Jefferies Says Prep for Downside in Machinery Stocks, Keep Powder Dry

October 15, 2012 8:54 AM EDT
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As macro concerns continue to plague Europe, emerging markets , and the U.S., Jefferies analyst remain cautious on Machinery stocks and see another 5 percent in downside, despite a 10-15 percent declined in just the past few weeks.

"We see more downside than upside risk in 3Q machinery earnings, and despite modest expectations we still recommend a defensive short term stance," said analyst Stephen Volkmann.

"We are lowering many of our estimates for 2013 and 2014. We see earnings and forecast risk at Caterpillar Inc. (NYSE: CAT) Eaton Corporation (NYSE: ETN) and Kennametal Inc (NYSE: KMT), while AGCO Corporation (NYSE: AGCO) and Ingersoll-Rand (NYSE: IR) and Titan International Inc (NYSE: TWI) top our list of more defensive names," said Volkmann.

Longer term, he still sees significant pent up demand in most industrial end markets when macro concerns fade.

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