Bloomberg's Ubelhart on GE, Honeywell, Industrials Space(Audio)

are among the biggest contributors to today's climb. Microsoft and Biogen adding to their strongest weekly increases since at least March. SMP five hundred index is up now by eight points to seventy three, a gain of four tenths of one percent.

We are brought to you by Sector Spider ETFs. Why by a single stock when you can invest in the entire sector of visits sector sp d r S dot Com recall sector et F down Industrial is up thirty five, a gain of two tenths of one percent, as Stack up twenty six to fifty one, a gain of five tenths one percent. Gold down seven fifty three, a drop of sixtenths of one percent. I'm Charlie Tell and that's a Bloomberg business flash. You're listening to taking stock with

bim box at Kathleen Hayes on Bloomberg Radio. Shares of General Electric are down about one point nine percent. General Electric selling fewer locomotives and less oil field equipment. Global uncertainty taking its toll on the demand for big ticket industrial products. Here to tell us more about the results

of these industrial companies is Karen Ebilhart. Karen is our industrials analyst for Bloomberg Intelligence, providing unique and real time research and context in a variety of industries as well as market and government factors that affect businesses are terminal. Customers can access this function by just typing b I go on the Bloomberg Karen, thank you very much for spending time, and then tell me about GE. Boy, this says it's not the same GE that it was tech

hated go by any means. What's going on at GE. I think they're having the same problem that everybody is having at this point in industrial land is that they had a negative another tough quarter in terms of organic growth. It was down one percent, as it was in the first quarter. The confusion and g E is that the company maintained an organic growth rate of two to four percent, and first half they're down one percent. Where is the

growth going to come from? And most of the end markets that they participate and we are not looking at, you know, and even a modest growth environment for a lot of a lot of the equipment. So there's skepticism around why didn't you just lower your organic growth rate? But they didn't because they said that they the best estimate is this is from Jeff Bornstein, the chief financial officer. He said, the best estimate is as you describe, the second half will be better than the first half. But

that still reflects a world that's pretty difficult. Uh. Their way, everything weighs on their power business. They there big turbines. They're going to be shipping six of them in the second half. Basically, that's what he that that they said is going to drive a bounce in organic growth, which, by the way, they need over five percent to make their full year number. They've got a ship an awful

lot of turbines to make up that number. Oil and gas comparisons might be a little bit easier as well, but we're talking big declines in oil and gas as well. I think it's going to be a stretch alright, Well, oil and gas is not something you necessarily think about with General Electric except for let's say the last maybe

three to four years. Correct. Yeah, they acquired into They always had a turbine business, some of which went into energy, but then they acquired into a number of businesses to get more involved in the uh, in the production end of it as well. And those orders are down thirty five percent and sales are down, uh, you know, over

twenty percent. And they have long lead time stuff, so they didn't see it as early as some of the oil service type guys now, but now they're starting to see double digit revenue declines and margins are cut in half, and we're not done with that decline. Um. There is some good news. The airspace business is doing okay, the health care business is doing okay. Um, but the big ugly equipment is uh, you know, is really going to be stretched and and the global economy isn't gonna give

them any help. Turn your attention now, tell us what's going on with Honeywell? Uh, Honeywell, I think was down today because you know, they've been a company that can just beat on you know, slightly better organic growth and than other companies and always get it in margin. Well, they had a disappointing organic growth uh UM quarter as well, and they lowered their organic growth number to barely growth

from one to two to one percent. And they're starting to you can start to see in my opinion, that they're starting to push on a string they had just don't have enough volume either. They and and uh they are one that has beat consistently. Now, they did raise the lower end of their their number, their estimate because they beat by a couple of cents. But I think they're teetering a little bit here too, and they've squeezed

a lot out on the margin side. They probably have some more, but I think we're getting to latter stages of that. They all need a little bit of top line to really get the story going. And both of them have been good stocks. So that's the problem with with the S and P up two percent, industrials up eight they were both up fifteen, and you've got to deliver if you're if you you're that out ahead of everybody else. Well, as you say, honey, honeywell, the shares

down about two and a half percent today. Year to date, they're up about eleven and a half percent Honeywell, uh, and it's disparate businesses. Will they be better separated into different units? Well, you know, they just announced that they are going to split one of their businesses into two units. It actually was two units and they folded it together. Now that yeah. I mean the theory of these companies is that diversity does UM lower your volatility, and in

fact that's true. I mean look at them compared to Caterpillar, right, I mean Caterpillars in single deep cyclical businesses. UM. I think the portfolio, you know, can fit under the you know, definition of a multi industrial UM. But they do. They have identified businesses they're going to grow faster, and they're going to do a lot of M and A and that. So the composition of the company may may change, you know, airspace maybe a little bit less because they're growing in

other businesses. UM. I think the picture fits UM in a in a company that wants to be have smoother, you know, sales and earning streams. So well, I'm looking at the sales increase at Honeywell, what you're talking really about is the acquisitions that were made by that automation and control solutions unit, right, yeah, yeah, that that really that that really helped and um, and they're gonna do they clearly said today. You know, they're still not done.

They've got eight billion dollars if they keep to buy more. Um that's before cash, if they keep the current leverage that they have. But they can you know, they can leverage a little bit more too. So they're going to keep using acquisitions I think to help them a little bit. But Elster and some of the safety products, uh, those

are going to be good businesses for them going ahead. UM. I don't think they're bad businesses with big margin opportunity like you have at Awesome because they bought decent businesses. But they've got probably a little bit of growth profile and uh, you know, I think they can help off it's uh, you know some of the slowdown and more and more the mature markets. Well, I'm glad you mentioned Awesome and that's the ge Engineering purchase. Can you give

us any details about how that's working out. That's actually on the synergy basis, they're actually a little bit ahead. They're about break even this year. They expect to get a nickel and earnings. UM, They're they're doing a little better on the on the cost side. You really can't see it yet, but they they actually um uh you know, did a little bit made a little bit of money net with the cost savings this quarter. I think they were expected to still lose in the second quarter and

then do better in the second half. There's a lot to fix there, and is a good operator. I think I think they'll pull that off. Plus, just you know, they have thirty cent of their sales are parts and service gees. It's that's a margin opportunity just by putting all some product through the ge parts service business, which is a great business. So that's almost something they don't even have to fix that. They just have to you know,

sell more parts. Uh. And then of course there's a lot to do internally to improve it because we know it was not a particularly well run company. Um. And it does fit, you know, it does feel an itch fill a product toll for them in that business. So I actually like the deal and I think over time it will pay off. I just want to uh note that you know, when we were talking about Honeywell that the split is the home and building technology business and

the safety and productivity solutions business. The description that you're offering for g E as well as Honeywell, can that be applied to all of these big industrial companies around the world. I means everyone's suffering the same thing. Yes, the only the one exception I would say is companies that have a little bit more consumer exposure doing a little bit better. Uh I. T W is about sixty of sales tied to Yes, yes, like food, equipment, auto

Believe it or not. Their auto aftermarket business is growing very nicely, so they're insulated a little bit from some of these heavy, deep, you know, capital goods type businesses everybody else I mean, and they're organic. Growth isn't terrific. It's just a little better. But this global economy isn't that.

We're not getting any help anywhere. The one area industrials, in industrials that was okay is the North American construction business, and now that's starting to show signs of getting tired. The growth rate there is slowing as well. United Technology is suffering the same issues. Yes, yes, um, they've got a big you know, they've got a big construction business as well with Carrier and their Odus elevator business, although

that's hurt more by China than anything. But it's really hard to get excited about most of these industrial and markets. So if you can't get excited about them, do you think that the Federal Reserve is also watching the performance of these companies in order to gauge perhaps interest rate policy. I you know, they're certainly a factor. They're all on the FED. You know the Fed. You know committees that

they I know, honeywell they talked to regularly. Um. But the consumer seems to be doing a little bit better, and you know, they're actually a bigger part of the economy. So I think as long as the consumer looks like he's getting incrementally better, they'll be a little there. It won't be quite as worried about the industrial danna Her Eaten also falling into the same category. I know, we're going to get the results from danna Her next week.

Dan Her has changed their profile so significantly by getting rid of those industrial businesses that they have a big medical healthcare component. They have some industrial businesses, but again they're growthier like digital printing, things like that, so they're kind of a different story. They should they should grow, um,

you know, better than these traditional Maltese. Eaten has had a problem with the organic growth there got a huge electrical exposure, and they have a truck exposure which isn't in and of itself that big, but it's down. So a deep cyclical like that can hurt when nothing else is able to offset it. So yeah, I think we're gonna have the same problem there. I want to thank you very much. It's not great news, but I want

to thank you for illuminating nothing less. Karen yubile Heart is Industrial's analyst for Bloomberg Intelligence, giving us details on General Electric, Honeywell, and the industrial sector. Of course, Bloomberg Intelligence provides real time research and context on a variety of industries. Terminal customers can access this function at b I go. This is Bloomberg