The latest tED magazine/Baird Research on distribution for the 3rd quarter of 2018 shows continued growth, with an outlook for a positive 2019.
“The current trends that most distributors are seeing are for good growth and continued growth that’s a pretty positive force for the industry over the next 12 to 18 months,” Dave Manthey, Senior Research Analyst for Baird Research told tED magazine. The latest research shows a 6.9% increase in revenue for electrical year to year for the third quarter of 2018, and a 3.7% increase in datacomm revenue. “If you look at it on a year to year basis, what is expected would be considered good growth,” Manthey added. “But the theme of the fastest growth that we had in 2Q and 3Q, we are in the same range of where they have been.”
Revenue
“6.9%, if you put it together with the pricing component, it implies that price was stronger in the 3rdquarter, but volume may have come in a little bit,” Manthey said. Pricing for the third quarter was up 3.5% on the electrical side, and 1% for datacomm. Many of the respondents told Baird they are concerned about tariffs and their margins.
- “Many supplier price increases lead to an uptick in revenue, but at the same time pressure to margins because of competition and increased ‘reluctance.’”
- “Tariff’s will increase revenue but not much impact on margin as we try to grow our business and remain competitive.”
- “We are doing all we can to strengthen relationships with customers and suppliers.”
Manthey told tED magazine the price increases and the erosion of margin could lead to some interesting decisions by distributors in the near future. “Are they willing to take less of a price increase to take more of the market share,” Manthey told tED magazine.
Pricing
Manthey added that he expects to see solid growth in 2019. The exclusive tED magazine/Baird research shows an expected increase in revenue of 5.5% in electrical and 4.1% in datacomm for the 4th quarter of 2018 when compared to 2017. And distributors are expecting a 4.9% increase in revenue for electrical and a 4% increase for datacomm next year when compared to this year.
Outlook
“Trends in general were about what we expected,” Manthey told tED magazine. “We are seeing a lot of the same trends that we are seeing in a lot of industrial categories. We expect to see growth in 2019, and barring some external force, it should stay strong. Most people are viewing this a the ‘glass half-full’. They have their eyes on the risks, tariffs, inflation, and labor shortages, but they still say the outlook for the next 12 month is positive.”
tED magazine and Baird conduct these economic surveys every quarter. For this survey, Baird received 105 responses from distributor companies that represent more than $23 billion in annual revenue. We will be sending out the Baird survey for the 4th quarter of 2018 in early January. Look for it in your e-mail inboxes. If you have questions about the Baird survey, you can contact tED magazine Publisher Scott Costa at scosta@naed.org.
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