Barclays Warns Investors To Stay Out Of U.S. Machinery This Summer

The analysts reduced their 2017 estimates on the sector by 7 percent on average, stating there is no stability in machinery earnings yet, and they expect most companies in this group to show margin downside of below normal volumes for the first time in the second quarter of this year.

According to the analysts, there are no positive near-term opportunities based on data trending in the quarter. "We continue to see more attractive valuation and earnings path at Allison Transmission Holdings Inc ALSN, valuation at United Rentals, Inc. URI, and potential in Joy Global Inc. JOY.

Related Link: FBR Upgrades Joy Global To Outperform, Lifts Target To $25

"Caterpillar Inc. CAT is by far the most below our view of normal volumes and profits, and structurally has the best businesses along with Deere & Company DE, though both are likely get worse before better." said Barclays.

Furthermore, the analysts mentioned WABCO Holdings Inc. WBC as having the best combination of structural growth, balance sheet, acquisitive success and increasingly valuation. However, the analysts added that it probably has a rough second half ahead on production cuts and mix.