Blazing Hot PCI Manufacturers' Index Roars Ahead

Stockwatch

As expected, the Federal Reserve held interest rates at 5.25 percent on the last day of our trading session, which ended January 31, 2007. Although the rates have remained stable for five consecutive meetings of the federal bankers, markets were volatile on the run-up to the meeting, fearing that the Fed might signal their intention to raise rates in the future.

The Fed, however, gave a more positive message on the economy than when they met in December. “They coupled a firmer economic growth scenario with the expectation of moderate growth, and they expect the inflation outlook to be improving,” John Miller, head of fund management at Nuveen Investments, said about the Fed’s decision. “I don’t think it makes it any more likely that they would feel compelled to raise rates.”

The PCI Manufacturers’ Index suffered little equivocation this session: the direction was up. The index increased 73 points even to end at 1234.23, a 6.29 percent increase. Two of our 10 companies were up over six points; four more were up above three points. Only one company closed in negative terrain.

Sherwin-Williams reported a 31 percent increase in fourth quarter net income. The paint maker earned $98.7 million, or $0.73 per share, versus $75.1 million or $0.54 per share earned in last year’s fourth quarter. Net sales were up 4.9 percent to $1.79 billion. The company said that strong industrial markets offset soft consumer sales. KeyBanc Capital Markets analyst Saul Ludwig said that Sherwin-Williams’ strength was supported by cost controls, stock repurchases and price increases. “When you have dominant brands, you have pricing power,” Ludwig said. Sherwin-Williams added 6.55 points, or 10.47 percent, and was the top dollar gainer. SHW ended at 69.10.

Although Rohm & Haas also noted a 31 percent gain in its fourth quarter profit, the company shed 0.16 points, or 0.31 percent and closed at 56.02. Rohm & Haas estimated that its fiscal 2007 earnings were in line with analysts’ expectations. The company said net income would range between $3.40 to $3.60 per share for the year, with revenue between $8.7 billion and $8.9 billion. Analysts surveyed by Thomson Financial anticipated, on average, earnings of $3.58 per share and sales of $8.69 billion. Rohm & Haas was the top dollar and percentage loser.

RPM was up this session, gaining 3.06 points, or 15.17 percent and closing at 23.23. For its second quarter ended Nov. 30, RPM reported net income of $52.9 million, or $0.42 per share, up from $18.5 million, or $0.15 per share earned in the same quarter last year. Last year’s results were hampered by the Gulf Coast hurricanes, and this year, RPM’s Bondex unit received a $15 million settlement from one of its asbestos liability insurance carriers. RPM was the top percentage gainer this session.