Industrials and Machinery ratings adjusted at Evercore post-election

November 14, 2024 02:13 AM AEDT | By Investing

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Industrials and Machinery ratings adjusted at Evercore post-election

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Investing.com -- Evercore ISI revised its ratings for several industrial and machinery stocks following the US election results, citing a more optimistic business outlook tied to the anticipated "pro-business Trump" policies.

However, the investment bank remains cautious, stating that “Trump/Red Sweep requires less caution but not broad bullishness with current starting point challenging.”

The firm upgraded Timken Company (NYSE:TKR), Cummins (NYSE:CMI), and Paccar (NASDAQ:PCAR), prioritizing "SMID cap&domestic oriented stories over global players with less compelling valuations."

Timken, an underperforming SMID cap, was upgraded from In-Line to Outperform, with Evercore noting it comes with “risky execution, yes, but worth the relative risk-reward.”

Paccar’s upgrade reflects Evercore’s view that while they are “still anxious about near-term margin pressure,” a recovery in the “second half of 2025 as emission pre-buy kicks in” could support growth.

Cummins, which analysts highlight as the “#1 truck engine&after treatment supplier,” may also benefit from an early truck emission pre-buy cycle expected to ramp up in 2025.

On the other hand, Evercore downgraded Eaton (NYSE:ETN), Caterpillar (NYSE:CAT), ESAB Corp (NYSE:ESAB), and Illinois Tool Works (NYSE:ITW), citing high valuations and specific risks.

Caterpillar faces “downside EPS risk” in light of “elevated construction equipment channel inventory” and strong global competition.

Meanwhile, Eaton’s downgrade is described as a “valuation ‘breather’ call,” as its recent performance has left limited room for additional gains despite solid fundamentals.

Overall, Evercore’s current approach toward the sector emphasizes a cautious stance, recommending “more selective” investments rather than a broad bullish view on the sector.

Their top 5 favorite stocks now include Parker Hannifin (NYSE:PH), United Rentals (NYSE:URI), Cummins, Timken, and Paccar.

This article first appeared in Investing.com

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