The Oppenheimer analysts note in their report that not only has growth started to revive the economic engine in the United States, but companies have also seen improvement in Brazil and China, and while they still expect continued European softness (with some signs of stabilization), they expect modest, but a broad-based North American expansion led by oil and gas, aerospace and residential markets.

Given widespread multiple expansion in the industrial companies the analysts cover, they look for the best combination of:

1. A case for structural margin traction and growth
2. Remaining relative multiple headroom, expanding current price to earnings higher
3. Relative visibility of organic opportunity and the ability to grow a company’s business

Using those three areas as a guideline, they have searched for stocks that may have significant earnings growth as the U.S. economy expands in the second half of 2013. Here are the industrial stocks that fit that criteria.

Diversified industrial powerhouse Honeywell International Inc. (NYSE: HON) leads off the Oppenheimer list. The analysts also note very large (and order-driven) capacity expansion at the specialty materials division, which bodes well for the next couple of years. They expect second half earnings growth of 11%. The Thomson/First Call consensus price target for the stock is $77.

Based in Ireland, Eaton Corp. PLC (NYSE: ETN) makes the list. A strong infrastructure play, Eaton operates as a diversified power management company worldwide, and it has expected earnings growth of 28% in the second half. The Wall St. price target is $68.

Nordson Corp. (NASDAQ: NDSN), with multiple divisions to drive growth, engineers, manufactures and markets products and systems for precision dispensing and processing, fluid management, testing and inspection, surface treatment and curing. Oppenheimer expects earnings growth of 17% in the second half of 2013. The Wall St. consensus price target is $74.

Hitting new highs, electrical product maker WESCO International Inc. (NYSE: WCC) is poised for second-half earnings growth of a staggering 40%, if the analysts at Oppenheimer are correct. The consensus price target for the Pittsburgh-based industrial leader is $79.50.

Based in Switzerland, Pentair Ltd. (NYSE: PNR) looks poised for strong growth. Providing multiple solutions for water and fluids management, it is expected to grow earnings 39% in the second part of this year. The consensus price target for the stock is $57.

Regal Beloit Corp. (NYSE: RBC) manufactures and sells electric motors and controls, electric generators and mechanical motion control products in the United States, Asia and internationally. Its growing business is expected to drive 18% second-half earnings growth. The consensus price target for the stock is $83.50.

The team at Oppenheimer makes it clear in their research that there can always be extenuating circumstances that change or alter earnings growth. The most important thing to remember is that economic growth, both here in the United States and in growing countries around the world, will drive earnings growth for these solid industrial names.

The Challenger Job Cut Report came in at 55,356 for February, versus a prior cut of 40,430. This is not expected to alter the Labor Department report on Friday. The weekly jobless claims report from the Labor Department came in at 340,000, versus estimates from Bloomberg of 355,000. As the range of estimates was 335,000 to 362,000, we expect no change on the Friday report for February nonfarm payrolls and unemployment.

Today’s report on international trade, AKA the trade deficit, showed a wider deficit at -$44.4 billion for the month of January, versus a prior report of -$38.1 billion and a Bloomberg consensus of -$43.0 billion. This is not enough of a change to alter many numbers and will not have any impact on Friday’s employment report.

A key report on worker productivity and unit labor costs was released, but investors need to know that this was a report for the fourth quarter of 2012. That gives no bearing on the Friday employment report, as that is a February reading. Nonfarm productivity was down by 1.9%, versus a Bloomberg estimate of -1.6%. Unit labor costs were up by 4.4%, but that was under the 4.6% estimate from Bloomberg.

As a final reminder, the unemployment rate is expected to slip 0.1% to 7.8%. Bloomberg has expectations for nonfarm payrolls gains of 171,000 and private sector payrolls of 195,000 for the month of February. That key data will come at 8:30 a.m. EST on Friday, but we would caution that it is a week later than normal due to a calendar issue from February.

Bloomberg had a consensus estimate of -2.2% on the headline reading from its pool of economists, with a range of -4.5% to a gain of 0.5%. Dow Jones was calling for a headline consensus of -2.3% for January factory orders. The December report initially was shown to be up by 1.8%, so the drop was expected.

What is interesting is that the coming spending sequestration was not as much of a very negative issue in January compared with the fiscal cliff resolution that happened in the final hours of December. Still, as we saw with durable goods, there had been some serious channel stuffing in November and December based on the expectation that spending may slow.

Today’s report was delayed a couple of minutes from the usual 10:00 a.m. EST posting time. We do not expect this report to have much of an impact, even at the DJIA hitting new highs. The DJIA is up 50 points at 14,304 and the S&P 500 is up 3.50 at 1,543.29.

Expansion has been the trend over the past several months. The sudden reversal could have several causes. The first among these is that estimates of China’s economic activity are notoriously inaccurate because of the quality of the data. The second is that global demand may have slowed due to Europe, Japan and the “uneven” U.S. recovery.

The Wall Street Journal reports:

“The Chinese economy is still on track for a gradual recovery,” HSBC economist Qu Hongbin said in a statement. He noted that the February reading still marks the fourth straight month that the index has been above the boom-bust line at 50, showing that manufacturing still grew in February, just at a slower pace than in January.

“The slower pace of manufacturing expansion partly reflects the impact of a week-long Chinese New Year holiday and partly the continued softness of external demand,” Mr. Qu said.

The comments on each are as follows:

• Waste Management Inc. (NYSE: WM) “Raising target price based on a 7.5x multiple on our normalized EBITDA estimate of $3.6 billion. Our 7.5x multiple is a slight discount to what the sector trades in a normalized environment given choppy execution. raised target to $38 from $35.”
• Republic Services (NYSE: RSG) “Raising TP based on an 8x multiple on our normalized EBITDA estimate of $2.6 billion; raising target to $38 from $34.”
• JB Hunt Transport Services (NASDAQ: JBHT) “reported 4Q12 EPS of $0.70. The company noted that it intends to focus on developing the LTL mode. That should put further pressure on revenue per load, but LTL freight carries higher margins. Our O.R. forecast in this division was largely unchanged.”
• Oshkosh Corporation (NYSE: OSK) “reported F1Q13 EPS of $0.60 (vs cons $0.31) and management raised its 2013 EPS to $2.80-$3.05. While expectations were low for Oshkosh going into the print, execution was solid, driving increased confidence in the company’s ability to hit its longer-term 2015 EPS targets.”
• Teekay Corporation (NYSE: TK) “remains well positioned to expand into both the LNG and Offshore Energy sectors. While Teekay has had its hands full with the construction of the FPSO Knarr nearing completion (early 2014) and the repair/upgrade of the FPSO Banff (restarting in Q4 2013) we expect Teekay to return to making project investments in the next few quarters.”

24/7 Wall St. has looked at many figures to generate an idea of what things cost for the Super Bowl. We tracked the ticket prices for a physical seat at the game, the price of a TV commercial, the many millions of viewers, chicken wing and pizza consumption, beer consumption and more. We also have shown some basic figures for New Orleans on a local level to see what sort of expectations will be there for hotel rooms, restaurants and sports bars, energy use and so on. Another issue is the team economics, with team salaries and pay for the big game.

Raw Dollars for the Big Game

The lowest priced ticket on the Ticketmaster website was $2,387, and the highest priced ticket was $13,120. Those were per-ticket prices as of 2:00 p.m. EST on Tuesday, Jan. 22, 2013. Stubhub listed tickets starting at $2,119 per ticket. A check on the Ticketmaster site on Thursday, January 24, showed that the cheap tickets were now “only” $2,188 per seat. Regular football game seating at the Superdome accommodates roughly 69,700. Even just at the base price, and averaging the two lowest ticket prices as the norm, this comes to $2,253 for an average entry-level ticket. If all 69,700 seats averaged this, the tally comes to just over $157 million.

What about the Super Bowl 2013 TV commercials? Superbowl-ads.com shows that Super Bowl TV ads are selling for up to $3.8 million on average for the 30-second spots, but CBS reportedly is already sold out for the most part, and some ads sold for more than $4 million for 30-second spots. That average is up by $300,000 from the $3.5 million published rate for the 2012 Super Bowl, but we caution that the figure may change before the final game day. Advertisers were listed as follows: Anheuser-Busch, AXE, Best Buy, Cars.com, Century 21, Coca-Cola, Doritos, Fiat, Ford/Lincoln, GoDaddy.com, Hyundai, Kia, Kraft’s MiO, Mars, Mercedes-Benz, Milk Processor Education Program, Paramount, PepsiCo, Skechers, SodaStream, Taco Bell, Tide — Proctor & Gamble, Toyota, Volkswagen and Wonderful Pistachios. A more recent look shows some 31 advertisers, but some ads are longer and some are multiple ads. If we just take 35 ads, this comes to roughly $133 million spent by advertisers at the $3.8 million average. And again, some television ads supposedly sold for more than $4 million.

The Nielsen Company showed that the broadcast of Super Bowl XLVI on NBC had an average audience of 111.3 million viewers and was said to be the most-watched television program of all time. The game was viewed in roughly 53.3 million households, with a 47.8 U.S. household rating.

Food and Beer Trends

According to the National Chicken Council, Americans will eat some 1.23 billion chicken wings over Super Bowl weekend. This is projected to be down about 1% from a year ago, but the drop is due to prices impacting production rather than demand. Wholesale wings are currently at about $2.11 a pound (in the Northeast), the highest on record at the U.S. Department of Agriculture, up 26 cents or 14% from a year earlier. The group cites Nielsen showing that fresh and prepared wings totaled $1.6 billion in sales for the 52 weeks ending Nov. 24, 2012, but its graph shows that wings are at record sales by more than 2:1, with almost 16 million chicken wings sold during Super Bowl 46 in 2012.

What about pizza? Super Bowl is the busiest day of the year for pizza sales, and figures from 2012 showed an expected 4 million pizzas being sold by restaurants alone. That is not counting the frozen pizzas from grocery stores nor the diehards who make their own pizzas from scratch. Statistic Brain said that Pizza Hut sold 2 million pizzas during the Super Bowl in 2012. Domino’s does not readily break out sales, but it shows that Super Bowl Sunday is the busiest of its top five pizza days, and that Domino’s delivery drivers will log about 4 million miles on Super Bowl Sunday. A report from Nation’s Restaurant News in 2012 showed that it is about 11 million slices, or 1.4 million whole pizzas.

Saveonbrew.com had an infographic for the 2013 Super Bowl showing the following: 50 million cases of beer will be consumed, resulting in more than 2 billion gallons of water used to flush away that much beer consumed, with roughly 7 million people calling in sick after the Super Bowl.

City Stats: San Francisco, Baltimore, New Orleans

The U.S. Census issued a report using the 2011 American Community Survey. Those living in San Francisco, ostensibly 49ers fans, had a median household income of $69,894 with a median home value of $719,800. Baltimore residents, ostensibly Ravens fans, had a median income of $38,721 and the median home value was $154,400.

These compare to national averages of $50,502 in median income and a median of $173,600 for owner-occupied homes. The averages in New Orleans are $35,041 in median household income and $185,400 in median home value of owner-occupied homes.

Local Stats for New Orleans

Super Bowl 47 will be the 10th Super Bowl held in the Big Easy, but this is the first time since Hurricane Katrina. The city’s “Katrina Mayor,” Ray Nagin, has been charged with 21 felony counts, including bribery, wire fraud, conspiracy and filing false income tax returns. His arraignment was moved back from immediately before the Super Bowl weekend to February 20.

The Greater New Orleans Hotel & Lodging Association (NOHLA) reported that tourism officials project some 125,000 to 150,000 people will be in town for Super Bowl weekend, with 75,000 at the game and the rest in to be around the happenings. The association also said that it counts some 33,000 hotel rooms in the area, although we have seen larger figures than this in prior articles. A search on Hotels.com revealed as recently as Tuesday, Jan. 22, that the closest hotel not sold out had only one room left — in Chalmette, at $350 per night! An additional 214 hotels are listed as being NOT AVAILABLE from Feb. 2 to Feb. 4. The NOHLA said that the rooms have an average daily rate starting at $500 per night for three-star properties and $700 per night for four-star and five-star properties.

The New Orleans Metropolitan Convention and Visitors Bureau was quoted as saying that the Super Bowl will generate $300 million to $400 million in direct spending. The New Orleans Tourism Marketing Corporation said that the Super Bowl is expected to have a $432 million economic impact on the city. The Superdome has undergone $336 million in renovations since Katrina, followed closely by $300 million in improvements to Louis Armstrong International Airport.

Energy usage at the Superdome and at supporting facilities was listed as roughly 4,600 MW of electricity. The generation of this electricity will result in approximately 3.8 million pounds of CO2 emissions. Entergy Corp. said that it will donate carbon credits to offset or neutralize the impact of these emissions.

The NOHLA showed that round-trip airplane tickets from Baltimore were averaging about $800, and about $1,100 from San Francisco. Smaller boutique-style hotels that usually go for $300 to $500 a night during Mardi Gras are as high as $800 during the Super Bowl. Rooms at some major hotels are up to $2,000 a night.

Player and Finance Factoids

With the head coaches both being Harbaugh brothers, this is a first. The nicknames for Super Bowl 47 are already coming on strong: the Bros. Bowl, the Harbowl and the SuperBaugh.

The salaries for each team in 2012, according to Spotrac.com, include base salary, signing bonuses and other bonuses. This also includes active contracts, dead money, injured reserve and a cap rollover. The rounded cap figure for each team was listed as $130.9 million for the Ravens and $124.4 million for the 49ers. In 2012, the pay per player for the Super Bowl was a record $88,000 on the winning team and a record $44,000 of the losing team. That figure for a winning game is expected to rise to $92,000 next year and to reach $130,000 in the year 2020.

ESPN’s NFL site shows that the Ravens regular season offensive stats were 352.5 yards per game, versus 361.8 yards per game for the 49ers. The Ravens led in passing at 233.7 yards per game, versus 206.1 yards per game for the 49ers. The 49ers led in rushing yards at 155.7 yards per game, versus 118.8 yards for the Ravens. Defense is where the stats are wider: the Ravens allowed 350.9 yards per game, versus 294.4 yards per game for the 49ers.

According to EuroStat:

In November 2012 compared with October 2012, seasonally adjusted industrial production fell by 0.3% in both the euro area (EA17) and the EU272. In October production decreased by 1.0% and 0.8% respectively.

In November 2012 compared with November 2011, industrial production dropped by 3.7% in the euro area and by 3.3% in the EU27.

Spain, with its unemployment rate at about 25%, was among those countries that took the worst of it:

Among the Member States for which data are available, industrial production fell in fourteen and rose in seven. The largest decreases were registered in Slovenia (-4.0%), Portugal (-3.4%) and Spain (-2.5%), and the highest increases in Estonia (+4.7%), Latvia and the Netherlands (both +1.0%).

Under the terms of the agreement, EnergySolutions may solicit superior bids until February 6. No expected closing date was given for the transaction, which must receive regulatory approval in the United States and the United Kingdom and approval from the company’s current shareholders.

Predecessor companies to EnergySolutions have operated a low-level radioactive waste facility in the desert west of Salt Lake City since 1990. The company also owns another disposal facility in South Carolina. Virtually every nuclear power plant in the U.S. and the U.K. uses EnergySolutions directly or indirectly.

Shares are up 9.6% in early trading, at $3.77 in a 52-week range of $1.43 to $5.43.

Data collected 5–14 December.
• Final Eurozone Manufacturing PMI at 46.1 in
December (flash estimate 46.3)
• Downturn remains widespread, with all nations
bar Ireland reporting contractions
• Cost caution leads to job losses and further
scaling back of inventory holdings

Some of the details looked worse, particularly those that cover purchasing manager’s activity for December among the region’s countries:

Ireland 51.4 4-month low
Netherlands 49.6 3-month high
Austria 48.1 2-month low
Italy 46.7 9-month high
Germany 46.0 2-month low
France 44.6 4-month high
Spain 44.6 2-month low
Greece 41.4 2-month low

The Greece and Spain number should be expected. Much more troubling is the slowdown in Europe’s two largest economies by gross domestic product — France and Germany.

Chris Williamson, Chief Economist at Markit said:

The eurozone manufacturing sector remained
entrenched in a steep downturn at the end of the
year. Although not as severe as in the autumn, the
survey indicates that production continued to fall at
a quarterly rate of approximately 1% in December,
therefore acting as a severe drag on the wider
economy. The region’s recession therefore looks
likely to have deepened, possibly quite significantly,
in the final quarter.

Manufacturers look to be in for another tough year
in 2013, though prospects have brightened a little,
as producers should benefit from signs of stronger
demand in key export markets such as the US and
China. Improving competitiveness remains the key
to success, however, and Ireland perhaps provides
a reassuring example to other countries of how
exports can rise on the back of structural reforms.

Much of course also depends on how the region’s
debt crisis evolves over coming months, and any
set-backs could mean the resulting damage to
domestic business and consumer confidence could
easily offset any gains made in export markets
outside of the eurozone.

Douglas A. McIntyre

Matthew Shay, the president and CEO of the National Retail Federation, recently wrote to several members of Congress and the Obama Administration:

We cannot afford further supply chain disruptions as we enter 2013. The two sides must remain at the negotiating table until a deal is reached. We fully believe the two sides can reach an agreement that will ensure the continued competitiveness of these ports for the foreseeable future.

At this point, however, we believe that a strike will only be averted through immediate intervention by the administration. Allowing a strike to occur for even one day could have a negative impact on all of those downstream businesses and employees who rely on the ports. The U.S. economy cannot afford to wait for a strike to occur before we see administration action. We urge you to get engaged now with these parties to ensure a strike does not occur.

Douglas A. McIntyre