Wells Fargo Initiates Coverage On 5 Machinery Stocks With Mixed Ratings

Wells Fargo analyst Joseph O'Dea initiated coverage of machinery companies Parker-Hannifin, Stanley Black & Decker, Otis Worldwide, Dover, and Ingersoll-Rand.
Parker-Hannifin Corp PH was initiated with an Overweight rating and a price target of $337, implying an upside of 16%.
O'Dea says that Parker-Hannifin shares appear to have "succumbed" to cycle positioning that's driven its largest relative valuation discount versus the EEMI group in at least ten years. He anticipates better-than-group average earnings growth over the next two years.
Stanley Black & Decker, Inc. SWK was initiated with an Overweight rating and a price target of $227, implying an upside of 27%.
O'Dea mentions that the stock's underperformance year-to-date reflects a market view on tools and storage demand that is "overly pessimistic."
With the shares trading at a 30% discount to electrical equipment and multi-industry peers, Stanley offers a "compelling value with a favorable risk/reward setup."
Otis Worldwide Corp OTIS was initiated with an Underweight rating and a price target of $72, implying a downside of 13%. The analyst identifies his opinion as a "valuation call with optionality on China property market uncertainty."
O'Dea says his call is not a cautious view on medium-term targets as he believes OTIS can grow revenue in a low- to mid-single digits percentage range and grow operating profit at a mid-single-digit or higher rate; he doesn't see "meaningful upside surprise risk" and sees better value in other building technology stocks.
Dover Corp DOV was initiated with an Underweight rating and a price target of $152, implying a downside of 4%.
The analyst states that "cyclical factors" give him some pause as he anticipates some deceleration in the Manufacturing PMI growth trends, leading to relative valuation compression in the EEMI group.
O'Dea adds that while 2023 consensus EPS estimates look "relatively reasonable," they also "lean slightly high."
Ingersoll Rand Inc IR was initiated with an Equal Weight rating and a price target of $54, implying an upside of 5%.
O'Dea is "impressed" by cycle management and business portfolio management in what amounts to "a lot of progress" in a short amount of time. He adds that sights appear to be set on "meaningful" capital deployment to M&A.
Price Action: PH shares are trading higher by 0.41% at $290.86, SWK higher by 0.52% at $178.54, OTIS lower by 1.94% at $82.74, DOV lower by 1.73% at $157.01, and IR lower by 0.93% at $51.22 on the last check Friday.

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