Posts Tagged ‘Boeing’

Companies Are Stocking Up on Durable Goods

Wednesday, November 30th, 2011

American companies ordered more heavy machinery, computers and other long-lasting manufactured goods in September, an encouraging sign for the shaky economy.  The increase in demand for these durable goods suggests businesses are staying with investment plans, despite slow growth and a lack of consumer confidence.

Durable goods are products expected to last a minimum of three years.  Core capital goods are products that have nothing to do with defense or aircraft.  The gains are driven by tax breaks given to businesses for investments made this year, an incentive Congress approved last December to boost the lethargic economy.

“Demand for big ticket items seems to be alive and well,” said John Ryding, an analyst at RDQ Economics.  “Outside of the volatile transportation sector, the gains in durable orders were broad based in September, and point to a manufacturing sector that continues to expand at a solid rate.”

“Despite the understandable concern about economic growth, businesses are still investing,” said Jennifer Lee, senior economist at BMO Capital Markets.

Robust demand for core capital goods is a strategic reason why economists expect an annual growth rate of 2.4 percent in the 3rd quarter.  That would be a major improvement from the first six months of the year, when the economy expanded at just 0.9 percent, the worst growth since the recession ended more than two years ago.  A 2.4 percent growth rate could ease fears that the economy is on the verge of sliding back into a recession.  Even so, the growth rate needs to nearly double to make a substantial dent in the unemployment rate, which remained stuck at 9.1 percent in September for the third consecutive month.

“Manufacturing is in pretty decent shape, and this ends the quarter on a high note,” said Brian Jones, a senior U.S. economist at Societe Generale, who accurately forecast demand for non-transportation equipment.  “We’ve got decent momentum going into the 4th quarter.”  Orders for computers and related products jumped as much as six percent.  A Commerce Department report is projected to show the world’s largest economy grew at a 2.5 percent annual pace in the 3rd quarter, an increase of the 1.3 percent rate in the previous three months.  Societe Generale’s Jones said the gain in durable goods demand has the potential to bring GDP growth for last quarter closer to three percent.

Boeing, the largest American aircraft maker, received 59 airplane orders in September, compared with 127 the preceding month.  September’s decline came on the heels of a 25 percent gain in August.  Orders for non-defense capital goods excluding aircraft jumped 17 percent at an annualized rate compared with an 11 percent increase in the previous three months, an indication that business investment is picking up.

Additional indicators show that manufacturing, which accounts for approximately 12 percent of the economy, continues to grow.  The Institute for Supply Management’s factory index rose a full point to 51.6 in September, compared with 50.6 in August.  A level greater than 50 indicates that expansion is taking place.  Industrial production advanced in September on demand for items such as cars and computers, according to the Federal Reserve.

According to Mike Shea, Managing Partner and Trader at Direct Access Partners LLC, “The number wasn’t bad, and having a decent number in durables is far better than having a bad number, since with the overhang of Europe, if we were getting lousy data here, then we wouldn’t have anything to hang our hats on.  If not for what was going on in Europe, this market would be running on all cylinders.  The summit in Europe is the tradable event.  We could have one hundred percent earnings positive surprises today, we could have great economic data come out, all of that could come in rosy domestically, but if the news out of Europe is judged to be bad, none of what happens in the U.S. will matter.  This market will not shrug off a lousy plan coming out of Europe.  It will not shrug off any plan that is not fundamentally based in reality.”

Companies Are Stocking Up on Durable Goods

Wednesday, November 2nd, 2011

American companies ordered more heavy machinery, computers and other long-lasting manufactured goods in September, an encouraging sign for the shaky economy.  The increase in demand for these durable goods suggests businesses are staying with investment plans, despite slow growth and a lack of consumer confidence.

Durable goods are products expected to last a minimum of three years.  Core capital goods are products that have nothing to do with defense or aircraft.  The gains are driven by tax breaks given to businesses for investments made this year, an incentive Congress approved last December to boost the lethargic economy.

“Demand for big ticket items seems to be alive and well,” said John Ryding, an analyst at RDQ Economics.  “Outside of the volatile transportation sector, the gains in durable orders were broad based in September, and point to a manufacturing sector that continues to expand at a solid rate.”

“Despite the understandable concern about economic growth, businesses are still investing,” said Jennifer Lee, senior economist at BMO Capital Markets.

Robust demand for core capital goods is a strategic reason why economists expect an annual growth rate of 2.4 percent in the 3rd quarter.  That would be a major improvement from the first six months of the year, when the economy expanded at just 0.9 percent, the worst growth since the recession ended more than two years ago.  A 2.4 percent growth rate could ease fears that the economy is on the verge of sliding back into a recession.  Even so, the growth rate needs to nearly double to make a substantial dent in the unemployment rate, which remained stuck at 9.1 percent in September for the third consecutive month.

“Manufacturing is in pretty decent shape, and this ends the quarter on a high note,” said Brian Jones, a senior U.S. economist at Societe Generale, who accurately forecast demand for non-transportation equipment.  “We’ve got decent momentum going into the 4th quarter.”  Orders for computers and related products jumped as much as six percent.  A Commerce Department report is projected to show the world’s largest economy grew at a 2.5 percent annual pace in the 3rd quarter, an increase of the 1.3 percent rate in the previous three months.  Societe Generale’s Jones said the gain in durable goods demand has the potential to bring GDP growth for last quarter closer to three percent.

Boeing, the largest American aircraft maker, received 59 airplane orders in September, compared with 127 the preceding month.  September’s decline came on the heels of a 25 percent gain in August.  Orders for non-defense capital goods excluding aircraft jumped 17 percent at an annualized rate compared with an 11 percent increase in the previous three months, an indication that business investment is picking up.

Additional indicators show that manufacturing, which accounts for approximately 12 percent of the economy, continues to grow.  The Institute for Supply Management’s factory index rose a full point to 51.6 in September, compared with 50.6 in August.  A level greater than 50 indicates that expansion is taking place.  Industrial production advanced in September on demand for items such as cars and computers, according to the Federal Reserve.

According to Mike Shea, Managing Partner and Trader at Direct Access Partners LLC, “The number wasn’t bad, and having a decent number in durables is far better than having a bad number, since with the overhang of Europe, if we were getting lousy data here, then we wouldn’t have anything to hang our hats on.  If not for what was going on in Europe, this market would be running on all cylinders.  The summit in Europe is the tradable event.  We could have one hundred percent earnings positive surprises today, we could have great economic data come out, all of that could come in rosy domestically, but if the news out of Europe is judged to be bad, none of what happens in the U.S. will matter.  This market will not shrug off a lousy plan coming out of Europe.  It will not shrug off any plan that is not fundamentally based in reality.”

Caterpillar, Boeing Defy the Odds With Strong Sales

Monday, August 16th, 2010

Some companies are posting 90 percent growth.  One company that is holding its own despite the shaky economy is Peoria, IL-based Caterpillar, Inc., which reported an enviable quarterly profit thanks to growth in emerging markets.  The world’s largest manufacturer of construction and mining equipment is benefiting from growing mining and energy operations with orders outpacing shipments to dealers.  Additionally, Caterpillar plans to increase production during the second half of 2010 and has hired 3,650 new employees this year — 1,250 in the United States and 2,400 overseas.

Caterpillar, which laid off 30,000 employees globally from late 2008 through 2009, is being cautious, saying it still has “significant economic concerns.”  Eli Lustgarten, an economist with Longbow Research, notes that “Construction in developed countries is not doing well, particularly in the United States.”  Caterpillar is well aware that its second-quarter profit of $707 million was derived from sales which rose 116 percent in Latin America and 62 percent in the Asia/Pacific region.

Another company that is prospering is Boeing, which has delivered 191 Next Generation 737s so far this year, including 95 in the second quarter.  Chicago-based Boeing has delivered 222 airplanes in 2010.  Demand for single aisle planes comes not only from growth markets, but also for replacing older aircraft such as the 737 Classics, A320s, and McDonnell Douglas MD-80/90s.  The demand for single-aisle airplanes remained strong even during 2009, according to Boeing.  The growth of low-cost carriers, emerging intra-China demand, and a large need for replacement airplanes will keep the demand for single-aisle airplanes strong into the future.

“The world market is doing much better than last year, but there are still challenges,” said Randy Tinseth, vice president of marketing, Boeing Commercial Airplanes.  “Looking at 2010, we see a world economy that continues to recover.  We expect the world economy to grow above the long-term trend this year.  As a result, both passenger and cargo travel will grow this year.”

Accounting Standards Designed to Increase Transparency

Thursday, October 22nd, 2009

is_accountingprinciples_440x248New accounting standards calling for property to be marked to market,  and changes in lease accounting rules will strongly impact balance sheets, income statements and the general financial outlook of American companies. Unfortunately, many corporations are not ready to deal with the changes, according to a new report from CB Richard Ellis.  The mark-to-market requirement – known as FAS 157 – became effective for financial assets November 15, 2007, and for non-financial assets such as real estate on November 15, 2008.

CBRE’s white paper – entitled “FAS Talking – Unpacking Real Estate’s Impact on Financial Statements” – notes that the estimated balance sheet impact of the lease accounting revisions will be in excess of $1 trillion.  According to the report, the combined consequences of mark-to-market and lease accounting changes might negatively impact earnings, capital requirements, debt covenant ratios, credit ratings and other yardsticks of financial health.

Todd P. Anderson, CBRE senior managing director of global corporate services, who wrote the report with Michael M. Omiya, CFO of Boeing Realty Corporation, says that the changes are “a continuation of the effort to have greater financial transparency, in particular in the financial statements of publicly traded corporations.”  According to Anderson, “In the absence of comparable sales, you have to figure out how to establish a value for your property.”  Corporations should accomplish that before the end of the year when they are on deadline to complete tax and accounting responsibilities.  “The corporate real estate department, if it understands what’s going on in the mark-to-market arena, can come in early and start to take a look at its properties and basically create an argument for why it is valuing properties the way it is,” Anderson concludes.

Corporate Then and Now

Wednesday, April 9th, 2008

I recently hosted a panel at DePaul University in Chicago on the history of corporate real estate, which highlighted the sector’s emergence from an embedded functionary to a stand-alone department with direct reporting to the CFO.  Unlike today’s more integrated version, the blueprint for corporations throughout the 60s, 70s and 80s was the holding company corporate model, featuring a small central command with a portfolio of autonomous, self-contained businesses, each of which owned the people, processes and technology needed to support it.  Examples included Boeing, GE, Honeywell, and AT&T.  They created value on the basis of the fact they could reorganize easily by selling off business units or through acquisitions.  Here, real estate was really a business-unit decision, which usually meant a complete separation of facilities.  Redundancy was intrinsic to the holding company model, representing a premium of as much as 20%-40% of operating cost.  In the 1990s, this changed when Corporate America, motivated in part by a recession, looked for ways to extract hard saves in their real estate and began outsourcing — first projects and later portfolio-wide functions.  This meant that internal real estate departments shrank and outside teams won global contracts to provide lease administration, property management, transaction management, etc.  The internal teams, meanwhile bcame consolidated across business units and oversaw the mission critical functions — namely strategy and customer relationship management, among other things.  We are still making this shift today.  The challenge for global service providers is to provide the depth of expertise that a dedicated internal team brings and to swim upstream to the strategic level so they make decisions that make sense on an enterprise level.