The S&P Capital IQ equity research team has published its
semiannual survey on the current business climate across U.S.
industries. Highlights follow:
Banking: Capital IQ says there are several risks to its
generally positive outlook. It notes bank share prices have
skyrocketed in anticipation of higher revenues, profitability, and
returns of capital. According to Capital IQ another Washington
standoff on the debt ceiling and budget could lead to uncertainty,
and could hurt economic growth. It says risks include worsening
employment trends and factory output. Capital IQ says a further
slowdown of China's economy could hurt global asset prices. A
resumption of the Eurozone crisis could affect liquidity, interest
rates, and credit quality.
Insurance: Capital IQ says the property and casualty insurance
industry has emerged from the credit crisis and the Great Recession
relatively unscathed, both financially and from a regulatory
standpoint, especially when compared with other financial
institutions. In addition, following several years of heavy storm
and catastrophe losses in 2011-12, industry premium rates have
started to firm, it notes. An economic recovery in the U.S. (even a
modest one) should help the demand curve for insurance, it
Household Durables: Capital IQ says U.S. appliance manufacturers
are gaining sales traction in many of the key developing markets
overseas. Among the emerging markets, major growth will come from
Latin America (particularly Brazil), followed by China and India.
Although China and India have billions of residents, many of whom
are entering the middle class as those economies grow, there are
some concerns regarding the strong presence of domestic players
within these countries, it says.
Oil and Gas, Equipment and Services: Capital IQ notes that 10
years ago, hydraulic fracturing was a blip on the U.S. land rig
count. Today, it says, it is ubiquitous and the most often used
process for land drilling, not only of natural gas wells (where the
phenomenon began), but also for crude oil extraction. If fracking
proponents can address critic concerns, the technology could win
huge worldwide support. New versions of fracking technology seem to
be doing just that, it says.
Oil and Gas, Production and Marketing: Capital IQ says scarcity
of global oil and gas resources, rising demand, tight supplies,
geopolitical factors, and the increasingly competitive dynamics
between international oil companies and national oil companies have
all driven the increase in unconventional oil and gas production.
North America, with its abundance of undeveloped shale and tight
gas reserves, has been at the forefront of this developing trend.
Now, the industry has begun a fundamental shift toward finding and
developing unconventional oil prospects, it says.
Supermarkets and Drug Stores: Capital IQ says despite near-term
benefits from lower gas and food prices, and improved confidence
from the wealth effect, retail food and drug operators faced
increased competition from nontraditional formats including
supercenter operators such as Wal-Mart Stores (
), and dollar stores - such as Dollar General Corp. (
), Family Dollar Stores Inc. (
), and Dollar Tree Inc. (
) - as they continued to gain market share in 2012 and into 2013 by
targeting low-income households with low-priced offerings and
through the implementation of new store expansion strategies.
Meanwhile, Capital IQ says, warehouse clubs including Costco
Wholesale Corp. (
) and Sam's Club, a division of Wal-Mart (
), and specialty store operators Whole Foods Market Inc. (WFMI) and
The Fresh Market, took market share by targeting higher-income
households through a focus on higher quality offerings at
Transportation and Commercial: Contending with rising operating
expenses, like driver wages, fuel, and insurance premiums, trucking
companies are trying to raise rates, according to Capital IQ.
However, given an environment where end demand is soft with a high
degree of uncertainty, shippers are resisting these price
increases, it says. Railroads have accelerated the buildout of
special intermodal facilities, allowing for storage and an
efficient handoff with trucking companies of intermodal freight, it
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