Cooper (NYSE:CBE), WESCO (NYSE:WCC), SPX (NYSE:SPW), ABB (NYSE:ABB) Should Benefit from Short Lead Times

With capital expenditures for electric utilities expected to rise in the near term, suppliers like Cooper (NYSE:CBE), WESCO (NYSE:WCC), SPX (NYSE:SPW) and ABB (NYSE:ABB), which have product portfolios with relatively short lead times stand to benefit in the near term.

Of those, ABB have the longest lead time, and may have to wait until the second half of 2011 before they benefit from increased capex.

FBR said, "After declining for the last several quarters, electric utility capex appears to be turning around and our analysis of capex plans of 46 U.S. Electric Utilities suggests potential for a solid pickup in spending. This pickup would be driven by (1) a potential catch-up in spending as electricity demand recovers following two years of declines; (2) new EPA regulations that should drive investment in environmental projects; (3) longer-term need to upgrade the aging T&D grid and ongoing investments in renewables, which necessitates buildout of the transmission infrastructure; and (4) generally strong balance sheets and easier credit availability where CDS spreads are considerably tighter from levels seen in 2009. More near term, we see a pickup related to spending push-out from 2010, during which year-to-date utility spending has tracked meaningfully below plan primarily due to unseasonably warm weather, and possible postponement of expansion at low utilization plants. Our analysis is supported by discussions with several U.S. shareholder-owned utilities at the recent Edison Electric Institute conference, where many companies commented on outlook for solid spending growth driven by environmental, reliability, and transmission spending. This improving capex outlook has positive implications for electrical equipment suppliers, in our view. Specifically, we see upside for suppliers with product portfolios that have relatively short lead times, who could benefit from the near-term pickup in spending, including Outperform-rated Cooper. WESCO should benefit from any spending pickup on the distribution infrastructure. Market Perform-rated SPX, and non-covered ABB also stand to benefit, but their longer lead-time products suggest a 2H11 impact. With regard to implications for Electric Utilities under coverage, high levels of capital expenditures remains consistent with robust rate base growth trajectories for the regulated utilities for the foreseeable future."

Cooper closed Monday at $54.32, down slightly by $0.04, or 0.07 percent. Wesco ended the session at $47.89, falling $0.71, or 1.46 percent. SPX closed at $65.96, down $0.31, or 0.47 percent. ABB ended almost level at $19.57, losing $0.01, or 0.05 percent.