WisBusiness: 3rd Quarter Earnings Strong for State’s Manufacturers

By Brian E. Clark

Wisconsin’s equipment manufacturing sector is performing well – as indicated by third quarter earnings reports – and should lead Wisconsin’s economy in 2006, economists said recently.

“It’s not so much sales to consumers as it is sales of equipment to other businesses that is driving this – and Wisconsin’s economy is disproportionately based on the machinery industry,” said Don Nichols, a professor of economics and public affairs at UW-Madison.

“Businesses are starting to buy again and there is a solid increase in capital spending and that is good for Wisconsin,” said Nichols, who is also the director of the LaFollette School of Public Affairs.

He said 2006 should be a good year for the state overall. He also predicted a spending increase for medical instruments because the health care industry will continue to grow.

David Ward, president of NorthStar Economics, said he, too, sees strength in the manufacturing sector, as well as in financial services and utilities.

“Manufacturing stock prices are up because analysts are expecting positive performances next year,” he said.

Ward said Bucyrus International, a mining equipment manufacturer; Manitowoc Co, which ships huge cranes all over the globe; and Oshkosh Truck, the state’s largest defense contractor all have had good years that should continue into 2006.

Earlier this month, South Milwaukee-based Bucyrus reported that its sales rose 41 percent, to $157.4 million, in the third quarter. After-market sales climbed 30 percent and new equipment sales were up almost 80 percent. Net income was $12.8 million, or 63 cents a share compared to a loss of $1 million or 6 cents a share for the same quarter last year.

For Oshkosh Truck, which also makes emergency and snow removal equipment, overall sales for the first three quarters of fiscal 2005 topped $2 billion, near the total sales for all of fiscal 2004, the company reported. Its defense business alone could be as much as $1.2 billion.

Ward also said Fiserv, a Brookfield financial services firm, and Wisconsin banks are “putting along OK, with M&I doing well. On the downside, paper stocks are weak because their outlook isn’t as good.”

Tens of thousands of Wisconsin jobs are tied to the success of farm and construction equipment makers. That list includes Gehl, Case and Joy Global.

Industry organizations have reported that equipment sales in the United States were up more 25 percent in 2004 over the previous year, and a sizable number of machines are being shipped to Asia.

Last year, China spent more than $60 million on U.S.-made construction equipment – up nearly 65 percent from 2003. That Asian industrial juggernaut is purchasing hundreds of millions of dollars worth of machines as it builds highways, hydro-electric dams, energy facilities and skyscrapers in areas that were once mostly rural.

Analysts note, however, that the equipment business is cyclical and was in down as recently as 2001. Industry officials, however, said the cycle for equipment firms runs from four to six years.

In a forecast released earlier this year, the Milwaukee-based trade group Association of Equipment Manufacturers said sales should continue to grow next year.

The organization said sales in the United States should be up 14 percent for 2005 and increase by nearly 10 percent next year. The group said it did not expect a downturn through 2009.

Earnings reports: