Market Overview

Morgan Stanley Overweight On WABCO, Deere, Caterpillar, United Rentals Among Machinery Stocks

Share:
Morgan Stanley Overweight On WABCO, Deere, Caterpillar, United Rentals Among Machinery Stocks

Morgan Stanley initiated coverage of machinery stocks belonging to the three industry subgroups — trucks and suppliers, agriculture and construction — in a Friday note.

The Analyst

Morgan Stanley analyst Courtney Yakavonis initiated coverage of the following stocks:

Trucks and Suppliers

  • PACCAR Inc (NASDAQ: PCAR): Underweight/$69
  • WABCO Holdings Inc. (NYSE: WBC): Overweight/$159
  • Cummins Inc. (NYSE: CMI): Equal-weight/$173
  • Rev Group Inc (NYSE: REVG): Equal-weight/$32

Agricultural Machinery

  • Deere & Company (NYSE: DE): Overweight/$195
  • CNH Global NV (NYSE: CNH): Equal-weight/$14.50
  • AGCO Corporation (NYSE: AGCO): Equal-weight/$69

Construction Machinery

  • Caterpillar Inc. (NYSE: CAT): Overweight/$185
  • Oshkosh Corp (NYSE: OSK): Equal-weight/$86
  • Terex Corporation (NYSE: TEX): Equal-weight/$45
  • United Rentals, Inc. (NYSE: URI): Overweight/$194

The Thesis

Trucks And Supplies

NAFTA Class 8 sales will peak in 2018, Yakavonis said. Morgan Stanley is below consensus on 2019 estimates. 

The analyst sees limited upside to truck OEMs from earnings per share revisions. Additionally, potential electric vehicle disruption is likely to exert pressure on multiples in the firm's bear case, Yakavonis said. 

Secular safety and autonomous tailwinds benefit WABCO, according to Morgan Stanley. 

Agricultural Machinery

Overweighted Deere is likely to be supported by the North American cycle and a potential rebound in corn and soybean prices, Yakanovis said. Inventory headwinds are projected for AGCO, while the analyst said diversification makes CNH relatively less appealing. 

See also: Stifel Upgrades Navistar On Long-Term Potential, Turnaround Story

Construction Machinery

Morgan Stanley sees rising earnings per share revisions for construction machinery companies due to strong end markets, a robust replacement cycle and supportive inventory levels. Valuations of the stocks of these companies look sustainable, Yakavonis said. 

The firm named Caterpillar as its top pick in this segment, while it sees United Rental surging in North American equipment rentals.

Price Action

Here's how the stocks have performed over the last year:

  • PACCAR: Down 0.71 percent.
  • WABCO: Up 18.18 percent.
  • Cummins: Up 4.16 percent.
  • REV Group : Down 6.09 percent.
  • CNH: Up 31.16 percent.
  • AGCO: Up 5.79 percent.
  • Caterpillar: Up 51.64 percent.
  • Oshkosh: Up 9.49 percent.
  • Terex: Up 22.87 percent.
  • United Rentals: Up 29.90 percent.

Related Link:

The Goldman Pair Trade In Machinery: PACCAR Upgraded, Terex Downgraded

Latest Ratings for WBC

DateFirmActionFromTo
Mar 2019DowngradesBuyNeutral
Mar 2019DowngradesOutperformSector Perform
Mar 2019MaintainsEqual-WeightEqual-Weight

View More Analyst Ratings for WBC
View the Latest Analyst Ratings

Posted-In: Courtney Yakavonis Morgan StanleyAnalyst Color Price Target Initiation Analyst Ratings Best of Benzinga

 

Related Articles (AGCO + CAT)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ABBBarclaysInitiates Coverage On
DPLOWilliam BlairUpgrades
SUPVItau BBADowngrades
GGALItau BBADowngrades
BMAItau BBADowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

6 Experts Discuss How AI Will Change The Future Of Wall Street (Part 1)

This Day In Market History: AIG Gets $30 Billion Bailout