Profit in line as short-cycle business disappoints at a time of heightened expectations With PMIs at near 40 year highs the market expects short-cycle stocks to deliver significant earnings beats; against this backdrop, Sandvik delivered a somewhat disappointing Q1 print. Orders, sales and adj. operating profit came in +8%/ -2%/ 0% versus Consensus. The orders beat was driven by the Group''s Mining businesses. Mining and Rock Solutions (MRS) orders beat by 14%; Rock Processing Solutions beat by 22%; in addition, Materials Technology (MT) beat by 18%. Unfortunately, Manufacturing and Machining Solutions (MMS), the business which should benefit most from PMI strength, actually missed on orders by -3%. The Group sales miss was driven by MMS (-6% light) and MRS (-5% light). Only MT surprised positively on margins. While forecasting the new mining business splits has injected some uncertainty into estimates for those businesses, the weak sales print explains the margin miss at MMS. Tooling needs Aerospace to recover; SMT spin still on track; did they rule out Renishaw? During the results call the CEO was asked what would need to happen for trading at MMS to recover further. He noted that MMS''s Aerospace activities remain down 40% - given its weighting within the MMS business mix; that alone explains half of the gap to some peers. MMS now appears to be a play on a future Aerospace recovery. In terms of portfolio, management reiterated that the SMT spin-off is still fully expected to happen next year; only a black swan event is seen as derailing the process. Management commentary regarding its MMS Metrology acquisition strategy came close to ruling out a move for larger assets such as the recently-put-up-for-sale Renishaw. The CEO stated that ''We are not first-hand looking to become a broad, generic Metrology company.'' We may be reading too much into that comment - but it sounded to our ear as though he was trying to distance Sandvik from any...