Barclays Sees Opportunity In U.S. Machinery

Barclays issued its U.S. Machinery 3Q 2014 Preview on Monday and noted that it still saw opportunity in the sector.

Analysts Andy Kaplowitz and Vlad Bystricky thought "investor expectations ahead of 3Q earnings have been notably lowered over the past several weeks."

The report saw "strong North American truck demand, solid land based drilling markets, and continuing gradual improvements in construction related end markets as supportive of results for companies leveraged to those markets."

As for the North American truck market, "freight volumes and rates remain positive and, with average fleet ages still elevated, we think truck demand could be resilient and support solid results in 3Q and beyond for truck-related companies, especially suppliers."

The report’s "Top Picks" for the quarter are truck suppliers Cummins Inc. CMI and Allison Transmission Holdings Inc ALSN.

Illinois Tools Works Inc.’s ITW "diverse end markets, internal initiatives, and continued outperformance in auto-related end markets could support resilient results vs. expectations despite ~30 percent exposure to Europe."

As for Caterpillar Inc. CAT, Kaplowitz continued to think that "sluggish mining end markets are well understood while solid North American energy markets and gradually improving North American construction equipment demand, as well as ongoing share repurchases, could drive good EPS growth in 3Q and beyond."

All the companies fell Monday with Allison Transmission Holdings Inc. slipping the most, down 3.24 percent.