electric Bills About to Spike", by Laura Colarusso of the Daily Beast that echoes these favorable trends:
"...From Alaska to Georgia and Wyoming to Florida, utilities are seeking permission to pass on hundreds of millions of dollars in new charges to customers to help upgrade aging infrastructure and build new or retrofitted power plants that comply with tougher environmental regulations..."
"...The influx of requests, many still pending before state regulators, has left energy experts convinced that electricity prices will be on the rise for the foreseeable future as the industry struggles to modernize its aging infrastructure..."
"...They [utility companies] desperately need to upgrade," says Bill Richardson, the former New Mexico governor and Clinton-era energy secretary who once famously called America a superpower with a Third World power grid. "You're seeing rate hikes everywhere because this is a widespread, national problem..."
"...states have imposed new clean-energy standards that require utilities to feed in renewable sources. Older systems can't handle variable power sources such as wind and solar, and therefore require significant upgrades. Throw in pollution controls now required by federal regulations, and utilities are facing billions in upgrade costs..."
These trends, combined with an improving economy and successful efforts by utilities to pass on costs of upgrades to customers, should create a growing pipeline of projects for Goldfield to bid on. Also exciting about the trends in the electric energy industry is that the push for utilities to offer clean energy initiatives brings an added dimension of "flavor" to the Goldfield story. Another plus is that GV strategically targets geographies where the needs to upgrade infrastructure (Florida) and expedite clean energy solutions (Texas) are in full force.
2. New Near-Term Growth Cycle. Goldfield entered our radar in Late March 2012. Until recently, GV had churned out lackluster earnings and sales growth. In fact, leading up to the 2011 fourth quarter, the last 11 quarters produced a minimal profit only two times. During this period, quarterly revenue ranged from $5 to $9 million.
However, in the 2011 fourth quarter GV reported revenues of $11.4 million and was solidly profitable with EPS of $0.06 ($0.04 fully taxed). Although our due diligence led us to believe that significant growth drivers were in place for GV, we were not quite certain if the 2011 fourth quarter set a new EPS bar for the company or was just a one-time event. On May 11, 2012 GV announced 2012 first quarter earnings that easily exceeded our expectations and increased our confidence in GV's near-term prospects.
Revenues for the three months ended March 31, 2012 nearly doubled, increasing to $17.7 million from $8.9 million in the comparable prior year period.
Net income for the three months ended March 31, 2012 was $2.7 million, or $0.10 per share ($0.06 fully taxed), compared to a net loss of $11,000, or ($0.00) net loss per share, in the comparable prior year period.
Quarterly revenue of $17 million is a big deal when considering that the company's annual revenue since 2004 has ranged between $27 million and $36 million. Management comments solidify that the company may be at a growth inflection point:
"...The prospects for our electrical construction business are brighter today than at any time in recent history..."
3. Margin Expansion. Equally telling about GV's new found growth is that its gain in sales has been accompanied by healthy margins. The company's pre-tax margins have not just improved, but have skyrocketed from under 3% to 15.2% and 14.9% for the 2011 fourth quarter and 2012 first quarter, respectively. This shows that Goldfield is not chasing sales just to gain market share and also has significant operating leverage.
4. Burgeoning Backlog. Since December 31, 2011 the company's electrical construction backlog, which stood at $12.2 million (vs. $5.2 million at December 31, 2010), has grown to $70.6 million as of March 31, 2012. Much of this backlog has come from winning a contract award from the Competitive Renewable Energy Zones (CREZ) project in Texas.
"...A CREZ is a geographic area, designated by the Public Utility Commission (PUC) of Texas, where wind generation facilities will be constructed. The project will eventually transmit 18,456 megawatts (MW) of wind power from West Texas and the Panhandle to highly populated metropolitan areas of the state..."
On February 27, 2012, the Company was selected as prime contractor to build a 110 mile long 345kV transmission line, as part of a CREZ project.
Furthermore, the company stated that $55 million of the backlog will be filled in 2012, which alone implies revenue growth of at least 68%. Overall, we believe the company can generate 2012 revenue of at least $100 million up from $32.8 million in 2011. Using first quarter 2011 pre-tax margins of around 15%, the $55 million backlog alone implies an EPS contribution of $0.32 ($0.20 fully taxed) for 2012. Combining this with our conservative pre-backlog EPS assumption run rate of $0.34 ($0.23 fully taxed), which takes into account seasonality, implies that GV could achieve 2012 EPS of $0.66 ($0.43 fully taxed). Applying a P/E of 15 on our 2012 fully taxed EPS assumption yields a near-term valuation scenario of $6.45.
Although investors may assume a good deal of GV's near term growth prospects are attributable to the CREZ project, the company already has a headstart going into 2013, since the project extends through August 2013. Furthermore, as the company becomes entrenched in the CREZ project we presume it will have good opportunities to secure additional contract wins with respect to this type of project as well as other projects in Texas. Additionally, as evidenced by the 2012 first quarter results, GV's existing core business (not including the CREZ project) is growing at an accelerated clip. We expect that this will alone grow revenues by at least 30% in 2012.
5. True Diamond in the Rough: Investors who value GV on trailing EPS or the assumption this is a one contract story (CREZ) could miss a golden opportunity. The company's improving financial results have yet to reflect its backlog which means $55 million in sales is going to be packed into the next three quarters. We are looking forward to the market participants scrambling to absorb this information. GV has an advantage of being a micro-cap stock liquid enough for institutions to pile into. And with only a 1% institutional ownership (according to Yahoo.com) we think such an event is imminent. In fact, the stock traded 1.5 million shares after it announced its stellar 2012 first quarter numbers compared to recent average trading daily volume of under 200,000. How much you want to bet some of this volume was institutional capital?
Institutions may not be the only entities building a position in GV. A GV director, Jeffrey Eberwein, just purchased a total of around 115,000 shares in the open market at current prices on May 31, 2012 and June 1, 2012. What is telling about this purchase is that this director just initiated his first position in GV.
As listed in the caveats at the end of this article, although the company has a small real-estate division that could mistakenly distract investors from GV's primary growth drivers, astute investors will realize that this division contributes less than 5% of revenues to GV and is not a major focus stressed by management.
Investors may be able to profit from the GV story as this could be a classic case of the exploitation of an inefficient market place. After having exhibited several years of stagnant growth, the company is now taking advantage of its opportunity in its served markets. GV is one big contract win away from adding a new layer of confidence to its story. Finding companies with these types of abrupt changes in fortunes is where diamonds in the rough are often born.
Quantitative Criteria Check List
GV Meets 9 out of 10 of our most important requirements for growth and risk-based quantitative data.
Requirement
Comments
Recent 52-week High(generally within 3 months)
Yes
Strong EPS Growth Rate
Yes, As of 1st Qtr. 2012
*Over 30% EPS Growth Rate: Yes,
1st Qtr. 2012 EPS increased to $.10 (0.06 fully taxed) from breakeven in the 1st. Qtr. 2011.
Full year 2012 GeoTeam calculated EPS estimate implies that fully taxed EPS will grow to $0.43 from $0.02 in 2011.
*GeoPowerRanking (GPR) of 4 (Number of consecutive quarters that EPS is expected to grow at least 20 to 30%).
10% Revenue Growth
1st Qtr. 2012 revenue increased 99%.
Based just off $55 million of backlog to be filled in 2012, revenue growth for 2012 is projected to increase over 70%
GeoMinimum Operating Cash Flow and Balance Sheet Requirements
No, as of 1st Qtr. 2012
*Positive Cash Flow - Yes; $395,553
*Long Term Debt to Equity Ratio less than 20% - No; 27%
*Current Ratio is at least 2:1 - No: 1.75:1
*Days in receivables < 90 - Yes; 60 days. This is a measure of liquidity that shows if the company converts its accounts receivable to cash within 90 days, or (receivables/sales)/days in quarter
Return on Equity is at least 15%
37% run rate
Minimum Pre-tax Operating Margins of 8%
15.2% as of 1st Qtr. 2012
Preferably Under 50 Million Shares (Fully Diluted)
25.4 Million shares as of 1st Qtr. 2012
High Insider Ownership (generally greater than 15%)
23.6% (Yahoo)
Limited Institutional Ownership (generally less than 20%)
1.9% (Yahoo)
P/E Divided by Growth Rate (PEG Ratio) is Less Than 1.
0.01
GeoTeam overall subjective/confidence comfort level: Pertains to the ability of a company to achieve solid and consistent EPS growth over the next several quarters (from 1 to 10): 7
Potential Valuation Scenarios if the company can achieve its EPS growth goals
Short-Term Potential value based on fully taxed adjusted trailing EPS:
P/E 25 $0.08 = $2.00
Short-term Potential value based on 2012 GeoTeam calculated fully taxed EPS estimate:
P/E 15 $0.43 = $6.45
Please note that we are placing much more weight to a valuation scenario based on forward EPS due to GV's growing backlog.
Additional factors to consider in analysis
Effective Internal Controls: Yes
Needs to raise equity capital: Low
Caveats:
Majority of revenue in the current backlog is from one contract related to the Competitive Renewable Energy Zone (CREZ) project. If the company is not able to win other contracts from this project, or awards of similar size from different projects, maintaining the current elevated revenue stream may be challenged going into the second half of 2013. (Additional contract wins in Texas could be game a changer for GV).
We don't have full insight into the CREZ project margins but are optimistic that management will not just chase sales and market share.
The company has a small real-estate division that could mistakenly distract investors from GV's primary growth drivers. Astute investors will realize that this division contributes less than 5% of revenues to GV and is not a major focus of management.
The company's projects are fixed price in nature. This means that the company is contracted to complete work within a pre described budget. There is risk to the company if it under estimates the cost of a project.
Seasonality can influence quarterly revenue distribution:
"...Revenue and results of operations in our electrical construction business can be subject to seasonal variations. These variations are influenced by weather, customer spending patterns and system loads. The Company performs electrical construction services throughout most of the United States, but historically, these services have been performed primarily in the southeast region of the United States. Electric utility customers normally perform their system upgrades and maintenance work during off-peak seasons when the demand for electrical power is reduced, which is in the first two quarters of the year in the southeast region. This pattern is typically reflected by a reduction in the number of our active projects in the third quarter. However, since hurricane season normally peaks during the third quarter, this reduction can be offset with storm restoration work resulting from hurricane damage..."
Foot notes:
1Valuation scenarios are not intended to be investment advice, but are scenarios based on some commonly used investment guidelines. They are provided to aid investors in making their own investment decisions.
2Our analysis is based on Quantitative and Qualitative factors. Even if a company does not meet the majority of our quantitative requirements, strong qualitative factors can still influence our optimism for a given story. Furthermore, gaining alpha in a market entails finding companies before the masses do, which means that there is value added when one can identify stocks that may currently have weaker quantitative data, but will soon improve. The GeoTeam typically considers EPS Growth, Revenue Growth and PEG Ratio as the most important quantitative attributes that affect short term valuation.
3All EPS numbers, valuation scenarios, P/Es and relevant quantitative data are based on a fully taxed assumption
<<<
Goldfield -- >>> 3 Small Caps That Got Away And May Keep Running
August 1, 2012
by: Alex B. Gray
includes: GV, REED, SNAK
http://seekingalpha.com/article/768191-3-small-caps-that-got-away-and-may-keep-running?source=yahoo
With so many possible investment opportunities in the stock market, it is nearly impossible to find every winner, and even when you do find a stock that eventually moves higher, you have to pull the trigger in order to participate. As an investor, I follow many stocks, but only invest in a few. My goal is to find stocks with limited downside and a potentially rewarding upside. Unfortunately, I have to make cuts and not make the plunge in many stocks that look interesting.
One such opportunity was Goldfield Corporation (GV), which provides electrical transmission construction and maintenance services to the energy infrastructure industry. These services include the installation and maintenance of electrical transmission lines for utilities, the installation of fiber optic cable and the construction of concrete foundations, distribution systems and substations. The company also has a small subsidiary that is involved in the development of residential real estate on the east coast of Florida.
I have been following Goldfield for many years and watched this small-cap stock push near the $3.00 mark in 2006 only to collapse and trade just under $0.30 per share as recently as February of this year. Then on February 27, 2012, the company was selected as prime contractor for a 110-mile long 345kV transmission line in Texas as part of a Competitive Renewable Energy Zone project. Goldfield estimates the revenue recognized by this project will be approximately $52 million. The project is required to be completed by July 31, 2013. This helped push the company's backlog from only $12.2 million on December 31, 2012 to approximately $77.8 million on February 27, 2012. Of this backlog, the company expects to complete $55 million during 2012.
Within a week of this announcement, the stock had already doubled in price. Shortly thereafter, the company reported its annual results for 2011 which showed a $1.6 million or $0.06 per share profit in the fourth quarter, which sent the stock higher. The good news continued when the company announced a first-quarter profit of $2.7 million or $0.10 per share. The stock finally topped out earlier this month reaching a high of $2.58 before dropping to the current price of just over $2.00 per share.
Goldfield Corporation 1-Year (click to enlarge)
There is little doubt the risks are high with such a small company whose share price is being driven by a single contract, but this reversal could just be a breather before the stock reaches new heights. I initially did not make an investment in this stock due to a lack of a catalyst, but the improved earnings and the large contract should continue to support the stock in the short-term and if the company can continue to add to its backlog, this could be long-term winner. However, if the company fails to add additional large contracts to the backlog, an investor should be prepared to quickly sell and leave this one behind. I currently see Goldfield as only a short-term trade. It's only a long-term investment if additional large contracts are added to the backlog. SA contributor, The GeoTeam, wrote their case for a significant increase in the stock price on June 7, 2012 when the stock was still trading around $1.60 in Goldfield: A "Four-Bagger" In The Making.
<<<
Airgas -- >>> 5 Stocks Getting Ready to Pay Bigger Dividends
By Jonas Elmerraji
08/29/12 -
http://www.stockpickr.com/5-stocks-getting-ready-pay-bigger-dividends.html
>>> Airgas
In the most literal sense of the phrase, Airgas (ARG) pulls profits out of thin air. The firm is the country’s largest industrial gas supplier, providing customers like industrial manufacturers and hospitals with gases such as oxygen, nitrous oxide, and acetylene, in addition to complementary hard goods such as welders and eye protection.
Airgas enjoys a lucrative business with relatively low costs. Gasses are high margin consumables that are recurring in nature -- customers need to keep coming back to Airgas if they want to keep their operations running smoothly. And some of the firm’s biggest returns come from renting out gas cylinders, equipment that customers rarely want to own and maintain themselves.
The gas supply business is fragmented, with a couple national names and many small operations. That means that large clients who want to simplify suppliers are much more apt to turn to a national operator like Airgas. And since gas is relatively low cost (compared to customers’ other overhead items), the firm also has considerable pricing power.
While a growth-by-acquisition strategy means that Airgas’ balance sheet is no stranger to debt, the firm is more than capable of hiking its 40-cent dividend in the next quarter.
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