Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Everco4re ISI downgrades machinery sector; Caterpillar also suffers

Published 20/02/2024, 09:34 pm
Updated 20/02/2024, 09:34 pm
© Reuters.

Investing.com - The U.S. machinery sector has performed very strongly over the past two years since the Federal Reserve began its interest rate hike cycle, but now looks like the time to take profits, according to Evercore ISI, as it downgraded the sector.

The average stock appreciation in the sector is more than 40% in the past two years since the Fed rate hike cycle began, compared with the benchmark S&P 500 index gaining 14%.

This strong performance has “survived” the past 24 months’ heightened fears of recession, that 2023 EPS would be down sharply and then fears 2024 EPS would be down sharply.

However, the stocks’ valuations, broadly speaking, have moved from just requiring avoiding an EPS collapse to then just needing to avoid a down year to now requiring sales and EPS reacceleration into 2025, and, for most names, growth in 2026 as well.

This may be asking too much, and thus the brokerage has downgraded the Machinery sector to ‘in line’ from ‘outperform’.

Three individual companies have also been caught in the wash, with Caterpillar (NYSE:CAT), Ingersoll Rand (NYSE:IR) and Timken (NYSE:TKR) also each downgraded to ‘in line’ from ‘outperform’.

“Their target prices are raised but stock moves leave modest upside to new targets,” the brokerage said in a note dated Feb. 19. The “same can be said for most of our names as our target prices are raised but most of our stocks are ‘already there’.”

 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.