Summary of Conference Call Notes Industry Overview - The focus is on the **Multi-Industry** sector in **North America** with specific attention to the impact of **Trump 2.0 tariffs** on pricing dynamics [1][7][75]. Key Insights - **Price Dynamics**: The year-to-date (YTD) change in Producer Price Index (PPI) by category indicates that certain verticals are better positioned to sustain price increases into Q3 compared to others [2][4]. - **Industrial Sector Performance**: Despite positive Q2 updates, US Industrials experienced a de-rating during earnings season, suggesting challenges in maintaining premium valuations observed earlier in July [4][9]. - **Pricing Power**: The report emphasizes that US Industrial pricing power is an underappreciated factor contributing to operational durability, which is expected to positively influence revisions and valuations in upcoming quarters [18]. - **Profitability from Tariffs**: Companies that capitalized on Trump 1.0 tariffs are now benefiting from excess backlog and improved value addition, which is expected to support pricing power in the second half of the year [9][18]. Notable Verticals - The strongest price increases are seen in sectors such as **Switchgear, Welding, Valves, Electrical Equipment, Pumps + Compressors, HVACR, Non-Residential Lighting, and Industrial Controls**. Companies like **Eaton (ETN), Acuity (AYI), Hubbell (HUBB), Rockwell (ROK), and others** are highlighted as favorable due to their pricing strategies [4][18]. - **Fastener PPI Data**: There is a noted disconnect between the muted Fastener PPI data and the strength observed in Fastenal (FAST), indicating potential market anomalies [4]. Historical Context - The analysis includes a review of pricing changes during the **2021-22 hyperinflation period**, revealing that no verticals have given back price increases in 2023-24 despite commodity deflation and a prolonged manufacturing recession [16][18]. Future Outlook - The expectation is that companies capable of ramping up volumes in the second half of the year will experience multiple expansions, indicating a more durable momentum into 2026 [9]. - The report suggests that the enhanced value addition and reshoring activities in the US will further support pricing power and profitability for the best-positioned companies [18]. Additional Considerations - The report includes a caution regarding the need for positive revisions to drive further upside in stock valuations, emphasizing that companies pushing the most price will likely fare better [4][9]. - The document also contains various disclosures regarding potential conflicts of interest and the investment banking relationships of Morgan Stanley with the companies mentioned [6][28][31]. This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state and future outlook of the Multi-Industry sector in North America.

Group 1 - The core viewpoint of the report is that the home appliance industry is expected to outperform the market, with positive expectations for major white goods companies in Q2 2025 due to the effective use of subsidy funds and a seasonal increase in demand [1] - Key recommendations include leading white goods companies such as Midea Group, Gree Electric Appliances, Haier Smart Home, and Hisense Visual Technology, along with a focus on TCL Electronics and companies like Bear Electric and Roborock that show potential for operational improvement [1] - The report highlights that the previous phase of subsidy withdrawal saw a resilient growth pattern in the industry, with core product categories maintaining positive revenue growth despite challenges [2] Group 2 - The impact of policy changes on the industry was concentrated in the earlier stages, with a notable adjustment in performance metrics during 2011, followed by a recovery phase where the white goods index outperformed the market [3] - The report draws parallels with the U.S. market, indicating that commercial HVAC systems have shown better performance compared to consumer appliances during economic downturns, suggesting a shift in demand dynamics [4] - Companies like Whirlpool have implemented price increases and enhanced dividend payouts to mitigate the impact of rising costs and maintain stable return on equity (ROE) amidst challenging market conditions [5] Group 3 - The anticipated impact of the old-for-new policy on overall white goods sales is estimated to be around 9% of the 2023 sales volume, indicating a limited effect on the overall market dynamics [6] - The diversification of leading home appliance companies is expected to further dilute the impact of policy changes on financial statements, suggesting a strategic advantage in navigating market fluctuations [6]