August 11, 2008 - SPX Corp. (SPW-NYSE) provides flow technology products, test and measurement products, thermal equipment and services, and industrial products and services in the United States and internationally. Its Flow Technology segment designs, manufactures, and markets products and solutions for processing or transporting fluids, and products for heat transfer applications. This segment offers pumps, valves, fluid mixers, agitators, metering systems, filters, and dehydration equipment for the sanitary; food, beverage, and pharmaceutical processing; general industrial; chemical processing; oil and gas processing; power generation; and mining markets.

SPX's Thermal Equipment and Services segment manufactures cooling, heating, and ventilation products, including dry, wet, and hybrid cooling systems for the power generation, refrigeration, HVAC, and industrial markets, as well as hydronic and heating and ventilation products for the commercial and residential markets. This segment also provides thermal components and engineered services.

The Industrial Products and Services segment offers power transformers for utilities, as well as industrial tools and hydraulic units, and precision machine components for the aerospace industry; crystal growing machines for the solar power market; automatic transmission filters; and television and radio broadcast antenna systems. SPX has a joint venture with Emerson Electric Co., which manufactures electrical fittings, hazardous location lighting, and power conditioning products. The company was founded in 1911. It was formerly known as Piston Ring Company and changed its name to SPX Corp. in 1988. SPX is headquartered in Charlotte, North Carolina.

Revenues are revving at SPX. In 2005, they were $4.292 billion. Last year they hit $4.8 billion. This year, analysts predict $6.29 billion, next year, $6.75 billion. That's a 30% increase for this year's sales. In the first quarter, revenues were up 35% compared to the same quarter last year. Part of that (7%) came from selling more of everything SPX makes. The rest came from acquisitions and currency exchanges. The Flow Technology group saw more than double top line growth, coming from the purchase of APV last year. The industries contributing the most to the higher sales: oil and gas, power, and sanitary markets. The power industry ordered a lot more cooling systems from the Thermal Equipment & Services group, bolstering its revenues in the quarter. And the need for upgrading the utility infrastructures created strong demand for power transformers.. That improved revenues in the Industrial Products and Services group by 26%.

How did profits do, if sales were up 35%. They more than doubled, went to $1.14 from 55 cents. For the upcoming quarter, analysts see $1.65, then in the final quarter $2.08. For the year, look for $6.57 according to the average estimate of 10 analysts following the company. That's up from $4.85 last year. Next year, the bottom line should show $7.93.

All this goodness isn't going unnoticed. The stock was on a strong run, starting in 2005 when it sold for $37.80 early in the year. Since then the chart looks like every stock should look. It went to a new high of $140.80 earlier this year, only to take a breather. So it's off about 18% from there. Will it gather strength and keep going or has the best already been accomplished?

There's a good chance it will. Earnings will most likely continue to improve. Even with the slower U.S. economy, sales are rising, domestically and internationally. Orders from global infrastructure markets are strong. Management has kept tight control of costs, generating better margins. Those are the good parts.

The one negative for the stock is valuation. With a P/E of 18, it's at the high end of the P/E range, going from a low of 12.7 in 2003 and a high of 21.8 in 2005 (annual averages). But it already reached $140 this year, so any positive surprises in earnings should get the stock closer to that number.

More numbers: Return on Equity went from 8.8% in 2006 to 13.6% in 2007. This year, expectations are for 15.5% and 16% next year. For the last 12 months, it was 16.64%. There's a dividend of $1.00 for a yield of .9. Price to Book is 2.71. Book Value is $42.83. The $140.82 price for the stock was hit on June 17 of this year while the 52 week low of $73.31 was on January 22. Market Cap is $6.4 billion with 53.407 million shares outstanding.

SPX is a very positive story. Earnings are strong. New markets offer good potential. The company's products are in high demand. Management delivered good results for years. The one negative is the valuation of the stock. Investors already love it. Will they become obsessed?

- Company Web site: www.spx.com

- Ted Allrich