Deutsche Bank Revisits Machinery Group After Tariffs, Macro Shifts

The Trump administration recently announced  Section 232 Proclamation on imports, imposing a 25-percent duty on steel and a 10-percent tariff on aluminum imports. Against this backdrop and a number of other macro shifts on the back of global political news, Deutsche Bank revisited its thesis on the machinery group.

The Analyst

Deutsche Bank analyst Nicole DeBlase made the following rating and price target changes for machinery stocks in the firm's coverage group:

• Oshkosh Corp OSK was upgraded from Hold to Buy with the price target raised from $90 to $99.
• Cummins Inc. CMI was upgraded from Sell to Hold with the price target Increased from $158 to $164.
• PACCAR Inc PCAR was downgraded from Hold to Sell with the price target lowered from $69 to $62.
• Terex Corporation TEX was maintained at Hold with a price target lowered from $48 to $45.
• Manitowoc Company Inc MTW was maintained at Hold with a price target reduced from $36 to $32.

The Thesis

The 3-percent drop in the machinery group over the past month versus a 2-percent gain for the S&P 500 Index makes sense given the substantial steel content in heavy machinery, DeBlase said in a Monday note.

The analyst — though expecting potential retribution in the form of trade war — said the recent dramatic stock price movements within Deutsche Bank's coverage universe are not fully reflective of near-to-medium-term risk in all cases.

The 11-percent and 6-percent price target reductions, respectively, for Manitowoc and Terex reflect greater price/cost risk for the crane industry, the analyst said. 

The Price Action

The one-year/year-to-date price moves of the stocks are as follows:

• Oshkosh: 11.97 percent/a loss of 13.5 percent. 
• Cummins: 3.15 percent/a loss of 9.78 percent. 
• PACCAR: a loss of 5.06 percent/a loss of 7.19 percent. 
• Terex: 22.89 percent/a loss of 20.6 percent. 
• Manitowoc: 15.66 percent/a loss of 27.3 percent. 

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