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Equity Research

13 February 2019

CORE

Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with

companies covered in its research reports. As a result, investors should be aware that the

firm may have a conflict of interest that could affect the objectivity of this report. Investors

should consider this report as only a single factor in making their investment decision.

PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 88.

Restricted

- Internal

U.S. Multi-Industry

Catalysts and Questions for

Management Teams Ahead of Q1

Conference Season

Ahead of industrial conferences and investor meetings in the weeks ahead, we

provide in this report a list of questions that we think are worth asking the various

US Multi-Industry management teams, as well as links to recent salient reports. Our

question list inside excludes near-term demand questions, as we assume those are

asked anyway in all meetings.

Broad topics that we are looking forward to hearing more color on: (i) There seemed

to be a sudden (and perhaps short-lived) dip in pockets of short-cycle industrial

demand late in Q4 – how much are we rebounding off this in Q1, if at all? (ii) Is the

bifurcation in EMEA between weak macro data and strong industrial organic sales

growth persisting (see our note ‘Learnings from Earnings 5; EMEA Resilience; February

3, 2019’ for more details)? (iii) Are the stimulus efforts in China large enough to drive a

recovery in industrial orders so far in Q1?

Stocks that we think could offer interesting updates by Q1 earnings include: (i) GE –

Catalysts include the Wabtec deal close, 10-K filing, LT Care teach-in, possible news on

Power restructuring, and more details on FY19 guidance; (ii) SWK – Confidence around

the price / commodity cost outlook and easing of tariff tensions could help this beaten-

down name continue to rebound; (iii) Related to point 1 above, how is it possible (given

its broad end-market mix) that PH is one of the only industrial companies in the

Western hemisphere that seems on the edge of an industrial downturn (see ‘Learnings

from Earnings 4: Parker skirts (perhaps) an Industrial Recession; January 31, 2019’).

Positioning: Based on our conversations and meetings with investors over the last

month, sentiment has been fairly volatile toward individual names; investors appeared

least favorably disposed toward FTV, ROK and MMM, and most positive toward HON

and IR. We receive the most incoming interest in GE. Among SMID caps, interest is

highest at GDI and ALLE; the latter and LII remain the two names where short-term

sentiment is most negative.

Q4 Sector Trends: Q4 organic sales growth accelerated for ~40% of the group (relative

to Q3), with overall organic sales growth reaching ~6%, but gross margins have

declined for ~55% of companies. ~80% of the sector beat our EPS estimates compared

to 90%+ in the 9M18. Organic sales growth accelerated (to ~12% in Q4 from ~9% in

Q3) for Long Cycle industrial businesses, decelerated for Short Cycle Industrial (to ~4%

in Q4 from ~7% in Q3), and accelerated slightly for Short Cycle Consumer (to 3% in Q4

from 2% in Q3). Organic sales growth in Non-Japan Asia / Latin America decelerated by

~5% / ~2% from Q3, and Americas / EMEA saw a pick-up of ~2% / 0.5%, respectively.

We show inside the list of upcoming catalysts and investor days.

INDUSTRY UPDATE

U.S. Multi-Industry

NEUTRAL

Unchanged

U.S. Multi-Industry

Julian Mitchell

+1 212 526 1661

julian.mitchell@barclays.com

BCI, US

Lee Sandquist

+ 1 212 526 3717

lee.sandquist@barclays.com

BCI, US

Jason Makishi

+1 212 526 5335

jason.makishi@barclays.com

BCI, US

Barclays | U.S. Multi-Industry 
13 February 2019  2 
CONTENTS 
UPCOMING 2019 EVENTS / CATALYSTS ................................................... 4 
SECTOR PERFORMANCE: HOW HAVE THE COMPANIES / STOCKS 
PERFORMED QTD? ........................................................................................... 5 
ALLEGION ............................................................................................................ 6 
COLFAX ................................................................................................................ 9 
DANAHER .......................................................................................................... 11 
DOVER ................................................................................................................ 15 
EMERSON ELECTRIC ....................................................................................... 18 
EATON ................................................................................................................ 21 
FORTIVE ............................................................................................................. 25 
GATES INDUSTRIAL ........................................................................................ 28 
GARDNER DENVER ......................................................................................... 30 
GENERAL ELECTRIC ........................................................................................ 33 
HD SUPPLY ........................................................................................................ 38 
HONEYWELL ..................................................................................................... 40 
INGERSOLL-RAND........................................................................................... 45 
JOHNSON CONTROLS .................................................................................... 48 
KENNAMETAL .................................................................................................. 50 
LENNOX ............................................................................................................. 53 
MMM .................................................................................................................. 56 
NVENT ................................................................................................................ 60 
PARKER HANNIFIN .......................................................................................... 63 
PENTAIR ............................................................................................................. 66 
REGAL BELOIT .................................................................................................. 68 
REXNORD .......................................................................................................... 70 
ROCKWELL AUTOMATION ........................................................................... 72 