Capital IQ Survey Focus On Financials, Household Durables, Oil and Gas, Retail and Transport

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 says.

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 ( WMT ), and dollar stores - such as Dollar General Corp. ( DG ), Family Dollar Stores Inc. ( FDO ), and Dollar Tree Inc. ( DLTR ) - 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. ( COST ) and Sam's Club, a division of Wal-Mart ( WMT ), 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 competitive prices.

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 adds.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright (C) 2016 All rights reserved. Unauthorized reproduction is strictly prohibited.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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