Deutsche Bank Is Cautious On U.S. Machinery Sector, Sees 'No Recovery In Sight'

Deutsche Bank is cautious on the machinery sector in the United States. Analysts Nicole DeBlase and Saree Boroditsky don't see any recovery in sight in the natural resources segment, although they think the sector has bottomed.

However, the brokerage picked up Caterpillar Inc. CAT as the topic pick in the sector on the belief that the company could grow its EPS independent of volumes. The analysts expect only a low-single-digit organic uptick until the year 2020 and kept a price tag of $98 on the company's stock.

Oshkosh Corp OSK and Westinghouse Air Brake Technologies Corp WAB also have Buy ratings. The brokerage has a price tag of $62 and $90, respectively, on these two.

Related Link: Deutsche Bank Initiates Coverage On 17 U.S. Machinery Stocks

In a research note to clients, the analysts said, "We cannot rely on multiple expansion to drive share price performance; we focus on EPS momentum, pointing us to CAT (+13 percent vs. cons) and OSK (+9 percent). We see 24 percent and 5 percent respective EPS risk for CNHI and CMI; these are our Sell-rated names."

The brokerage rated CNH Industrial NV CNHI as the least preferred stock in the sector with a price target of $6. Similarly, Cummins Inc. CMI were rated Sell, with a target price of $111. The analysts cited unfavorable impact from Brexit.

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