KeyBanc Downgrades Joy Global (JOY), Kennametal (KMT), and Terex (TEX) to Hold

KeyBanc downgraded Joy Global (NYSE: JOY), Kennametal (NYSE: KMT), and Terex (NYSE: TEX) from Buy to Hold.

"Heading into 2015, we take a more cautious view on our Machinery coverage given heightened uncertainty in the energy sector, a significant driver of industrial activity, and the weakening Euro, both of which we believe will pressure earnings and are not yet fully reflected in Street estimates. As such, we are downgrading JOY, KMT, and TEX from Buy to HOLD. Overall, we think investors should gravitate toward high-quality names with consistent free cash flow and favorable capital allocation strategies," said analyst Steve Barger.

On Joy he said, "We are moving to the sidelines on JOY given a lack of near-term catalysts to move shares higher. While we had previously expected continued strength in Service orders would eventually lead to growth in Service sales, and that management would aggressively utilize its share buyback program, our thesis failed to play out. Looking forward, given tepid expectations for commodities in 2015, we expect further declines in mining capital expenditures to negatively impact order growth (both OE & Service) for JOY."

On Kennametal he said, "We are moving to HOLD on KMT and reducing our FY15 FY16 estimates given increased end market headwinds driven by the decline in natural gas (and, to a lesser degree, oil) prices. While we still expect recently appointed CEO Don Nolan to pursue a turnaround plan for the Company, we now see heightened execution risk to the story. FY15-FY16E from $2.81 to $2.67 (FC $2.76) and from $3.26 to $3.01 (FC $3.10)."

Regarding Terex he said, "We are moving to the sidelines on TEX and reducing our ’14-’15 estimates. Given the recent declines in energy prices, we believe an energy-related CapEx decline could negatively impact order rates for construction equipment, which has enjoyed solid demand stemming from E&P and other energy-oriented infrastructure projects. This would primarily affect TEX’s AWP and Crane segments (~60% and 14% of EBIT, respectively). ’14-‘15E- from $2.31 to $2.24 (FC $2.30) and from $2.84 to $2.40 (FC $2.73)."

For an analyst ratings summary and ratings history on Joy Global click here. For more ratings news on Joy Global click here.

Shares of Joy Global closed at $44.50 yesterday.

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