- 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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