Lower water level lowers horizons of all boats

The first two quarters of 2002 were bad enough, with two of the indexes that we track here declining, except for the Dow Jones Industrial Average and the Control Engineering Index showing slight increases in 1Q02. The third quarter was the worst by far, with all of the indexes falling 10% to 20%. The CE Market Value Index appears to have ended the roller-coaster cycles that occurred from 3Q...

11/01/2002



CONTROL ENGINEERING STOCK INDEX

The first two quarters of 2002 were bad enough, with two of the indexes that we track here declining, except for the Dow Jones Industrial Average and the Control Engineering Index showing slight increases in 1Q02. The third quarter was the worst by far, with all of the indexes falling 10% to 20%.

The CE Market Value Index appears to have ended the roller-coaster cycles that occurred from 3Q01 to 3Q02, with the trend decreasing slightly, almost to the low point of that period. The main reason for the decline in 2Q02 was due to the meltdown of Tyco. This decline spilled over to 3Q02, of course, but the main reason for the decline continuing in 3Q02 was the turndown at Siemens. Just examining the current prices of these companies compared to their 52-week highs explains a lot. Not to be ignored is the fact that all except two of the smallest companies showed a decline in price in 3Q02.


The earnings picture also was greatly affected by Siemens and Tyco. Although Tyco took the big hit in prices in 2Q02, it took an even bigger hit in earnings. Thankfully, the percent of divisions in Tyco engaged in controls is below 25%. Siemens, however, has a very high percentage of business in automation and control, and it experienced the second largest drop in stock price among companies in the CE Index.

Meanwhile, a bright light can be seen in Honeywell's performance. Although its price for 3Q02 pretty much reflects the rest of the companies, the earnings of this industry leader experienced a very marked increase in the quarter compared to its prior performance.





Control Engineering Stock Index

Stock prices

($)

% chg.

Annual

Price/

12-mo.

($) at close

close

in

52-wk.

div.

earn.

EPS

6/30/02

9/30/02

3Q02

high

yield

ratio

($)

Ametek Inc . 37.25

29.12

-21.83

40.72

0.69

14

2.09

Badger Meter Inc. 27.50

30.50

10.91

34.00

3.28

17

1.79

Danaher Corp. 66.35

56.85

-14.32

75.47

0.18

28

2.03

Eaton Corp. 72.75

63.74

-12.38

88.69

2.82

24

2.66

Emerson Electric Co. 53.51

43.94

-17.88

66.09

3.64

23

1.90

Flowserve 29.80

10.00

-66.44

35.09

0

8

1.26

Honeywell Inc. 35.23

21.66

-38.52

40.95

3.69

27

0.79

K-Tron International 15.43

12.70

-17.67

18.00

0

30

0.43

National Instruments 32.56

21.89

-32.77

43.50

0

42

0.52

Rockwell Automation 19.98

16.27

-18.57

22.80

4.30

16

1.03

Siemens 59.40

33.61

-43.42

70.50

0

14

2.36

Thermo Electron 16.50

16.13

-2.24

24.60

0

15

1.08

Transmation Inc. 0.90

1.20

33.22

1.90

0

NC

-1.03

Tyco International Ltd. 13.51

14.10

4.37

60.09

0.71

NC

-2.96

EPS = earnings per share
Div. = dividend
Yield = % based on closing price
NC = not calculable due to negative numbers
Source: Control Engineering with data from Cnet Networks Inc. (San Francisco, CA, www.investor.cnet.com , 415/344-2836)







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