巴克萊美股機械與建筑業(yè)2018q3展望陷入惡性循環(huán)

Equity17OctoberU.S.MachineryEquity17OctoberU.S.Machinery&3Q’18andOutlook:CaughtInAViciousMachinerystockshavebeeninaviciouscyclein2018thattheycan’tquiteescape.Whenthedataisgood,thepoliticshavenotbeen.Whenthepoliticsarebetter,thedataismoremixed.There’splentyofgoodinthequarter.Newclass8truckordersincreased100%+insixofthefirstninemonthsin2018,AgEquipmentgrewinNorthAmerica,SouthAmericaandEurope.BrazilsaleshavegrowninbothAg(likeinQ2)andtruck(severalquartersnow)onlytobesomewhatoffsetbyaweakerArgentina.IntheNAnon-resmarket,rentalrates/utilizationshouldhaveremainedfairlyhigh,apositiveviewonratethat’smoredifferentiatedtodaythanonequarterago.Chinaexcavatorsales,projectedtobedown5-10%for’18areup~50%YTD.ButAlsoPlentyofReasonsToBeCautiousinMachinery;EuropeanandChinesegrowthappearstobeslowing,althoughtheslowdownofChinahasbeencalledbefore.Q3’18wasthefifthstraightquarterofdeceleratingbutstrongexcavatorsalesgrowth,datingbacktomid2017.Oil&Gas,U.S.residential,andusedsmallagequipmentarelikelymoreworseoffthantheywerethreemonthsago.Innumbers,thestreetismodelingupmarginsinallofCAT’sbusinesslinesfor2019;potentiallyachievablebutnotwithoutrisk.DE’sC&Fmargins,asprojectedbythestreetforQ4’18areabitheavyvs.historicals,unlessWirtgendeliverssignificantsynergiesand/orconstructionpricingisstrongpost2Hraises.MostinvestorsarefocusingonthelargecapsthisEPSseason(DE,CAT,CMI)butwealsoseecompellingopportunitiesinHRI,andMTW–twostockswhichhavebeenparticularlybeatendownmostofthequarterbuthavefairlylowearningsbars.ForMTW,therefinancingopportunityof~$10mnlessinterestexpenseisnotyetflowingthroughinto2019numbers.WeraiseCMI’sPTandadjustlowerTEX.InConstructionMaterials,HurricaneFlorence’simpacttoearningsarenosecret.Texas’sheavyrainfallwaslessvisiblebutjustasimpactful,ifnotmore,tothedirectionofthequarterforVMC&SUM.Westillseepriceachievementasthecure-alltoinvestorfatigue,thebeginningofwhichwethinkshouldbeenbeginninginQ4lastingthrough2019.Whilenon-residential/infrastructurevolumesarepoisedtoincreasethrough2019,iftheresidentialheadwindsaregreatenoughthatcouldputallthreeofthesenamesbackinthepenaltyboxthroughQ4.WeadjustourVMCandSUM’18&’19EPStoreflectQ3conditions.WepreviouslyadjustedMLM.InE&C,JEChavebeenstrongexecuters,andconsensusislikelyatleast30-40ctoolightfor2019.ForMTZ,Rover&MVPgarnersattention,butthestateof5Groll-outshouldleadtothenextleginthestock.We’reat$4.15on’19EPSbutonaconservative~10.5%communicationsmargin.FLR’sstockisstillreelingfromitspre-earningsguide-down,down20%since(vsS&P+2.9%),butthenarrativewillshiftquicklytotheWhatHasOurAttentionIntoTheReportingPeriod…CashDistribution(ALL),Brazil/NAAg.(AGCO,CNH,DE),NewCEO’s(CNH,WBT),BallotInitiatives(VMC,MLM,SUM),Permian(CAT,CMI,URI),2H&‘19Margins(Machinery),PriceTargets(ALL).SeePage3forCompanyOne-LinersIntoEarningsINDUSTRYU.S.Machinery&tableonpage2.U.S.Machinery&ConstructionAdamSeiden,CFA+1212526BCI,USAleksy+1212526BCI,USTimothy+1212526BCI,USBarclaysCapitalInc.and/oroneofitsaffiliatesdoesandseekstodobusinesswithfirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.PLEASESEEANALYSTCERTIFICATION(S)ANDIMPORTANTDISCLOSURESBEGINNINGONPAGE每日每日免費獲取報（增值服務(wù)關(guān)注回復(fù)：研究加入“起點財經(jīng)”微信群Barclays|U.S.Machinery&SummaryofourRatings,PriceTargetsandBarclays|U.S.Machinery&SummaryofourRatings,PriceTargetsandEarningsChangesinthisReport(allchangesareshowninCNHIndustrial(CNHI)Cummins(CMI)Deere(DE)JacobsEngineering(JEC)LincolnElectric(LECO)Manitowoc(MTW)MasTecInc.(MTZ)Terex(TEX)VulcanMaterials11Source:BarclaysResearch.SharepricesandtargetpricesareshownintheprimarylistingcurrencyandEPSestimatesareshowninthereportingcurrency.FY1(E):CurrentfiscalyearestimatesbyBarclaysResearch.FY2(E):NextfiscalyearestimatesbyBarclaysResearch.StockRating:OW:Overweight;EW:EqualWeight;UW:Underweight;RS:RatingSuspendedIndustryView:Pos:Positive;Neu:Neutral;Neg:Negative17October2 Price EPSFY1 EPSFY2OldNew16-Oct- %Chg New%Chg NewU.S.Machinery& PosBarclays|U.S.Machinery&FIGURECoverageLast8QtrsPriceImpliedUpTarget/Avg.1DDidPosVolsQ3InBrazil=ImprovedSAMargins(FlatBarclays|U.S.Machinery&FIGURECoverageLast8QtrsPriceImpliedUpTarget/Avg.1DDidPosVolsQ3InBrazil=ImprovedSAMargins(FlatAGCODeere&Buybacks-GuidedtoSimilar1Has2H,WasItTooCaterpillarTerexUnitedRating1)Permainslowdownimpact(ornot)onfracenginebusiness2)SupplierIntegration,synergyupdate?Lincoln1)Roverreceivablesupdate&Projectcloseoutpotential?2)MVPDelaysImpacton2018&20193)5GRampTiming-'19?4)Q4-PuertoRico,5G?MasTec1)CH2MIntegration2)MarginExpansion3)2019GuidanceUpdate4)PortfolioOptimizationThoughts/InvestorDayExpectationsJacobsVulcan3)HurricaneFlorence/MichaelMartinSource:BarclaysResearch,ThomsonReuters;Pricesasofthemarketcloseon16October2018;Stockratings:OW:Overweight;EW:EqualWeight;UW:Underweight.Forfulldisclosuresoneachcoveredcompany,includingdetailsofourcompany-specificvaluationmethodologyandrisks,pleasereferto17October3Summit ConstructionFluor 1)PowerProjects-OnPaceAtMarkedDownLevels2)Backlog-Did EngineeringWelbilt 2)TractionfromNexGen3)FirstCallForInterimCEO,UpdateonTrucks/HERC Manitowoc ConstructionCNHIndustrialNV 1)NewCEOFirstCall;60DayView2)EuropeanCVPricing= Barclays|U.S.Machinery&FIGUREBarclaysvs.StreetQ3’18E(*Q4’18E),2018E,2019E-$$$$$$$$$$Barclays|U.S.Machinery&FIGUREBarclaysvs.StreetQ3’18E(*Q4’18E),2018E,2019E-$$$$$$$$$$$$$$$$$$Source:BarclaysResearch,ThomsonReuters;*DE,JEC,ACMFQ3’18E,CATSalesaboveincludeFinCo(allunitsinFIGUREBarclaysvs.StreetQ3’18E(*Q4’18E),2018E,2019E-Source:BarclaysResearch,ThomsonReuters;*DE,JEC,ACM17October42018 % % %y - - - - s - - - - - - - - - - - - - - % - % - - - - - 2018 % - n& Barclays|U.S.Machinery&FIGURE3Q18E(*4Q18E)EstimateRevisions–Sales&iSource:BarclaysResearch;*DE,JEC,ACMFQ4’18E;noteSalesinFIGUREEstimateRevisions– %%MachineryMachineryBarclays|U.S.Machinery&FIGURE3Q18E(*4Q18E)EstimateRevisions–Sales&iSource:BarclaysResearch;*DE,JEC,ACMFQ4’18E;noteSalesinFIGUREEstimateRevisions– %%MachineryMachinery$$$$$$$$$-$$$$$$$$$$$$$$$$$$$-$$$$$$$$$-$$$$$$$$$$--$$$Construction&MaterialsConstruction&Materials$$$$$$$$$$$$$$--$$$$$$$--$$$$$$$$$$$$$$--17October5 % - & 2018 % - n& 2018 % - on& Barclays|U.S.Machinery&Trucks&Companies:CMI,CNHI(PCAR,NAV,WBC,ALSN:allnotIndustryordersinNAMediumDutyandHeavydutyhavebeenstrong,andtheusedmarketisfollowing(Figure8).Newclass8truckordersincreased100%+insixofthefirstninemonthsin2018,andonaverage~44kunits.ThemostrecentSep.wasthebestofalltime,+20%vs.Sep.of’98,thenexthighest.We’veagainsteppedupourClass82018buildforecastby10Kunitsto320K,aswethinkastrong3quarterssetsupwellfortheremainderof2018.ACThasheldBarclays|U.S.Machinery&Trucks&Companies:CMI,CNHI(PCAR,NAV,WBC,ALSN:allnotIndustryordersinNAMediumDutyandHeavydutyhavebeenstrong,andtheusedmarketisfollowing(Figure8).Newclass8truckordersincreased100%+insixofthefirstninemonthsin2018,andonaverage~44kunits.ThemostrecentSep.wasthebestofalltime,+20%vs.Sep.of’98,thenexthighest.We’veagainsteppedupourClass82018buildforecastby10Kunitsto320K,aswethinkastrong3quarterssetsupwellfortheremainderof2018.ACThasheldtheirforecastrelativelystableat~317kinOct.vs.~316KinJuly.Ourforecastsnowareclosetoin-line.Supplychainsaregettingstretchedandtheabilityformanufacturerstorampproductionfurtherislimited.Thismayleadtopeakactuallybeing2019,andfromastockperspectivecouldelongatetheperiodofinvestorslookingtoavoidpeakmarkets.InEurope,HDregistrationsincreased,continuingareboundoffadeclineseeninQ1’18.BrazilHDtruckshavecontinuedgrowingstrongsincethebeginningof2017.FIGURENorthAmericaClass8Production&FIGURENorthAmericaClass6/7Production&y/y%Class6/7OrderClass6/7BuildFIGUREAvgFIGUREBrazilianTruck&TractorHeavy--Source:BarclaysResearch,ACTSource:BarclaysResearch,ACTPeaksareincreasinglybeingbuiltintoUS&Europeanheavyduty,they’repushedto2019onsupplychaintightness.U.S.mediumdutyreplacementshouldcontinueforalittlelonger;wehaveuntil2019inourmodels.InEurope,heavydutyseemsquitepeakyasthereplacementcyclelaggedEuropebyseveralyears,with2017~130%above2014.Inshort,though,therisktothedownsideseemsstrongerinEuropewhereasinNorthAmericaheavydutyispoisedforagood2018,perhaps2019too,with2020increasinglybeingthoughtofasthestrongdownyearcustomarilyseenastruckcyclesturn.17October6Jul-May-Sep-Aug-Barclays|U.S.Machinery&AgricultureExposedCompanies:DE,CNHI,Q3’18wasanallaroundsolidquarterforAg.Machinery.InNorthAmerica,highhorsepowertractorsandcombineswereup~24%and9%y/y,respectively,andcomparewellvs.the5%and10%y/yindustryexpectationsineachclassofequipment,respectively.Smallequipmentvolumescontinuedtobestrong,positiveforBarclays|U.S.Machinery&AgricultureExposedCompanies:DE,CNHI,Q3’18wasanallaroundsolidquarterforAg.Machinery.InNorthAmerica,highhorsepowertractorsandcombineswereup~24%and9%y/y,respectively,andcomparewellvs.the5%and10%y/yindustryexpectationsineachclassofequipment,respectively.Smallequipmentvolumescontinuedtobestrong,positiveforAGCO.UsedtractorpricinginhighHPequipmentremainedstablethroughthequarter,inspiteofhigherhoursandfewerlistings.Announced$12bninfarmeraidshouldhelpeasetheburdenoflowercommodityprices.SouthAmericasaleshavebeenmixed,withtheArgentineandrought,increasesincommodityexporttariffsandaweakeningcurrencysuppressingsalesintheregion.Brazilvolumescontinuedapositivetrendacrossbothtractors(+20%)andharvesters(combines)(+54%).FINAMErateswhichdecreasedby1%onlargerhorsepowerequipmentearlierintheyearishelpingdrivedemand.WestillbelievetheStreetwillneedtoseeseveralsustainedquartersofgrowthtohelpsupportreplacementcycletrendsontoday’slacklustrecashreceipts.FIGURENAAg.MachineryRetailSales(>40HP,Combines,FIGUREBrazilianTractor&CombineSales-0Units0FIGUREU.S.Ag.MachinerySalesByTypeofy/ychangeUtilitySource:BarclaysResearch,LongerTermThemostpainfulyearsinagricultureareprobablyover.We’renotcallingforaV-shaperecovery,wejustdon’tthinkit’sgoingtogetmuchworse,andthereareevensomesignsforittomarginallygetbetter.NorthAmericaagmachineshavebeencomingoffapeak,throughtoday’slevels,onwhatweperceiveasa“newnormal”forthenextseveralyears.17October7Barclays|U.S.Machinery&Companies:CAT,FLR,JEC,Komatsu(NotReplacementpartssales(aftermarket)buoyedmultipleconsecutivequartersofgrowth,althoughthedoublederivativeislikelydownfromhere.CATdealersalesinAsiaPacificwerestronglypositivethroughJulyandAugust.Miningrecoveryisrealandweproject2018asthefirstyearofupcapexsincepeak.Muchoftheaftermarketrecoveryoccurredin2017,weestimateat80%,withtheremaining20%achievedin1H’18.TheimpactonarestructuredassetbaseforOEMslikeCAThavebeensignificant(negativemarginstosolidlypositive–afeatfewthoughtwaspossibleentering2017).ThelargeropportunityoverthenextseveralBarclays|U.S.Machinery&Companies:CAT,FLR,JEC,Komatsu(NotReplacementpartssales(aftermarket)buoyedmultipleconsecutivequartersofgrowth,althoughthedoublederivativeislikelydownfromhere.CATdealersalesinAsiaPacificwerestronglypositivethroughJulyandAugust.Miningrecoveryisrealandweproject2018asthefirstyearofupcapexsincepeak.Muchoftheaftermarketrecoveryoccurredin2017,weestimateat80%,withtheremaining20%achievedin1H’18.TheimpactonarestructuredassetbaseforOEMslikeCAThavebeensignificant(negativemarginstosolidlypositive–afeatfewthoughtwaspossibleentering2017).ThelargeropportunityoverthenextseveralyearsisinminingOEM,wherecombinedwithaftermarketweseea5+yeartailonminingequipment,althoughrecoveryhasbeenquickerthanexpectedwithtruckshipments~15-20%offof2008levels.Morebroadlyonprojects,thereisgrowinganticipationthatE&Ccompanieswillbookprojectsintheshortterm–QuellavecoCopperwasawardedtoFLRinAugust.BacklogsforminingprojectsarecertainlyatbottomandtherearestillseveralprojectsoriginallydesignedduringthecommodityboomthatcouldcometoFIDinthenextyearortwo.FIGUREQuarterlyTruckShipments–’08FIGURESteel,Copper,Coal&IronOre0Source:Barclays,FIGUREKomatsuPartsSales(LocalCurrency&Asdemandfornewequipmentcontinuestodecline,salesofpartshaveshownsignsofrebounding(ex.FX)Partsy/yyenPartsy/y-Source:CompanyLongerTermReplacementcyclealone,forgettingeconomicgrowthordecliningoregrades,shouldbeapowerfultailwindforthenext5+years.Mining,byourdatabase,hasalreadydoubledonitslargestequipmentvs.2016lows.Evenso,we’restill15-20%off2008,whatweconsideranormalyear.Aminingaftermarketreboundmostlyplayedout,anda7xtruckfleetwillsomedayneedtobereplaced,insomeformevenifnotthefullinstalledbase.17October8May-Sep-Barclays|U.S.Machinery&ExposedCompanies:CAT,URI,HRI,TEX,MTW,Barclays|U.S.Machinery&ExposedCompanies:CAT,URI,HRI,TEX,MTW,DE,NAConstructionisthesecondmostmarketinvestorsfearisgettingclosetopeak,aftertruck.Whenwelookatthereplacementcycle,fleetsaregettingbacktonormalizedlevels.Publicinfrastructurespendthoughmayjustbebeginningtorampandcoulddriveanotherwaveofgrowthbymunicipalitiesorcontractorssupportingthem,instateslikeTexasandCalifornia.Europeremainsontrackforagood2018.Chinaexcavatorsalesare+27%y/yinSeptembervs.+32%inMayand+45%inJuly.Isthedoublederivativelower,yes,butstillverystrongvs.adown2018thatwasexpectedasof~1yearago.Lightequipmentproducers(aerials)havesoughtsteelsurchargesin2H’18,fewwhichwebelievehavebeenmetbutcouldbepassedthroughbeginningin2019atamodestamount.Rentalequipmentutilizationin2018Eisbetween65-70%,thehigherend-moreaerialsbased,andrateexpectationsarerunninginthe2.5-3.0%forthefullyear–allsupportivetoagood2018inwhichwe’reaboveconsensus.FIGUREDodgeConstructionStartsInformation(Resi&Non--Source:BarclaysResearch,DodgeNon-FIGURECaterpillarConstructionIndustriesDealerSalesNorthLatinAsiaSource:BarclaysResearch,CompanyLongerTermOnConstructionEquipment:Wefavorheavyoverlightequipmentgloballydueto1)theoldageoftheequipmentbase,2)idleequipmenthavingbeenexported,and3)emissionsstandardsliftingpricesfornewequipment.Cranesareinforamarginallybetter2018,butatrueinflectionislargelycommoditydependentandrawmaterialsareastrongheadwind.InfrastructurestimulusintheU.S.couldhelpextendtheconstructioncyclethroughtheendofthedecade.17October9May-Barclays|U.S.Machinery&ExposedCompanies:ACM,FLR,MTZ,JEC,VMC,MLM,IntheU.S.historicallyheavyraininTexasandHurricaneFlorenceintheCarolinashaltedconstructionworkaswellasproductionandshipmentsatquarriesintheareas.Despitetheinclementweather,Barclays|U.S.Machinery&ExposedCompanies:ACM,FLR,MTZ,JEC,VMC,MLM,IntheU.S.historicallyheavyraininTexasandHurricaneFlorenceintheCarolinashaltedconstructionworkaswellasproductionandshipmentsatquarriesintheareas.Despitetheinclementweather,westillseeanenvironmentwherehigherpricesshouldfollowvolumesinthenext1-2quarters.Wecurrentlyforecastpricegrowthofmid-singledigitsinaggregates.Incement,anOctober$6/tonincreaseinTXdoesn’tappeartohavestuck,despiterelativecertaintyearlierintheyearthata2Hpricewouldbeaccepted.Thenextopportunityforpriceshouldbeinearly2019,withearlyindicationsbyproducerssignallingahigh-single,low-doubledigit$/tonincreaseannouncement.LTMHoustonresidentialpermitshaveremainedpositivethroughout2018andtheMSAispoisedforgrowthinQ4.InE&C,severalcontractorsreceivedextensionsonnuclear/environmentDoEprojectsincludingFLRatPortsmouthandJECatHanford.TheArmy’sLOGCAPVawardswerepostponedfromSeptemberuntilmidOctoberandthenagainuntilApril2019togivetheArmyextratimetoreviewtheproposal.We’dexpectFLRtoawinaportionofthework,thatwilllikelybesplitamongstmorepartiesthanthelastcontract.FIGUREIndustriesAreStabilizingFIGUREARTBAContractAwardsareLumpy,$0PersonsTTMTTMAwardsHighwayAwardsTTMHighwaysSource:BarclaysSource:Barclays,FIGUREEuropeanUnion:ConfidenceLeadsOrderBooks&ConstructionconfidenceandrisingfromlowlevelsandarepositiveforthefirsttimesinceEvolutionofthecurrentoverallorderConstructionconfidence0LongerTermWethink2018willseegrowingsalesandearnings,forourconstructionmaterialscompanies.Weseearenewedpricingenvironmentformaterials,partiallytopassthroughinflation,partiallyonincreasedpublicconstructiondemand.InE&C,wegenerallyfavorcompaniesthataresmallerandprofitableinafewindustriesandendmarkets(i.e.pipeline,telecom,defense,government,road/highway)vs.largerandinvolvedinmanyindustries.17OctoberJan-Jan-Jan-Jan-Apr-Jan-Barclays|U.S.Machinery&CATDealerFIGURECATDealerSales–FIGURECATDealerSales–Barclays|U.S.Machinery&CATDealerFIGURECATDealerSales–FIGURECATDealerSales–Source:BarclaysResearch,CompanySource:BarclaysResearch,CompanyFIGURECATDealerSales–FIGURECATDealerSales–Source:BarclaysResearch,CompanySource:BarclaysResearch,CompanyFIGURECATTopLineGrowthvs.RetailY/YChange--RetailSalesT3MSource:CompanyReports,BarclaysCATTopLineGrowth,Y/Y17OctoberMar-Jul-Oct-Apr-Mar-Jul-Oct-Apr-Barclays|U.S.MachineryBarclays|U.S.Machinery&PriceTargetCMI–Our12-monthpricetargetof$160isbasedona~11.2xforwardP/Emultipleappliedtoour2019Eof$14.35.Ourformer12-monthpricetargetof$156wasbasedona~11.0xforwardP/Emultipleappliedtoour2019Eof$14.25.OurupdatedtargetadjustsformarketTEX–Our12-monthpricetargetof$46isbasedona~12.5xforwardP/Emultipleappliedtoour2019Eof$3.70.Ourformer12-monthpricetargetof$48wasbasedona~13.0xforwardP/Emultipleappliedtoour2019Eof$3.70.OurupdatedtargetadjustsformarketJEC–Our12-monthpricetargetof$83isbasedona~10.2xforwardEV/EBITDAmultipleappliedtoour2019Eof~$1.3bn.Ourformer12-monthpricetargetof$78wasbasedona~9.8xforwardEV/EBITDAmultipleappliedtoour2019Eof~$1.3bn.Ourupdatedtargetadjustsformarketmultiples.VMC–Our12-monthpricetargetof$132isbasedona~14.6xforwardEV/EBITDAmultipleappliedtoour2019Eof~$1.4bn.Ourformer12-monthpricetargetof$138wasbasedona~14.8xforwardEV/EBITDAmultipleappliedtoour2019Eof~$1.4bn.Ourupdatedtargetadjustsformarketmultiples.17OctoberBarclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD155.00WhyEqualWeight?CATisworkingitswayoutoftheworstfouryearperiodinitshistory,basedonsalesHeavyconstructiongloballyhasacceleratedmeaningfully.Miningispoisedfora~5yearrunpredicatedonOEM,withaftermarketalreadyoccuring.Risingcommodityenvironmentdrivesupsideinoil/gasengines.EBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)Barclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD155.00WhyEqualWeight?CATisworkingitswayoutoftheworstfouryearperiodinitshistory,basedonsalesHeavyconstructiongloballyhasacceleratedmeaningfully.Miningispoisedfora~5yearrunpredicatedonOEM,withaftermarketalreadyoccuring.Risingcommodityenvironmentdrivesupsideinoil/gasengines.EBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)--MarginandreturnUpsidecase USD180.00Ourupsidecaseof$180isbasedona~12.4xforwardP/Emultipleonourupside2019EEPSof~$14.51.Thisassumesthatthebusinessgenerates20%incrementalsonahealthyconstructioncyclegrowing20-40%internationally.EBIT(adj)margin(%)Net(adj)margin(%)ROIC(%)ROAROEDownsidecase Ourdownsidecaseof$120isbasedona~12.6xforwardP/Emultipleonourdownside2019EEPSof~$9.55.ThisassumeslowerconstructionsalespressureresourcemarginsbeyondstructuralcostBalancesheetandcashflowTangiblefixedassetsCashandequivalentsTotalassetsShortandlong-termdebtOtherlong-termliabilitiesTotalliabilitiesNetdebt/(funds)Shareholders'equityChangeinworkingcapitalCapitalexpenditureFreecashUpside/DownsideP/E(adj)(x)EV/sales(x)P/BV(x)Dividendyield(%)Netdebt/EBITDA(adj)Capex/sales(%)D&A/sales(%)Source:Companydata,BarclaysResearchNote:FYEndDec17OctoberU.S.Machinery& IndustryView:Caterpillar StockRating:EQUALBarclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD64.00WhyEqualWeight?AGCOhashigherexposuretosheet.InternalimprovementssuchasAGCOenginepower,sourcing,factoryproductivityandChinamidtiercouldhelpbettercompetitivelypositionAGCO.EBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)Barclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD64.00WhyEqualWeight?AGCOhashigherexposuretosheet.InternalimprovementssuchasAGCOenginepower,sourcing,factoryproductivityandChinamidtiercouldhelpbettercompetitivelypositionAGCO.EBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)-Upsidecase Ourupsidecaseof$70isbasedona~10.9xforwardP/Emultipleonourupside2019EEPSof~$6.45.ThisassumesSouthAmericasalesandmarginsexpand,reachingpreviouspeaklevelsby2019-2020.MarginandreturnEBIT(adj)margin(%)Net(adj)margin(%)ROIC(%)ROAROEDownsideUSDOurdownsidecaseof$50isbasedona~19.5x~$2.55.ThisassumesanoverhangofequipmentfromthepreviouscycleweighsonnewtractorsalesinNorthAmerica.Emergingmarketseitherslowordon’tinflectinAg.BalancesheetandcashflowTangiblefixedassetsCashandequivalentsTotalassetsShortandlong-termdebtOtherlong-termliabilitiesTotalliabilitiesNetdebt/(funds)Shareholders'equityChangeinworkingcapitalCapitalexpenditureFreecashUpside/DownsideP/E(adj)(x)EV/sales(x)P/BV(x)Dividendyield(%)Netdebt/EBITDA(adj)FCF/NICapex/sales(%)D&A/sales(%)Source:Companydata,BarclaysResearchNote:FYEndDec17OctoberU.S.Machinery& IndustryView:AGCOCorp. StockRating:EQUALBarclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD57.00WhyOverweight?MTZisaconsensuslongandweagree.Oil&Gasshouldbesupportiveforthenext2-3yearsintheUSbeforepivotingtoMexico.Communications5Grollout,althoughuncertaintiming,shouldbelarge~20%peryear’19-’20.MarginsinelectronictransmissioncoulddoublebyBarclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD57.00WhyOverweight?MTZisaconsensuslongandweagree.Oil&Gasshouldbesupportiveforthenext2-3yearsintheUSbeforepivotingtoMexico.Communications5Grollout,althoughuncertaintiming,shouldbelarge~20%peryear’19-’20.MarginsinelectronictransmissioncoulddoublebyEBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)-Upsidecase Ourupsidecaseof$64isbasedonan~7.2xof$870mn.Higherutilizationbringscommunicationsmarginsintothelowdoubledigitsandtransmissionincreasesto~10%.MarginandreturnEBIT(adj)margin(%)Net(adj)margin(%)ROIC(%)ROAROEDownsidecase Ourdownsidecaseof$38isbasedonan~7.6xEV/EBITDAmultipleonourdownside2019EAdj.EBITDAof~$550mn.Thisassumesoil&gasdemandisbelow$3Binrevenuesin2018andthebulkof5Gworkisdelayedtoouteryears(beyond’18-19).Taxreformisapartialoffset.BalancesheetandcashflowTangiblefixedassetsCashandequivalentsTotalassetsShortandlong-termdebtOtherlong-termliabilitiesTotalliabilitiesNetdebt/(funds)Shareholders'equityChangeinworkingcapitalCapitalexpenditureFreecashUpside/DownsideP/E(adj)(x)EV/sales(x)P/BV(x)Dividendyield(%)Netdebt/EBITDA(adj)FCF/NICapex/sales(%)D&A/sales(%)Source:Companydata,BarclaysResearchNote:FYEndDec17OctoberU.S.Machinery& IndustryView:MasTecInc. StockRating:Barclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget WhyOverweight?CNHIhasdiversemarketsindifferentcyclesinAg,Construction,&Truck.WebelievetheworstoftheAg.Equipmentdown-cyclehaspassed.Theconstructionbusinesshasstructuraltailwindsbehindit.SignificantFCFgenerationandoptionalityintheportfolio(businessmixanddividendpotential)postinvestmentgradecouldbeadditionalEBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)Barclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget WhyOverweight?CNHIhasdiversemarketsindifferentcyclesinAg,Construction,&Truck.WebelievetheworstoftheAg.Equipmentdown-cyclehaspassed.Theconstructionbusinesshasstructuraltailwindsbehindit.SignificantFCFgenerationandoptionalityintheportfolio(businessmixanddividendpotential)postinvestmentgradecouldbeadditionalEBITNetincome(adj)EPS(adj)($)Dilutedshares(mn)DPS($)-MarginandreturnUpsidecase USD15.00Ourupsidecaseof$15isbasedonaSOTPvaluationusingour2019EEBITDA.ThisassumescommercialvehiclesalesstaystrongandAg.momentumEBIT(adj)margin(%)Net(adj)margin(%)ROIC(%)ROAROE-Downsidecase USD8.00Ourdownsidecaseof$8isbasedona~21xforwardP/Emultipleonourdownside2019Eof$0.37.ThisassumesanequipmentoverhangfromthepreviouscycleweighsonnewtractorsalesinNorthAmerica.Emergingmarketseitherslowordon’tinflectintheirrespectiveendmarkets.BalancesheetandcashflowTangiblefixedassetsCashandequivalentsTotalassetsShortandlong-termdebtOtherlong-termliabilitiesTotalliabilitiesNetdebt/(funds)Shareholders'equityChangeinworkingcapitalCapitalexpenditureFreecashUpside/DownsideP/E(adj)(x)EV/sales(x)P/BV(x)Dividendyield(%)Netdebt/EBITDA(adj)FCF/NICapex/sales(%)D&A/sales(%)Source:Companydata,BarclaysResearchNote:FYEndDec17OctoberU.S.Machinery& IndustryView:CNHIndustrial StockRating:Barclays|U.S.Machinery&IncomestatementPrice(16-Oct-USDPriceTarget USD160.00WhyEqualWeight?MostofCumminsendmarketsex.chinatruckarepoisedforasolidnextyear,withpotentialupsideinmining&oil&gas.Power-genhasbeenalaggardforseveralyearsandappearstohavestabilized.Intruckswe’relessoptimisticthanmarketforecasts.WarrantyandEngineele