Machinery industry upgraded to Attractive at Morgan Stanley
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Makers of heavy machinery as a group on Wednesday were upgraded to an Attractive industry rating from In-Line by analysts at Morgan Stanley, though ratings on individual stocks were mostly unchanged.
The investment bank downgraded building materials and concrete supplier Martin Marietta Materials (NYSE:MLM) to Equal weight from Overweight. Conversely, it upgraded Paccar (NASDAQ:PCAR), whose big-rig truck brands include Peterbilt, Kenworth and DAF, to Overweight from Equal weight.
Companies that make machinery for agriculture, airports and non-residential construction are considered most preferred based on historical trends, while some parts of the machinery industry have rebounded from the pandemic recession and may be close to cyclical peaks, according to Morgan Stanley.
âWhile our fundamental work implies a more bullish backdrop for the bulk of our coverage, we are not ignoring the potential risk of a recession and still see pockets of excess with our end market exposures,â Dillon G. Cumming, analyst at Morgan Stanley, said in a Dec. 14 report. âNorth American construction equipment remains the primary vertical where we see tangible evidence of peak cycle risk in 2023.â
The upgrade to the machinery industry comes as investors contemplate how billions of dollars in federal spending on infrastructure will be allocated. In addition, the Inflation Reduction Act of 2022 signed by President Biden in August provides incentives for renewable energy projects. The law also offers credits for mining materials such as aluminum, lithium and graphite used to make batteries for clean-energy storage.







Morgan Stanley order of preference for machinery stocks, Dec. 14










Price Target






Rating
New


Old


WillScot Corp. (NASDAQ:WSC)
Overweight
$62


$56


Deere & Co. (NYSE:DE)
Overweight
$522


$522


CNH Industrial N.V. (NYSE:CNHI)
Overweight
$20


$17


Paccar Inc. (PCAR)
Overweight
$136


$91


Donaldson Co. (NYSE:DCI)
Overweight
$66


$66


Oshkosh Corp. (NYSE:OSK)
Overweight
$114


$98


Agco Corp. (NYSE:AGCO)
Equal Weight
$129


$119


Timken Co. (NYSE:TKR)
Equal Weight
$83


$70


Terex Corp. (NYSE:TEX)
Equal Weight
$52


$35


Martin Marietta Materials Inc. (MLM)
Equal Weight
$399


$409


Vulcan Materials Co. (NYSE:VMC)
Equal Weight
$203


$181


United Rentals Inc. (NYSE:URI)
Equal Weight
$404


$320


Lincoln Electric Holdings Inc. (NASDAQ:LECO)
Equal Weight
$149


$140


Cummins Inc. (NYSE:CMI)
Equal Weight
$264


$222


Summit Materials Inc. (NYSE:SUM)
Equal Weight
$30


$28


Westinghouse Air Brake (NYSE:WAB)
Equal Weight
$106


$87


Proterra Inc. (NASDAQ:PTRA)
Equal Weight
$7


$7


Rev Group Inc. (NYSE:REVG)
Equal Weight
$13


$12


Kennametal Inc. (NYSE:KMT)
Equal Weight
$26


$23


Hyzon Motors Inc. (NASDAQ:HYZN)
Equal Weight
$5


$5


Allison Transmission Holdings Inc. (NYSE:ALSN)
Underweight
$36


$33


Caterpillar Inc. (NYSE:CAT)
Underweight
$190


$174