Deutsche Bank's Top 10 Predictions For Machinery In 2015

Deutsche Bank issued an update on the machinery industry Monday. Analysts led by Vishal Shah expected “global machinery volumes to increase by 4 percent in 2015, vs. down 1 percent in 2014. The primary driver is a strong trucking/engine sector."

The firm raised "global engines/trucking 2015 outlook from low single digit growth to up 8 percent.”

“For construction equipment, we believe improving developed market growth will partially be partially offset by impact from lower commodity prices and EM headwinds and are tweaking our outlook from flat to down 1 percent. For mining equipment, continued declines in commodity prices and further growth capex is leading us to revise our estimate from flat to down 5 percent. We are maintaining our outlook for global ag equipment of flat to down slightly,” according to Shah

Below are the firm’s top 10 predictions for 2015:

1. Mining equipment aftermarket will recover and grow by 5 percent - several mining majors are raising 2015 maintenance capex;
2. Mining original equipment volumes will continue declining (down 5-10 percent), but orders may turn positive in 2H;
3. US construction equipment sector will transition from mid to late cycle – (from heavy equipment/aerial platforms to cranes/light equipment;
4. The China construction equipment market will decline for a 2nd consecutive year – down mid single digits;
5. Class 8 trucks/engine volumes will peak in 2015 – up 10 percent to 320K units;
6. A replacement cycle will begin in the European HD Market – up 3 percent Y/Y;
7. Asia truck/engine market will outperform other regions – China/India to be key drivers;
8. N. America large ag equipment volumes will bottom (down 30-40 percent Y/Y) but several catalysts will improve sector sentiment– tighter crop supply/demand, Section 179;
9. Brazil ag equipment market will remain under pressure –farmers below breakeven and capex at maintenance levels;
10. Recent oil price declines will pressure equipment sales in mid-2015.

The firm’s Top Picks in the U.S. were Allison Transmission Holdings Inc ALSN and Deere & Company DE, although Morgan Stanley recently took a different perspective.