Avery Schumer
All posts from Avery Schumer
Avery Schumer in Sector Report,

Goldman Upgrades Machinery Sector From Cautious To Neutral

Broad Analysis

On the sector, the analyst sees potential for mining equipment share of capex to return to historical average, implying "a doubling in new equipment sales off 2016 levels." Revich also highlighted that the construction machinery demand in commodity export countries could improve if the current commodity recovery is sustained.

"While capex/FCF is above the historical average, we note that if spot prices hold, earnings power for the major global miners would improve by 80 percent – a scenario that would take capital allocation toward capex to historical lows."

That said, the analyst is not positive on the sector due to oversupply of Machinery in many regions of the world "with pockets of pricing pressure."

A Few Favorites

Revich's top picks in the sector include Trimble Navigation Limited TRMB, WABCO Holdings Inc. WBC, Allison Transmission Holdings Inc ALSN and PACCAR Inc PCAR.

In addition, Goldman still prefers construction productsover machinery and E&C, with Buy ratings on Vulcan Materials Company VMC, Martin Marietta Materials, Inc. MLM and Summit Materials Inc SUM.