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 machinery sector, led by Rob Wertheimer, Founding Partner and Director of Research at Melius.

Wertheimer’s coverage includes 19 companies in total and spans market capitalizations, including large-cap companies such as Caterpillar, Deere & Co. and smaller cap companies such as Manitowoc. The initiation follows Melius’ initiation of 28 multi-industry companies, led by Scott Davis, Melius’ Chairman and Chief Executive Officer, and 19 global aerospace and defense companies, led by Founding Partner and Melius President, Carter Copeland.

“For the second time in twenty years, machinery stocks trade at a premium to multi-industry stocks, which usually only happens in a trough. In 2009, machinery revenues had fallen 60-70% in trucks and construction, which was far steeper than the more diversified multi-industry group,” said Wertheimer. “As equipment inevitably aged out, those revenues were too low, and so stocks properly discounted a steeper upward rebound. Today, the premium valuation justification is less clear.”

Highlights from the report include:

Neutral View on Global Machinery Sector

  • Opportunities and cycles are split. Some end markets are coming off recent years of strong volumes, others have yet to recover.
  • Machinery multiples should have already contracted in some subsectors, but too often shares trade at high multiples on high earnings for too long.
  • Heavy construction and mining are the best combination of older equipment fleets needing replacement with positively inflecting demand.
  • On highway trucks are seeing positive demand indicators, but after a long stretch of high truck production.

Company-Specific Weightings Are Mixed

  • We have our highest conviction Buy-Accumulate ratings on Caterpillar and United Rentals.
  • Overweight rated names include Cummins, Volvo, Stanley Black & Decker, WABCO Holdings, Ashtead/Sunbelt, and Lincoln Electric.
  • We are Underweight five stocks: Herc Holdings, Navistar International, Manitowoc, PACCAR and Terex Corporation.

Wertheimer brings more than a decade of machinery research experience to Melius, and has been recognized as a top-three analyst by Institutional Investor at both Barclays and Morgan Stanley. Most recently, Mr. Wertheimer was the lead machinery analyst at Barclays. Prior to Barclays, he led the machinery coverage at Vertical Research and Morgan Stanley and started his career covering beverage and retail across Latin America as an associate on a top-ranked team.

About Melius Research

Based in New York City, Melius Research was founded in October 2017 as an independent equity research boutique focused on the industrials sector. The team of seventeen professionals includes top-ranked Multi-Industry analyst Scott Davis, top-three ranked Global Aerospace and Defense analyst Carter Copeland and top-three ranked Global Machinery analyst Rob Wertheimer. Melius’ independent research offering is based on extensive cycle experience, differentiated and dedicated corporate access and a data-centric approach. Melius utilizes vast data sets and leading edge analytics in our process in the journey to help our clients make better informed investment decisions.

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