Citi analysts initiated research coverage on US machinery stocks, voicing a neutral-to-positive outlook based on its balanced distribution of Buy and Neutral ratings across the sector.
Within it, Citi identifies construction-levered companies as having the most upside potential, owing to a more optimistic view of North American non-residential construction and Commercial Equipment markets than initially anticipated.
“This outlook is underpinned by our proprietary non-res starts-to-spending model. Our positive non-res outlook suggests that United Rentals (NYSE:URI) has room to run,” analysts wrote.
Moreover, Citi maintains Buy ratings for Caterpillar (NYSE:CAT) and Oshkosh Corporation (NYSE:OSK), citing unique catalysts and strong exposure to ongoing secular trends that could propel these stocks.
On the flip side, the bank sees more significant downside risks within the North American agriculture sector. Analysts point to potential challenges ahead, with an increase in used equipment inventories and a possible decline in large agriculture replacement demand. According to Citi, these factors may pose risks to the current and projected estimates for 2025.
Analysts identify CNH Industrial (NYSE:CNH) (CNHI) as their top agriculture sector pick, saying the stock stands out “as the only ag OEM we cover for which we expect EPS growth next year, driven by its sizable cost savings initiatives.”