ProShares Debuts -3x Long Term Treasury ETF (TTT) – ETF News And Commentary
With over $23 billion of assets under management, ProShares is one of the leading providers of leveraged and inverse ETFs. Presently, they are managing 132 funds in total and their current lineup consists of products across asset classes including equity, fixed income and even funds targeting volatility benchmarks (see Use VIX ETPs to Profit From Market Volatility). The company looks to expand its reach in the bond space, making another addition to their inverse offering in the long term Treasury bond space with the ProShares UltraPro Short 20+ Year Treasury ETF (TTT).
Given the launch and great popularity of the company’s UltraShort 20+ Year Treasury ETF (TBT) the launch can be viewed as a strategic move from ProShares in order to strengthen their already dominant position in the geared ETF space. Additionally, it could be coming at a great time since bonds are at record highs and many are forecasting a crash in Treasury bonds at some point in the near future (see Forget About Low Rates With These Three Bond ETFs).
In fact, yields are at pretty low levels with current rates around 3.27%, with yearly highs coming in at about 4.45%. However, going forward it is believed that the yields have significant potential to increase in the near future, leading to a fall in the benchmark index possibly resulting in good performance of funds in the space.
Geared Investing
Geared funds are also known as leveraged and inverse funds. With an increasing appetite for risk among the investors, these products have gained tremendous popularity over the recent years given their high risk high reward characteristics.
Traditionally leveraged funds provide -1x, 2x or 3x the exposure of the benchmark performance. For example, if the benchmark rises by 1%, the ETF will rise by 2% and vice-versa, for a fund that provides 2x the exposure. On the other hand an inverse leveraged ETF bets against the positive movement of the underlying index, usually over a single day.
In the case of inverse products, the opposite is true, although time periods are usually one day as well. So in this case, if the benchmark falls by 1%, the fund gains 2%, however, if the index rises by 1%, the fund would lose 2% for an inverse leveraged fund that provides -2x the exposure (see UBS Launches Monthly Leveraged Real Estate Securities ETN (RWXL)).
TTT in focus
The newly launched TTT is an inverse bond ETF that seeks to provide -3x the exposure of the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index, before adjustments for fees and expenses of the fund. The index tracks the performance of U.S Treasury bonds with maturities greater than or equal to 20 years.
The fund short sells the bonds in order to provide -3x the exposure. However, the fund may buy derivatives and swaps instead of shorting the debt securities. Like most of its counterparts in the geared ETF space, TTT is quite pricey as it charges investors 95 basis points a year in fees and expenses.
The fund employs daily rebalancing techniques as measured from one NAV calculation to the next, which gives rise to compounding of daily returns. This leads to a difference between the ‘standard’ -3x the returns of the benchmark (as specified by the fund) and the actual daily returns of the fund.
This phenomenon works really well during a consistent downtrend, (see Is The Bear Market For Bond ETFs Finally Here?) where the actual compounded positive returns of the fund, exceeds the standard -3x the compounded negative returns of the index. Or during a consistent uptrend, where the actual compounded negative returns of the fund is less than the standard -3x the compounded positive returns of the index, leading to a win-win situation for the investor during both market trends. However, during periods of high volatility, this phenomenon can hurt the investor leading to larger losses than what some investors might initially expect.
The fund typically targets bonds at the longer end of the yield curve (i.e. 20 years and above) which are more sensitive to the changes in interest rates. Since yields and prices of bonds move in opposite directions, a slight increase in the yields may result in a significant decrease in the prices of bonds and a slight decrease in yields will result in a significant increase in its prices. Technically speaking, long term debt securities have greater duration and convexity leading to higher volatility than their short term counterparts.
Competition
ProShares as a fund family is the market leaders when it comes to the inverse and ETF space. The new product launch is just another small offering in its already large base of geared exchange traded products. However, talking of individual funds, the newly launched fund may face severe competition from certain experienced funds in this space:
PowerShares 3x Short 25+ Year Treasury Bond ETN (SBND)
Launched in July 2010, the inverse leveraged fund tracks, before fees and expenses, the price and yield performance of the Deutsche Bank Short U.S. Treasury Bond Futures Index and gives exposure of 300% of the short performance of the Ultra T. Bond Futures. The index short sells Ultra T-Bond Futures, which are the future contracts of U.S Treasury Bonds that do not mature until at least 25 years from now.
The index has AUM of $ 23.4 million and currently has an expense ratio of 0.95%. This fund being an ETN will incur no tracking error and will track the index perfectly since it will not buy or sell securities in the benchmark (see ETFs vs. ETNs: What’s The Difference?). However, the fund has experienced dismal performance returning -60.75% in the past one year period.
Direxion Daily 20 Year Plus Treasury Bear 3x Shares (TMV)
This fund seeks investment results of 3x the inverse performance of the NYSE 20 Year Plus Treasury Bond Index by creating short positions in various derivative securities that provides leveraged and unleveraged positions in the index. The benchmark tracks the performance of the long term U.S Treasury Bonds having maturity of 20 years or more.
The AUM of the fund is $367.8 million and it has an expense ratio of 95 basis points. The fund has experienced significant negative returns of 64.38% in the past one year, thanks to its leveraged position and the oscillating market of long term Treasury bonds.
ProShares UltraShort 20+ Year Treasury (TBT)
This fund was launched by ProShares in mid 2008 and was ProShares’ second inverse ETF offering in the long term Treasury bond space. Compared to the newly launched fund, TBT significantly reduces volatility as it provides -2x the daily performance of the same index instead of -300%.
However, this fund is also exposed to compounding risk as it employs daily rebalancing techniques. Nevertheless, the fund is extremely popular and has seen a whopping $ 3.79 billion worth of inflow in its asset base and an average daily volume of 9.27 million shares. Due to its -2x exposure, the fund has performed relatively better than the above two funds, returning -47% in the past one year.
Given these above numbers, it is prudent to note that TTT may see a significant amount of inflows in its asset base in the near future. The new ETF also enjoys the high brand quality that comes with being a part of the market leader in the inverse and leveraged ETF space. However, these products fall under the “high risk, high reward” category of financial instruments and investing in them involves daily portfolio tracking and thus is not suitable for all investors.
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Don’t Just Sit There, Go Ahead and Do Nothing!
Research indicates that for most investors, tuning out the noise and sticking to their portfolio plan may be their best path to success.
These days, it’s not simply Homer Simpson that is uttering the famous TV catchphrase, “d’oh!” Some shaken investors who ran for the door in late 2008 and early 2009 are feeling stunned and bewildered at the markets dramatic recovery. As of March 9, 2009, three short years ago, the DOW sank to a shocking 6,547. Today, the DOW has boldly marched past the 13,000 mark, well above the pre-crash 11,543 close of August 2008. Investors who simply tuned out the drama and did little more than follow through with their portfolio plan consisting of low-cost diversification and disciplined rebalancing, are now rejoicing. Could such a simple approach be a key to good portfolio management?
The Roller Coaster from Hell
When it comes to roller coasters, even the youngest children know they should remain buckled in their seat until the ride deposits them safely back on terra firma. Unfortunately, for investors, the stock market allows a panicked rider to hit the eject button midcourse in spite of the risk of being thrown headlong to an ignominious demise.
According to research by Drs. Joy and Layton Smith, professors of Finance at Coggin College, this is exactly what many investors in fact did. Gripped by fear from both the market collapse of 2009 and the Flash Crash of 2010, a majority of investors abandoned their portfolio plan in a “flight to quality”. The roller coaster drama of watching a life of hard work and disciplined savings be hewn in half in a few short and horrific months was, for most, too much to bear.
Like an ultimate fighter suffering an unbearable chokehold, investors “tapped out” in a “flight to quality” – selling their stocks in favor of treasury bonds. Investors no longer cared that bond yields produced less than the annual inflation rate. They wanted off the crazy train and were in desperate need of security.
The Power of a Plan
In the late nineteen-sixties, Walter Michel, a Stanford professor of psychology performed the now historic Bing studies more commonly known as the marshmallow test. In this study, researches sat four year-old children at a table in a private room, marshmallow temptingly placed in front of them on a solitary plate. The kids where further told that the instructor must leave the room but would be back shortly. If they wanted, they could eat the marshmallow at any time, but if they waited for the instructor’s return, they would receive a second marshmallow as a reward.
On average, children lasted about three minutes before caving into desire and consuming the treat. However, thirty percent of the children lasted the entire fifteen-minute wait, receiving the reward of a double portion.
It is no surprise that after tracking of these children into adult life, those with the ability to delay gratification had greater success across many areas of life. One of the remarkable insights of the Bing studies, however, was in how children successfully in delaying gratification – something us shot delayers need help with. The high delayers approached the stress of the marshmallow temptation quite different from the majority – via something researchers called strategic allocation of attention. Instead of sitting there and getting obsessed with the marshmallow or “hot stimulus”, the children distracted themselves with other activities, like playing hide-and-seek underneath the desk, singing songs or moving about the room. Their desire wasn’t defeated – it was intentionally ignored via a distraction plan.
A simple analysis of the past three years demonstrates how this same skill worked for some investors. Take for instance a simple $1M portfolio of 50% stocks via the SPDR S&P 500 ETF, SPY, and 50% bonds via the Vanguard Total Bond Market ETF, BND. If an investor had simply made those purchases on August 1 of 2008, turned off every news source and spent the last three years gardening or playing with the grandkids, as of March 9, 2012 that investor’s account would be a robust $1,213,140 with a return of 21.32%. Not too shabby a three-year return for the worst market in modern history.
Now what happens if that same investor added the basic discipline of rebalancing according to the pre-established portfolio plan? The MarketRiders analytics engine reveals that such an investor would have been alerted to rebalance eight times over those three years. The results of the rebalancing are that the investor enjoyed account growth to $1,260,598, or a return of 26.07% – a 4.75% outperformance to the unbalanced equivalent.
Founder of the Vanguard Group and white hat, John Bogle, wrote, “Stay the course. No matter what happens, stick to your program. I’ve said ‘stay the course’ a thousand times, and I meant it every time. It is the most important single piece of investment wisdom I can give to you.”
As much as investors believe that they can anticipate the downturns and time the market, research repeatedly debunks this myth. This three-year anniversary of the downturn has once again illustrated that bailing out of even the simplest of portfolio plans is an easy way to torpedo your investment program. Yes, this turbulent journey sure felt hopeless at times, but steadfast investors understood the dictum – this too shall pass. Like the kids with the marshmallows, staying focused on the plan helped such investors resist the temptation to react, and in the end, they move a little closer to their reward of a double portion.
Johnson Control Forms JV in India – Analyst Blog
Johnson Controls Inc. (JCI) formed a 50:50 joint venture with India-based automotive instrument cluster supplier Pricol Limited that will develop and manufacture instrument clusters, displays and body electronics for both car and motorcycle industry in India. The joint venture, Johnson Controls Pricol Private Limited, has chosen Pricol’s manufacturing plant in Pune as its base.
The joint venture will help Johnson enter a new market segment by gaining access to Pricol’s instrument cluster offerings and customer base for motorcycle manufacturers. On the other hand, Pricol will be able to strengthen its market position in India by taking advantage of Johnson’s cutting-edge product development technology and global customer relationships.
Johnson Controls is a Wisconsin-based supplier of automotive interiors, batteries, and other control equipment. The company functions through three segments: Automotive Experience, Building Efficiency and Power Solutions. Its main competitors include Magna International Inc. (MGA).
Johnson expects to grow through meaningful acquisitions and its long-term focus on emerging markets, including China. Recently, the company announced that it will acquire 49% stake in Karat Guc Sistemleri Sanayi & Ticaret AS, a Turkey-based distributor of car-batteries. Karat sells batteries including Varta and Energizer brands, both owned by Johnson.
The company also raised the prices of lead-acid batteries by 8% in the U.S. and Canada in order to support increased investments for meeting environmental, health and safety standards. The new price will be applied for orders starting on May 1, 2012.
The Zacks #3 Rank (Hold) company posted a 9% increase in profit to $410 million or 60 cents per share in the first quarter of its fiscal 2012 from $375 million or 55 cents per share in the same quarter of prior fiscal year. However, the profits were lower than the Zacks Consensus Estimate by 2 cents per share.
The higher profits were attributable to higher earnings in the company’s Power Solutions and Automotive Experience segments. Net sales in the quarter rose 9% to $10.4 billion, which was slightly lower than the Zacks Consensus Estimate of $10.5 billion.
Johnson Controls lowered its earnings guidance for the second quarter and the fiscal year 2012 due to decline in automotive production in Europe, weak demand for aftermarket battery due to weather-related factors, indefinite shut down of Shanghai, China battery plant and lower demand for residential Heating, Ventilation and Air-Conditioning (HVAC).
The company anticipates earnings in the second quarter of fiscal 2012 to be 52 cents–54 cents. For the fiscal year, the company lowered its earnings guidance to $2.70–$2.85 compared with the earlier guidance of $2.85–$3.00.
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Neutral on United Therapeutics – Analyst Blog
We recently reiterated our Neutral recommendation on United Therapeutics (UTHR). United Therapeutics is focused on the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases.
The company's lead product is Remodulin (treprostinil), indicated for the treatment of pulmonary arterial hypertension (PAH) in patients with New York Heart Association (NYHA) Class II-IV symptoms. Remodulin is approved for both subcutaneous (SC) and intravenous (IV) use.
The company received approval for an inhaled version of treprostinil, which is being marketed under the trade name Tyvaso. In May 2009, United Therapeutics received US Food and Drug Administration (FDA) approval to market Adcirca (tadalafil) for the treatment of PAH. The company licensed certain exclusive rights to tadalafil from Eli Lilly (LLY) in November 2008.
We believe United Therapeutics is well-positioned to gain share in the PAH market. Lead product, Remodulin, continues to look very strong in both the intravenous and subcutaneous forms. With the approval of Adcirca and Tyvaso, the company has a varied range of therapies available for the treatment of PAH. We believe United Therapeutics’ PAH product portfolio will drive top-and bottom-line growth.
The company is working on strengthening its PAH franchise further through the FDA approval of an oral version of treprostinil. United Therapeutics filed for approval of oral treprostinil in late December 2011 with a response from the FDA expected by October 27, 2012. However, given the mixed data on the candidate, our expectations for oral treprostinil gaining approval in 2012 are low.
We are concerned about the company’s dependence on Remodulin for revenues. Remodulin, which accounted for 57.9% of total sales in 2011, is currently facing a generic challenge from Sandoz, Novartis’ (NVS) generics unit. The company needs to develop products that could help make up for the loss of revenues in the event of genericization of Remodulin.
Although United Therapeutics has several candidates in its pipeline, these products are still in too early stages of development to get excited about. We were disappointed to hear that the company has suspended its plans to commence phase III studies with its most advanced pipeline candidate, beraprost-MR, in December 2011.
With beraprost-MR failing to meet its primary and secondary endpoints in a phase II study, United Therapeutics is now working on designing new trials and dosing regimens for the candidate. Given the early stage nature of the rest of the pipeline, we do not see any near-term pipeline catalysts that could drive the stock.
Given the lack of significant near-term catalysts, we expect the stock to remain range bound in the coming months and remain Neutral on the stock. United Therapeutics carries a Zacks #3 Rank (short-term Hold rating).
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Yet Another Defense Deal for Harris – Analyst Blog
Communication technology company Harris Corp. (HRS) recently received a contract worth $15.2 million from the Department of Defense in Australia. Per the contract, Harris will deliver Falcon III AN/PRC-152(C) multiband multimode radios in different military vehicles.
Moreover, the company will also provide training and support to the Australian military force to properly deploy as well as maintain these tactical radios in the vehicles.
In the beginning of fiscal 2012, Harris received a massive deal worth $235 million from the Australian Department of Defense to upgrade the tactical radio programme of their military service.
Presently, Harris is expressing more interest in expanding its international presence by supplying its technology to emerging economies like Brazil, Russia, India, and China as well as Latin American, Asia-Pacific, and Africa regions. Currently, the company has a sustainable and diversified product pipeline with a potential market size of $15 billion.
As a leading government electronics supplier, Harris is benefiting from strong international market conditions. In fact, the emerging economies like Brazil, Russia, India and China together with Latin American, Asia-Pacific and African regions paved the way for the company’s growth over the long term. Harris has a sustainable and diversified product pipeline with a potential market size of $15 billion.
In the earlier quarter, Harris generated new orders worth $183 million in the Tactical Radio Communications business. The company ended the second quarter of fiscal 2012 with a total order backlog of $581 million. For the ongoing quarter, the company has already generated orders more than $400 million in the Tactical Radio Communications segment, including the massive deal signed with the Australian Department of Defense.
Despite consistently winning new contracts and huge order back log the company remains exposed to stiff competition from companies like Boeing Co. (BA), General Dynamics Corp. (GD) and Raytheon Co. (RTN), which also provide high-end public safety communication systems.
Currently, Harris Corporation has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
Harris Corporation, based in Melbourne, Florida, remains one of the leader in the public safety and professional communication market and boasts products ranging from industry leading multi-band, multi-mode radios, public safety-grade broadband voice, video and data solutions.
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Neutral on People’s United – Analyst Blog
We are reiterating our Neutral recommendation on People's United Financial Inc. (PBCT). The recommendation is based on the company’s detailed analysis of fourth-quarter 2011 earnings and its expense savings initiatives.
In January, People's United reported fourth-quarter 2011 operating earnings per share of 17 cents, missing the Zacks Consensus Estimate by 2 cents. Moreover, earnings lagged the prior quarter’s figure by 2 cents. Quarterly results were impacted by a lower top line coupled with a downtrend in credit quality driven by economic weakness. However, lower non-interest expenses reflected better expense management.
People’s United is highly emphasizing on its cost reduction efforts in order to increase the recurring operating income. During the fourth quarter 2011, People’s United rightsized its employee base after the completion of 4 acquisitions in 2010 and the Danvers transaction in July 2011. This action is expected to result in compensation savings of $13 million in 2012.
Consolidation of about 15 branches during 2012 is also expected, resulting in $4 million of operating expense savings. We expect such measures to help improve the company’s bottom line in the upcoming quarters.
Despite an asset sensitive balance sheet, People’s United Bank continues to pose a modest capital position, with capital ratios exceeding each of the regulatory requirements. Its tangible capital ratio and total risk-based capital ratio were 11.1% and 14.0%, respectively, as of December 31, 2011, far exceeding the regulatory minimum requirements of 1.5% and 8%, respectively.
However, thenet interest margin has been impacted by the historically low interest rate environment and the company’s continued investment of a portion of its excess capital in relatively low-yielding short-term investments. However, the company successfully recorded an improvement in its net interest margin in 2010 as well as in 2011, primarily due to the benefits from the acquisitions completed over the past two years, an increase in investment income and lower deposit costs.
Yet, given the sluggish market recovery, we expect significant disruption and volatility caused in the financial markets to challenge margins in the foreseeable future. Moreover, regulatory issues remain a concern.
People's United currently retains its Zacks #3 Rank, which translates to a short-term Hold rating. However, one of its peers -- Hudson City Bancorp Inc. (HCBK) retains a Zacks #5 Rank, which implies a short-term Strong Sell rating.
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Sears to Sell Lands’ End – Analyst Blog
In a move to enhance liquidity and improve operating performance, Sears Holdings Corporation (SHLD), a cash strapped company, is likely to sell its Lands’ End brand, The Wall Street Journal reported.
The Journal stated that Sears Holdings, who is already in talks with various private-equity firms, is looking to raise about $2 billion in cash from this sale. Goldman Sachs is likely to assist the company on the sale. Further, the company is looking to structure a sale-and-license-back deal, through which Sears will hold the license to sale Lands’ End products.
The company has long been grappling with weak top-line performances and even weaker bottom-line results. What’s more frustrating for the company is the deteriorating margins, followed by the rising inventory and debt levels.
The company registered a loss of $4.52 per share in fiscal 2011 compared with earnings of $1.97 in fiscal 2010, primarily due to lower revenue and decreased margins. Revenue during the fiscal year decreased between $1,097 million and $41,567 million compared with $42,664 million in the previous fiscal. The decline in revenue not only reflects lower comparable store sales at the company’s each and every segment but also reduced Kmart and Sears full-line stores in operation during the fiscal year.
Initiatives Taken
The company, in its streak to optimize its financial performance, recently announced string of measures to enhance its growth prospects by dipping investment in sections of the company that no longer contributes significantly to its growth.
Prior to it, management’s cost-cutting measures for enhancing profits was of no use and were largely criticized, as improving the merchandise mix as well as customer service would have been a better option.
Further, the retail giant is planning to pull down shutters on 100 to 120 Kmart and Sears full-line stores in near future to trim down costs and produce cash. The company expects to produce $140 to $170 million of cash from store closures through inventory clearance.
Moreover, Sears intends to sale or sublease the real estate related to these stores and optimally allocate space based on category performances.
Apart from this, the company will focus on cost containment, inventory management, and merchandise initiatives to improve margins through leverage on buying and occupancy expenses.
About Land’s End
Acquired in 2002 for a sum of $1.86 billion, Lands’ End is a brand of Sears Holdings, offering traditional casual clothing for men, women and kids along with items for home and soft luggage through its 290 ‘store within a store’ concept. However, the brand offers its products mainly through catalog and website channel, landsend.com.
Wrapping Up
Sears with its strategic measures expect to curtail its inventory by $500 to $580 million and abridge its borrowings by $300 to $350 million in 2012.
Moreover, the company expects to capitalize on opportunities and mitigate risks while increasing profitability through its revamped organizational structure and new operating model.
Sears Holdings, which competes with Wal-Mart Stores Inc. (WMT) and Target Corporation (TGT), currently retains a long-term Underperform recommendation. Besides, the company has a Zacks #3 Rank, implying a short-term Hold rating.
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Home Depot Plans E-commerce Center – Analyst Blog
Fortunes of home improvement companies are correlated to the health of the economy. Thus, there remains no surprise that the companies operating in this sector are striving to add diverse revenue streams to hedge against economic cycles.
Building on the strategy, home improvement chain store Home Depot Inc. (HD) is planning to come up with a 1-million-square-foot e-commerce distribution center in McDonough, Georgia, Business Journal reported.
Moreover, the new distribution center is expected to generate about 300 jobs in the region.
Why E-commerce?
The technological advancement in marketing, including e-commerce and online business, provides a win-win situation for both the retailers and shoppers. This situation enables the companies to generate additional sales while broadening the company’s existing customer base globally. Moreover, it also enhances the visibility and reputation of the retailer as a global firm offering great fashion and value at the same time.
On the other side, shoppers get the benefit of purchasing researched products at the best prices, as they can compare the prices with various companies.
Home Depot is a leading player in the highly-fragmented home improvement industry. The company has reinvigorated itself with a shift in focus from new square footage growth to maximization of productivity through its existing store base.
In addition, the company has implemented significant changes to its store operations to make them simpler and more customer friendly. We believe these initiatives will induce more customer traffic to its stores, while boosting its top line.
Home improvement retailing business is highly competitive and the company faces stiff competition from Lowe’s Companies Inc. (LOW) and other home supply retailers on attributes such as location, price and quality of merchandise, in-stock consistency, merchandise assortments and customer service. This might weigh upon the company’s results.
Currently, Home Depot has a Zacks #2 Rank, implying a short-term Buy rating. Also, we retain our long-term Neutral recommendation on the stock.
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Neutral on 3M Company – Analyst Blog
We are reaffirming our Neutral recommendation on 3M Company (MMM). The company achieved top-line and bottom-line growth during the quarter, outperforming the Zacks Consensus Estimate by $0.04.
The company’s sales increased in four out of its six business segments. Lower sales of optical systems and consumer electronics affected sales of the Display & Graphics and the Electro & Communication segments. Weak economic conditions continue to prevail in certain markets, with recovery not expected before the second quarter of the year.
3M’s sales growth in Asia-Pacific was affected in the quarter. However, quick benefits are expected after these markets revive.
The 3M brand is recognized around the world. Household names like Nexcare™, Post-it®, Scotch®, Scotch-Brite®, and Scotchgard™ are market leaders. The company remains focused on inventing new products, with its scientists and innovators enjoying an important competitive advantage worldwide.
3M Company continues to deliver sustainable increases in sales, earnings and free cash flow, benefiting from its long-term strategy of accelerating investment in higher growth programs. The company’s ability to convert high R&D spend into upcycle market share gains, pricing power, and margin determines its success.
Solid acquisitions, like Winterthur and Alpha Beta, by the company are also impressive. Free cash flow for the quarter was strong at $1.2 billion, up $116 million year over year. The company converted 128% of net income to free cash flow during the quarter.
However, the company’s growth objectives are largely dependent on timing and market acceptances of its new product offerings, including its ability to continually renew its pipeline of new offerings and bring those to market at acceptable price points.
Further, the company faces tremendous local competitive pressure, whether it is in Brazil, China, India or Indonesia. 3M believes that to survive in the competitive environment, it will have to locally develop, manufacture, hire, purchase and lead. While doing so, it will face insurmountable issues.
3M Company currently holds a Zacks Rank #3 which implies a short term Hold rating on the stock.
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OTIS Awarded Six Contracts – Analyst Blog
Otis Elevator Company Saudi Arabia Ltd., part of Otis Elevator Company, (a unit of United Technologies Corp - UTX), announced that it has won six contracts to supply and install 263 elevators, which include 10 double-deck elevators and 90 escalators to different buildings in the King Abdullah Financial District (KAFD) in Riyadh, Saudi Arabia.
Otis is expected to install 25 elevators and eight escalators in the KAFD World Trade Centre and 30 elevators and four escalators in the GCC Bank Headquarters.
Otis double-deck elevators at both the KAFD World Trade Centre and GCC Bank Headquarters will help save space, thereby freeing up space for renting. Typically, depending on the building, double-deck elevators save up to 40% more space than traditional elevators. These double deck elevators also increase transportation capacity by up to 30%. In addition, Otis double-deck elevators also enable building developers to create taller structures with a more limited ground-level footprint.
The installation at the KAFD World Trade Centre is expected to be complete by the end of fiscal 2012.
In addition, Otis products have also been selected by other global trade and financial centers, including the Shanghai World Financial Center in China and both the World Trade Center Transportation Hub and 7 World Trade Center in lower Manhattan.
Otis is the world’s largest elevator and escalator manufacturing, installation and service company. Otis designs, manufactures, sells and installs a wide range of passenger and freight elevators for low-, medium- and high-speed applications, as well as a broad line of escalators and moving walkways.
In addition to new equipment, Otis provides modernization products to upgrade elevators and escalators as well as maintenance and repair services for both its products and those of other manufacturers. Otis serves customers in the commercial and residential property industries around the world. Otis sells directly to the end customer and through sales representatives and distributors.
During fiscal 2011, revenue generated by Otis' international operations was 83% of the total Otis segment sales. Further, Otis had a backlog worth $14.3 billion and the company expects to realize approximately $8.0 billion from the order backlog in fiscal 2012.
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