BASIC INDUSTRIES
- Industrial spreads underperformed slightly at +2 on the week. Verallia (+11) gave back some of last week’s tightening; BWSA confirmed interest but the implied CoC probability priced in last week looked aggressive.
- Honeywell took its separation plans a step further and will now split into three rather than two. It sounds like it will seek similar credit outcomes for both remaining businesses and is committed to strong IG for both, but capital structure uncertainty remains. S&P moved it to watch negative following the announcement.
- Agricultural OEMs had a mixed week with AGCO (-4) helped by margins beating low expectations. CNH (+9) on the other hand missed on margins and gave weaker-than-expected guidance. Deere (+5) widened in sympathy.
- ArcelorMittalreported a solid EBITDA beat and optimistic outlook; this still looks one of the better value names in the sector.
- UPM-Kymmene reported soft results and outlook due to ongoing subdued pulp prices. Amcor was largely in-line.
- Capital goods names Emerson Electric, Illinois Tool Works and Veralto reported largely in-line results. Timken EBITDA beat, but soft guidance saw spreads underperform at +8. Johnson Controls posted a small beat and raise. Assa Abloy, KION and Vestas Wind produced beats.
- In Chemicals, results from Air Products and Linde were close to in-line with further evidence of no imminent macro recovery.
- Smiths Group was put on outlook negative by S&P in response to break up plans.
Parker-Hannifin printed a new issue 5bp through our theoretical FV, although it lacks a secondary curve.
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