Matter of Fact – 28th June 2015

matteroffactheader

June 28th 2015 Edition

 

1. US Housing – Positive trends continue

2. Data dive into US Vehicle body and trailer manufacturers

 

1. US Housing – Positive trends continue 

QMG Data has been quite positive on the residential construction and overall housing space (think other construction, DIY retailers etc) for quite some time and the most recent data points coming out from the US continue to reflect this trend.

We recently received existing home sales figures and these have come in at a solid 5.1% (up 5.35m units from 5.09m in April). This beat the estimates of only 5.26m units expected in the same period.

Our data shows that our latest sales growth figures which were on an upward trend have most recently start to come off at 25% from 32% in April.

Chart 1 – Sales Growth (YoY) – US Residential Construction 

Sales Resi

 

This is being driven by a drop off in volumes and continual (albeit) slow decline in pricing.

Chart 2 – Price, Cost, Volumes – US Residential Construction

PCV resi

 

In fact, volumes in April were the highest in terms of growth since we started tracking residential construction data at the end of 2006.

Chart 3 – Volumes – US Residential Construction

Vols resi

 

So whilst some analysts can get quite euphoric on these highs the next few months will show whether or not the ceiling has been reached.

In analysing things further the short term trend for Sales shows slight downward inflection.

Chart 4 – Sales – US Residential Construction – short term trend (since 2013)

sales trend

 

Long term though the sales trend is inflecting upwards however.

 

Chart 5 – Sales – US Residential Construction – short term trend (since 2009)

sales trend long

 

2. Data dive into US Vehicle body and trailer manufacturers

This sector has returned quite positive data over the last few months and we’ll show you why.

Firstly, pricing is continually on the way up since 2013.

Chart 6 – Pricing – US Manufacturers of Vehicle bodies and trailers

342 price short

 

In addition, volumes are pushing back up to the 3 year highs seen in January this year and the combined effect is evidence of pricing power in existence.

Chart 6 – Volume – US Manufacturers of Vehicle bodies and trailers

 

 

342 vol short

 

 

The above leads to strong sales observed for this group in our May data and a continued rise since the negative Sales growth seen in 2013.

Chart 8 – Sales – US Manufacturers of Vehicle bodies and trailers

342 sales short

 

Furthermore, cost management is another key factor to our decision to highlight this group because as this has improved and signals further margin expansion.

Chart 9 – Cost – US Manufacturers of Vehicle bodies and trailers

342 cost short

 

All 3 earnings drivers (Price, Cost, Volume) are heading in the right direction but lets look at this in further historical context.

Despite the recent positivity, the sector is not seeing anything near its long term 5 year highs for sales growth (82% growth occurred in June 2011). It is however trending further upwards and all the signs are there to signal that this group has turned around from its decline.

Chart 10 – Sales – US Manufacturers of Vehicle bodies and trailers – long term

us342 sales long

The sector is one that we highlight and recommend watching. Listed equities that fall into this group include, Winnebago (WGO US), Apogee (APOG US), Navistar (NAV US) and Drew (DW US).

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