机械行业q3预览:收益风险偏向于上行

机械行业q3预览:收益风险偏向于上行

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时间:2018-10-25

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1、ABGlobalResearch11October2018MachineryAnalysisQ3MachineryPreview:Earningsriskskewedtotheupside;risk-offtradeleavesitlesspricedinPositiveonthesectorintoQ3-upsidetoQ3revenueandFY19incrementalsWeseeupsidetoQ3top-linegrowthbasedonendmarketdata(continuestosurp

2、risetotheupside),channelchecks,andourMacrotomicromodel(forecasting8revenuebeats),whichmayhelpquellpeakfears.WhilematerialcostinflationwilllikelybealargerheadwindinQ3thanitwasin1H,weexpectrecentpriceincreasestohelpoffsetthis.Ourbasecaseisthatprice/costwill

3、beamodestnetpositivein2H.However,steelpricesareflattening,whichcoupledwithimplemented/plannedpriceincreases,providesapositivesetupforFY19incrementals.Ifdemandcommentaryremainspositive(wethinkitwilleventhoughmgmts.willbehesitanttoletexpectationsgettoohigh)

4、,weseeriskskewedtotheupsideforFY19EPSrevisionsandstockperformance.Topicallyexpectfocusontariffs,regionalgrowth,hurricanes,capitalallocationWeexpectfocustoremainontheimpactoftrade/tariffsondemand,supplychains,pricing,andcapitalallocation.Weexpectadivergenc

5、einregionalgrowthexpectations,withChinaoutlookslowestandNAstrongest,butEuropeisaswingfactor(betterthanweexpectedinQ2).HurricaneFlorencemayhavehadamodestimpactinQ3andtheremayberebuildingopportunities(URIraisedcapexguidance$200mpost-Harvey;anindustryarticle

6、saysCATshipped30k+portablepowergeneratorsduringFlorence).Endmarkets:NAtrucks,Brazilag,rentalstrong;EuropetrucksandagslowingOurQ3channelchecksanddatapointssuggestNAtruck,Brazilag,&rentalwereamongthestrongestmarkets,whileEuropetruck,Europeag,&Autoareslowing

7、.WehavereceivedmixedindicationsonNAag,butwethinkitwillbesupportiveinQ3.Weexpectoil&gastobeasourceofstrengthforCATdespitecompetitorsseeingaslowdownandfortheminingrecoverytocontinuewithalongtailinto2019.PositivemomentumintoQ3:DE,CAT,URI,HEES;Negative:ITW,KM

8、TFundamentally,weseeriskskewedtotheupsideforQ3earnings.However,thedegreetowhichthisisalreadypricedintothestocksvaries.IntoQ3,welikestocksthathaveunderperformedrelativetothegroup,withsupportiveendmarkettrends,M2msigm

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