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Jefferies Looking For 'Green Shoots' In Machinery Stocks: What That Means

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Deere & Company NYSE:DE, Joy Global Inc. NYSE:JOY - Jefferies Looking For 'Green Shoots' In Machinery Stocks: What That Means

Analysts at Jefferies said they "don't expect much from the first quarter earnings season" in the machinery sector, despite some encouraging macro industrial data.

"1Q is the seasonally weakest quarter of the year, and with many company forecasts 2H loaded already we don't expect increases in guidance. But order activity may be better against easy comparisons, and currency should be a relative tailwind," analysts led by Stephen Volkmann wrote in a note to clients.

In this scenario, Volkmann said he is looking for "green shoots," a term used to describe signs of economic recovery or positive data during an economic downturn.

Got To Find The Green

"Positive trends in currency (weaker dollar) through the quarter and recent macro level indications that destocking could be abating sooner than originally anticipated are positives for the sector," Volkmann said.

"However, we still think it's too early to see much positive evidence in the 1Q earnings," he added.

The analyst continued...