Lowering estimates on pre-2Q channel checks; reiterating ratings
Channel checks highlight a tough 2Q; minor estimate cuts
2Q channel checks have not yet given us evidence of a sustained global recovery in fixed investment. We note three key trends across the sector since March (which have also been highlighted by ABB’s and Schneider’s CEOs recently):
(1) Further slowdown in growth in China as receivable and inventory levels continue to rise and distributors face financing issues (e.g., Assa Abloy, Schneider, Siemens, ABB have all highlighted this and a few noted that receivable days for some distributors have almost tripled vs. pre-crisis years).
(2) A temporary slowdown in growth in the US due to a combination of slower capex growth in O&G and tougher comps in 2014 (ABB, Schneider, Assa Abloy). And
(3) no material signs of a change in trends in Europe, except in small pockets within construction and telecoms
(Prysmian, Nexans, Assa Abloy).