Recovery momentum is building across several key Machinery end markets following declines that started as early as 2012.  The 2015-16 industrial recession further weighed on Machinery demand and drove severe downturns in mining, oil and gas and ag equipment.  We’re encouraged by early signs of recovery, with still significant upside to replacement demand given how deep the declines were.  Beyond end customer demand, dealers spent the last several years working down inventory levels, which are now tight and poised to add further lift to demand moving forward.  A stronger backdrop should also support better pricing and healthy incremental margins.  While cycle positioning in off-highway markets looks attractive, we’re more cautious on on-highway commercial vehicles where synchronous global growth is driving continued strength and leaves limited upside to volumes.

Top Picks:

  • Caterpillar Inc. (CAT)
  • Deere & Company (DE)
  • Rexnord Corporation (RXN)