Research Report
February 20, 2018

BA: Dream Big… Why Not Go After GE Aviation?

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By: Carter Copeland & Scott Davis Is M&A the next leg of BA’s transformation? We think BA is still in the early stages of a once-in-50-year transformation focused on becoming a higher…

Research Report
February 20, 2018

Better Truck History Shows Cycle Duration and Efficiency Risk to Growth in Machinery

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By: Rob Wertheimer  Truck cycle analysis suffers from a short history of available data, with the widely used ACT series going back only to 1996. We dug up a longer history for…

Research Report
February 15, 2018

EMR: Still a Top Pick

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By: Scott Davis Analyst day was well attended, mostly long only community vs. HF’s, mostly NYC and Boston folks.  General mood among attendees was bullish – most people like this…

Research Report
February 15, 2018

Airbus: Back on Track? Feels Like It

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By: Carter Copeland We’ve been bullish on the multi-year outlook for Airbus for the last several years, but admittedly our optimism has been modestly tempered over the last ~6 months…

Research Report
February 14, 2018

Cycles and Unexpected Outcomes on Fleet Dynamics

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By: Rob Wertheimer  A theme in our fleet and cycle work is that when normal sales on aging and shrinking fleets run into a surge in demand, results can be…

Research Report
February 14, 2018

Defense: Lots of Catalysts Now in the Price

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By: Carter Copeland This note concludes the sixth year in our effort to aggregate quarterly defense company results into “scorecards” to more clearly compare various operational and stock-performance metrics across…

Research Report
February 14, 2018

Melius Industrials Strategy

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By: Scott Davis Industrial Strategy Folks, in the link below please find our monthly Melius Industrials Macro Strategy deck. Key takeaways below… Report Here  

Research Report
February 13, 2018

GE: Baker Hughes a Win/Win…Buy It All

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By: Scott Davis GE is expected to liquidate its 62.5% stake in the Baker Hughes/GE Oil & Gas business and we propose that GE consider the exact opposite… With BHGE…

Research Report
February 13, 2018

Ag Dashboard

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By: Rob Wertheimer  Our ag thesis: ag machinery markets are probably much closer to normal than to trough, and equities risk mis-pricing as a result. We’ve worked on individual build…

Research Report
February 13, 2018

Thesis Creep on the Cheap

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By: Carter Copeland GD’s proposed acquisition of Fed IT provider CSRA came as a bit of a shock this morning. Few seem enamored by the deal and we attribute the…

Research Report
February 12, 2018

The GTF – Here We Go Again

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By: Carter Copeland News on Friday afternoon that the Pratt GTF engine had encountered a new problem (and a follow up on Saturday from Airbus confirming that GTFpowered aircraft deliveries would be…

Research Report
February 12, 2018

The Smartest Man in Industrials is Back (and Supporting Melius)

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By: Scott Davis In starting Melius, the biggest to-do on my list was to lever the benefit of independence to reconnect with the best of the best, and not just in the…

Research Report
February 12, 2018

Industrial Technology: Shape of the Market

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By: Rob Wertheimer  We are launching a new avenue of research aimed at disruptive technology. Alongside this note we are publishing a separate chartbook, a new and unique overview of funding…

Research Report
February 9, 2018

FTV: Proving That Spins Do Work

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By: Scott Davis We were initially skeptical that the FTV spin-off from Danaher would create outsized value – after all DHR had already traded at a pretty healthy multiple.  Key…

Research Report
February 9, 2018

Mining Cycle: Status, Thesis, & Outlook

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By: Rob Wertheimer  We use some highly detailed mining equipment data in support of our work, and present a year-end wrap up and quarterly trend data here. Our thesis in…

Research Report
February 8, 2018

What’s Going on With All This Boeing M&A Talk?

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By: Carter Copeland With the WSJ reporting on BA’s potential interest in WWD, a couple of things are on our mind: 1) The pace and scale of BA’s M&A effort…

Research Report
February 8, 2018

GE Should Move Faster: 5 Ideas

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By: Scott Davis The best pushback we get on buying GE here is a lack of tangible catalysts, lack of visibility, and the reality that other industrial peers are riding…

Research Report
February 7, 2018

U.S. Industrials: Upcycle Intact – Shopping List on the “Pullback”

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By: Scott Davis, Carter Copeland & Rob Wertheimer On our Melius launch in Oct 2017 we stated that we are only in inning 3 of the upcycle, however the market…

Research Report
February 6, 2018

EMR: Still a Top Pick

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By: Scott Davis EMR is one the key stocks that we target to buy on the market’s correction.  EMR Report Here  

Research Report
February 6, 2018

CFX: Not Ready For Prime Time

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By: Scott Davis Colfax is an intriguing story, solely because of its common ancestry with Danaher and Fortive. Otherwise it’s a pretty uninteresting story with middle-of-the-pack assets and a culture…

Research Report
February 6, 2018

BAH: Growth vs. Margin Saga Continues, Upside Intact

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By: Carter Copeland There was enough evidence in BAH’s FYQ3 results to support our bullish top-line acceleration thesis despite disappointing margins again stealing the show. We’re staying Buy-Accumulate and think…

Research Report
February 5, 2018

Money-Making Themes Post Q4 Earnings

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By: Carter Copeland With earnings season now close to done, we highlight a handful of themes that we see as significant marginal drivers of group performance as we exit Q4…

Research Report
February 5, 2018

What We Learned in 4Q17

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By: Scott Davis We are officially in quarter 3 of the industrial upcycle and all signs continue to point up and to the right.  As we said most of 4Q17,…

Research Report
February 5, 2018

US Ag/Construction Market Share & Leasing Dashboard

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By: Rob Wertheimer  CNHI continues to lose share in high horsepower North American ag equipment, which may be a 10% headwind to 2018 large ag sales in NA for CNH….

Research Report
February 1, 2018

RXN: This is the Quarter We’ve Been Looking For

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By: Scott Davis Since our Oct launch, RXN has stood out to us as one of the few deep value cyclicals left in an otherwise pricey space, and as such…

Research Report
February 1, 2018

ETN: It’s Their Turn…

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By: Scott Davis In October, on our launch of Melius, we upgraded ETN to Overweight vs. our prior view and leaned in more heavily on cyclicals.  And the ETN recommendation…

Research Report
February 1, 2018

IR: Time to Buy It Again…Upgrade to OW from EW

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By: Scott Davis We love the theme of industrial laggards and IR has trailed the group by 700 bps LTM.  What has kept us on the sidelines have been three…

Research Report
January 31, 2018

BA: $500 or Bust…Still a Must Own in Industrials

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By: Carter Copeland We harbored some modest concerns that BA expectations were growing a bit lofty into earnings; however, the company once again delivered, laying to rest any short-term fears…

Research Report
January 31, 2018

PACCAR Thesis Post 4Q17

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By: Rob Wertheimer  Paccar finished another positive year from a strategic standpoint. Share up in North America, parts revenue up 11% on continuation of a longstanding strategy, and increased integration,…

Research Report
January 30, 2018

DHR: These Guys Are Good

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By: Scott Davis We’ve had a Buy rating of some sorts on DHR for a dozen years or so and obviously no regrets there.   But each of those years there…

Research Report
January 26, 2018

HON: What Matters for the Stock

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By: Scott Davis The minutia around quarterly earnings is maddening.  So here’s a quick summary of what matters: The 2018 guide went up with the new tax tailwind but not…

Research Report
January 26, 2018

CAT With More Room: What We Think and What We Learned After 4Q17 Results

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By: Rob Wertheimer  Still at deep trough: CAT revenues peaked at almost $66 billion in 2012. In 2017, CAT earned $6.88 (adjusted) on $45 billion in revenues, down more than…

Research Report
January 25, 2018

URI 2018 and Beyond

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By: Rob Wertheimer  URI’s 2017 full year report and outlook showed improved scale, industry pricing, and operations. Its adjusted EBITDA guide is up ~16% year over year, with incremental margin…

Research Report
January 25, 2018

UTX: How Much More Could be Left in This Move?

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By: Carter Copeland We missed it: Some trades can seem obvious after the fact and frankly that’s how we feel about UTX here. The stock felt like a great upgrade…

Research Report
January 24, 2018

CAT Retail Sales: Machines up 34%, Managing the Growth is Key Issue

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By: Rob Wertheimer  CAT dealer/retail sales in the three months ended December rose a remarkable 34%, up from the three month up 26% in November and 19% in October. Engines…

Research Report
January 24, 2018

GE: Still Messy, But De-Risking Quickly

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By: Scott Davis The stock seems to have found a bottom and the narrative seems to be finding balance.  For those waiting for the falling knife to land, you can…

Research Report
January 23, 2018

GE: Getting Out of the Abyss (In Pictures)

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By: Scott Davis Following up on our piece yesterday, we have provided a PPT presentation with some more granular data/info on GE and our positive view.  We include a new…

Research Report
January 23, 2018

Why This Earnings Season Should be More Volatile, and Provide Buying Opportunities

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By: Carter Copeland For several reasons, we expect Q4 earnings season to be more volatile than any we can recall in recent years. However, we expect short-term volatility to fade…

Research Report
January 22, 2018

Compounding Value: Tax Benefits and Asset Returns at URI/AHT

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By: Rob Wertheimer  Our view of rental equipment companies like URI, Sunbelt/Ashtead, and eventually maybe HRI is that they are akin to low risk compounders, trading at a steep discount…

Research Report
January 22, 2018

GE: Getting Out of the Abyss

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By: Scott Davis It’s been since April 2008 that we’ve seen GE in a negative vortex like this.  Banks had their “fun” in 2008-2009 and no price was too low. …

Research Report
January 22, 2018

SPR: I Got 99 Problems, But The Brits Ain’t One

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By: Carter Copeland With GKN now actively in play, SPR shareholders and management should be thinking creatively about what a potential tie-up might mean for the company’s long-term future. Since…

Research Report
January 18, 2018

Where Are China Excavators in the Cycle?

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By: Rob Wertheimer  CAT some weeks ago made cautionary comments on China construction equipment; we’ve argued that CAT construction is at low cycle levels or deep troughs in North America,…

Research Report
January 16, 2018

Post Tax Revisions, BAH Looks Like Most Dislocated Name in A&D

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  By: Carter Copeland With initial 2018 outlooks set to include the benefits of tax reform, like others we’re updating our models with new effective rates: For our commercial aerospace…

Research Report
January 16, 2018

Volvo, Paccar and Rising Power of Scale

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By: Rob Wertheimer  We are occasionally asked why recommend Volvo shares given our more negative North American Truck cycle view, and given that Europe trucks are also at high cycle?…

Research Report
January 16, 2018

Melius Industrials Strategy

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By: Scott Davis Industrial Strategy Folks, today we are rolling out the latest iteration of our Melius Industrials Macro Strategy Databook, with a focus on the capex cycle.  Our view…

Research Report
January 12, 2018

DE: Ag Thoughts Post CEO Breakfast

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By: Rob Wertheimer  We are adding our analysis and opinion to the well reported and very positive dynamic at the Deere analyst breakfast. First the report: Deere is bullish, encapsulated…

Research Report
January 11, 2018

US Ag/Construction Share & Leasing Dashboard

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By: Rob Wertheimer  We are updating our data on financed equipment market share and leasing activity in US construction and ag machinery markets. Generally speaking, share data in ag is…

Research Report
January 9, 2018

U.S. Industrials: The Capex Upcycle in Pictures

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By: Scott Davis Folks, we’ve put together a slide deck outlining our view that capital spending will be the next industrial cycle driver. Key takeaways … Report Here  

Research Report
January 8, 2018

Rolling Forward the Machinery Cycle

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By: Rob Wertheimer  When should machinery investors start to look across the peak to the downside of cycles? Despite the obvious and varied melt-ups in our space, it is generally…

Research Report
January 8, 2018

U.S. Multi-Industry: Updating Numbers for Tax Bill

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By: Scott Davis With tax reform impacts becoming clearer, we’re updating our models with new (mostly lower) rates. Our average tax rate decreases 425 bps to ~23% from ~27%, translating…

Research Report
January 8, 2018

A Case for $500 As Operational Improvements Accelerate – The Boeing Company

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By: Carter Copeland After a detailed scrubbing of our multi-year bottom-up free cash flow and earnings forecasts in light of recent performance revelations and tax benefits, we still see significant…

Research Report
January 4, 2018

Brazil Ag Tractors: Analysis of “Normal”

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By: Rob Wertheimer  Surprising result: 2017 is more likely normal than trough For the first time we have an analytical framework to estimate normal sales volume for Brazil’s tractor market—a…

Research Report
January 4, 2018

EMR: 5 Ways to Win – High Conviction Buy

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By: Scott Davis EMR remains one of our 4 high-conviction Buy-Accumulate rated names. With cyclical upside from a recovering industrial macro, it’s surprising to us that the stock continues to…

Research Report
January 2, 2018

The Earnings Setup – Q4 2017

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By: Carter Copeland Back by popular demand: Following several requests, we’re bringing back our quarterly earnings setup analysis, in which we use various quantitative and qualitative measures to rank levels…

Research Report
December 22, 2017

Forget Accretion – What Does a Potential ERJ Deal Tell Us About BA’s Strategy?

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By: Carter Copeland Boeing continues to move aggressively to maximize their market position: Over the last several years, there has been a notable acceleration in BA’s forward-leaning posture when dealing…

Research Report
December 20, 2017

Melius Industrials Strategy

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By: Scott Davis Multi-Industry & Electrical Equipment, Aerospace & Defense, Machinery Folks, today we are rolling out the 2nd iteration of our Melius Industrials Macro Strategy Databook, representing the next…

Research Report
December 20, 2017

Does Tax Reform Break TDG’s Business Model?

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By: Carter Copeland We’ve fielded several questions about the secondary and tertiary impacts of tax reform following our note last week. One line of questioning that has come up in…

Research Report
December 20, 2017

Trucks and Tailwinds at Cummins

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By: Rob Wertheimer  The upcycle into a tightening freight market has truck orders strong and truck production likely to continue its record upcycle, with growth in fleet and sales into…

Research Report
December 15, 2017

Ag Dashboard

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By: Rob Wertheimer  Everyone loves the ag cycle.  We are still struggling to catch up with the bullish mood, and so far, still failing. As we wrote on Thanksgiving, this…

Research Report
December 14, 2017

Mining Machinery Needed to Fill EV Demand: Modest Increase

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By: Rob Wertheimer  The past two days have seen headlines on the Electric Vehicle impact on mined minerals. Glencore noted that Electric Vehicles may drive a 3-fold increase in cobalt…

Research Report
December 14, 2017

U.S. Multi-Industry: Tax Reform More Clear…Average EPS Revision 11%

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By: Scott Davis With yesterday’s final deal on a tax bill, we’ve put together some thoughts on the impact for industrials. Much has been written here, so we’ll keep our…

Research Report
December 12, 2017

Lots of Potential A&D Winners in Tax Bills

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By: Carter Copeland With the House/Senate tax bills making their way to conference, and after numerous inquiries from clients looking into the some of the less obvious implications for A&D…

Research Report
December 8, 2017

US Ag/Construction Share & Leasing Dashboard

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By: Rob Wertheimer  We’ve long had some unique data on US equipment sales, sourced from lien filings. Over the past ten years we’ve used these data in several highly non…

Research Report
December 7, 2017

GE: Gas Power Generation – Some History & Outlook

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By: Scott Davis If I thought attending my 15th Powergen trade show in Vegas would either be fun or put me in a good mood, I was wrong.  The show…

Research Report
December 5, 2017

GE: The Investment Case Post the Apocalypse…The Road from $18 to $27

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By: Scott Davis Folks – we’re unsurprisingly still getting a ton of questions on GE. At $18, it’s an asset play now. Our liquidation and DCF valuations easily get us…

Research Report
December 4, 2017

What Defense CEO’s, the DoD, and Congressional Leaders Are Talking About

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By: Carter Copeland For the fifth year in a row, we spent much of the weekend with a who’s who of the US national security establishment, including dozens of CEOs,…

Research Report
December 4, 2017

Strategy, History and Future at CAT

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By: Rob Wertheimer  Virtually no one we meet with fully believes/prices in the implied normal earnings ranges from CAT’s investor day. That particularly applies to non-owners. Disbelief is evident in…

Research Report
November 27, 2017

Tesla Semi and the Fuel Savings Window

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By: Rob Wertheimer  There is a quirk in using miles per gallon as a metric for fuel consumption… the inverse of mpg: gallons per mile, or gallons hundred miles would…

Research Report
November 21, 2017

What if Orders Reaccelerate?

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By: Carter Copeland Since our re-launching of coverage, we’ve fielded a lot of questions on Boeing and Airbus, most frequently, “What pushes these stocks higher?” and “Can the stocks work…

Research Report
November 21, 2017

Melius Industrials Strategy

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By: Scott Davis Multi-Industry & Electrical Equipment, Aerospace & Defense, Machinery Folks, today we are introducing the new Melius Industrials Macro Strategy Databook, representing the next evolution in our historical…

Research Report
November 16, 2017

ROK: $225 WOW – View From the Front Row

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By: Scott Davis I’m literally sitting on the front row of the ROK annual analyst day, having spent much of the morning speaking to ROK employees, most of whom seem…

Research Report
November 16, 2017

Cummins Investor Day – Electric Truck Thoughts ahead of Tesla & A Few Thoughts on Capital and Growth

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By: Rob Wertheimer  There will probably be more people live blogging the Tesla truck launch event tonight at 11 EST than the Cummins Analyst day here in Indianapolis, though there…

press
November 15, 2017

Scott Davis – CNBC Clip “GE is an asset story at this point”

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Scott Davis speaks with CNBC’s “Squawk Alley” about what to do with the stock   

Research Report
November 13, 2017

GE: We’ve Had the Reset – Need More From GE Though

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By: Scott Davis New CEO John Flannery has a chance to fix the GE mess he was handed and we’ll see how he does.   It’s early days.  We have high…

Research Report
November 10, 2017

Strong Positive Signs in Ritchie Bros. Construction Miss

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By: Rob Wertheimer There were two positive data points for construction equipment out today… Report Here  

Research Report
November 6, 2017

Mining Shipments & Cycle Views

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By: Rob Wertheimer Our thesis in mining: there is a powerful 10 year cycle ahead. Fleets doubled from 2004-2012, making replacement demand today higher than the total market in the…

press
November 3, 2017

Scott Davis, CEO Shares his Views on GE Corporate Jet Controversy with NYT

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“‘G.E. was a great American company and now its reputation is tarnished and the brand is damaged,’ Mr. Davis said.” Full article by James B. Stewart: https://www.nytimes.com/2017/11/02/business/ge-corporate-jets.html

Research Report
November 3, 2017

GE: The Most Likely Outcome

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By: Scott Davis GE under $20 gets us to a stock price most of us considered unfathomable post the Financial Crisis.  How we got here is still open to debate…

Research Report
October 31, 2017

ROK: Someone Could Still Step Up and Buy It

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By: Scott Davis Emerson willing to pay $215 for ROK may represent a “peak of cycle” type valuation and should be seriously considered by ROK’s board, particularly if that price…

Research Report
October 30, 2017

Holy Bull – What We’ve Learned in Oct

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By: Scott Davis 3Q17 has been full of drama, noise, and debate but underlying all the usual non-sense is a clear up-cycle, a full 3 quarters in and gaining momentum….

Research Report
October 27, 2017

L3 Technologies – This One Not Like the Others: Moving to OW

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By: Carter Copeland Our previous thesis on LLL was that while incoming CEO Chris Kubasik was likely to be successful in affecting value-creating change in the organization (the prevailing central…

Research Report
October 27, 2017

CMI: Finding a Deal at GE’s Sale?

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By: Rob Wertheimer & Scott Davis Cummins has a depressed multiple problem from electrification risk, global scale in reciprocating engines, no clear way to buy new technology to dominate electrification,…

Research Report
October 25, 2017

Ten Years of Truck Upcycle: Never Happened, Never Gonna Happen

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By: Rob Wertheimer Let’s look at consensus forecasts for trucks, following ACT as a guide. Consensus expects an upcycle, a rise in long haul truck sales in 2018, 2019, and…

Coverage Universe
October 25, 2017

Coverage Universe

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Research Report
October 23, 2017

GE: The Free Cash Flow Story in Pictures

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By: Scott Davis GE: The Free Cash Flow Story in Pictures Folks – lots of information out there on GE cash flow.  Wanted to weigh-in on the debate.  We see…

press
October 20, 2017

Scott Davis – CNBC Clip on GE Outlook Following 3Q17 Earnings Release

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Scott Davis speaks with CNBC’s “Squawk Alley” about his outlook on General Electric shares following 3Q earnings release.  

Research Report
October 20, 2017

GE: A Painful Reset – But It’s Over

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By: Scott Davis GE: A Painful Reset – But It’s Over For those who avoided this GE mess, hats off to you.  This is painful.  And it’s hard not to…

Research Report
October 18, 2017

The Boeing Company – Q3: A Key Milestone on the Margin Journey

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By: Carter Copeland The inevitability of significant margin expansion at BA remains a key pillar of our thesis, and we expect upcoming Q3 results to provide a particularly unique window…

Research Report
October 17, 2017

W.W. Grainger: Why You Got Your Face Ripped Off

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By: Scott Davis GWW: 3Q17 Thoughts & Model Our cycle call is bullish, and so far earnings results support that view. Though early, FAST (Fastenal) had strong top-line results (core…

Research Report
October 17, 2017

What’s Pricing at United Rentals? Mispriced

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By: Rob Wertheimer Our thesis: URI is structurally undervalued and also has cyclical upside. The market is focused on the risk of operating in a fragmented industry with low differentiation….

press
October 10, 2017

Melius Research Initiates Coverage of Global Machinery Sector

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NEW YORK – October 10, 2017 – Melius Research (Melius), an independent equity research boutique focused on the industrial sector today announced that it has initiated coverage of the global…

Research Report
October 10, 2017

Initiation of Melius Machinery Research

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For the second time in twenty years, machinery stocks trade at a premium to multi-industry. That’s what should happen at a trough. In the deep trough of 2009, machinery revenues…

Research Report
October 5, 2017

Melius Research Initiation of Multi-Industry

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Six years ago, I experienced my first ever “garden leave” – 3 months of rest/fitness/golf and extra happy “happy hours.” I had an awaiting job and a contract. I smiled…

press
October 5, 2017

Melius Research Initiates Coverage of Multi-Industry Sector

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NEW YORK – October 5, 2017 – Melius Research (Melius), an independent equity research boutique focused on the industrial sector today announced that it has initiated coverage of the multi-industry…

Research Report
October 3, 2017

Initiating Melius A&D Research

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Two 2-Sigma Observations You Can’t Afford to Ignore Now in my 13th year as an aerospace analyst, this is my first ever sector launch. Years ago my apprenticeship turned into…

article
October 3, 2017

Letter to Clients

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The Latin word “melius” directly translates into “better” in English. However, it is the Japanese translation into “kaizen,” which means “continuous improvement,” that best reflects our culture and core values….

press
October 3, 2017

Star Analysts Debut New Firm, $180k All-In Price as MiFID Looms

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By Felice Maranz and Joshua Fineman  (Bloomberg) — Equity research firm Melius Research LLC plans to use a three-tier system to charge clients as it launches coverage today, according to…

press
October 3, 2017

Top Industrials Analysts Launch Melius Research LLC

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Melius Initiates Coverage on 19 Global Aerospace & Defense Companies NEW YORK – October 3, 2017 – Top-ranked multi-industry analyst, Scott Davis, today announced the launch of Melius Research (Melius),…

press
June 28, 2017

Barclays Trio Said to Found Research Startup as MiFID Looms

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By Stephen Morris and Trista Kelley Three Barclays Plc analysts in New York have left the bank to set up their own firm in anticipation of the upheaval caused by European rules that will…