Pump Market Analysis

The Jordan, Knauff & Company (JKC) Valve Stock Index was up 11.2 percent over the last 12 months, while the broader S&P 500 Index was up 13.7 percent. The JKC Pump Stock Index increased 9.5 percent for the same time period.1

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) dropped slightly to 56.3 percent in July from 57.8 percent in June, showing expansion for 11 consecutive months. Fourteen of 18 industries reported growth in new orders and production. Eleven industries reported growth in new export orders. The backlog of orders subcomponent was 55.0 percent in July, the seventh straight month of expansion.

Stock Indices from August 1, 2016 to July 31, 2017.Figure 1. Stock Indices from August 1, 2016 to July 31, 2017. Local currency converted to USD using historical spot rates. The JKC Pump and Valve Stock Indices include a select list of publicly traded companies involved in the pump and valve industries weighted by market capitalization. Source: Capital IQ and JKC research.

The Labor Department reported that nonfarm payrolls increased by 209,000 jobs in July. Monthly job growth has averaged 184,000 this year, comparable to the average of 186,000 in 2016. Manufacturing jobs increased by 16,000 during the month, the largest gain since February. Since November of last year, manufacturing has averaged 12,500 new jobs per month. The unemployment rate dropped to 4.3 percent, matching a 16-year low reached in May. Average hourly earnings increased 0.3 percent in July, after rising 0.2 percent in June. On a year-on-year basis, wages have increased 2.5 percent for the fourth straight month.

Wyoming, Texas, Pennsylvania, West Virginia and North Dakota were the top five net suppliers of energy in the U.S. in 2015. Wyoming leads the country in coal production with more than 40 percent of the U.S. total in 2015. The state is also the sixth-highest natural gas producing state. Texas heads the nation in both energy production and consumption. The state accounts for more than one-third of crude oil production, almost one-third of natural gas production and more than one-fourth of wind powered electricity generation. Pennsylvania is one of the five largest producers of coal along with rapid growth in natural gas production. Since 2012, North Dakota has been the second largest crude oil producer and also accounted for about two percent of total national production for both natural gas and coal in 2015.

U.S. energy consumption and rig countsFigure 2. U.S. energy consumption and rig counts. Source: U.S. Energy Information Administration and Baker Hughes Inc.

U.S. crude oil production is forecast to reach an average of 9.9 million barrels per day in 2018, passing the previous record of 9.6 million barrels per day set in 1970, with most of the growth coming from the Permian Basin in Texas and New Mexico and from the Federal Gulf of Mexico. By the end of 2018, production from the Permian Basin will account for nearly 30 percent of total U.S. production. In the Federal Gulf of Mexico eight new projects came online in 2016, contributing to its production growth. Another seven projects are expected to come online by the end of 2018.

U.S. PMI and manufacturing shipmentsFigure 3. U.S. PMI and manufacturing shipments. Source: Institute for Supply Management Manufacturing Report on Business and U.S. Census Bureau

On Wall Street the Dow Jones Industrial Average rose 2.5 percent, the S&P 500 Index increased 1.9 percent and the NASDAQ Composite grew 3.4 percent for the month of July. The Dow Jones Industrial Average finished the month at an all-time high boosted by corporate earnings and the Federal Reserve’s decision not to raise interest rates.

Better-than-expected earnings were seen by McDonalds, AT&T, Boeing and Verizon.

1. The S&P Return figures are provided by Capital IQ.

These materials were prepared for informational purposes from sources that are believed to be reliable but which could change without notice. Jordan, Knauff & Company and Pumps & Systems shall not in any way be liable for claims relating to these materials and makes no warranties, express or implied, or representations as to their accuracy or completeness or for errors or omissions contained herein. This information is not intended to be construed as tax, legal or investment advice. These materials do not constitute an offer to buy or sell any financial security or participate in any investment offering or deployment of capital.