Any time an analyst initiates or upgrades a stock and accompanies that recommendation with a long-term positive outlook a stock can see a considerable increase in its share price within just a few minutes of that note. With that said, I wanted to focus on two diversified machinery stocks that were initiated with new coverage in the last 24 hours and some of the variables long-term growth investors should consider.
ITT Corp. (NYSE:ITT) had its coverage initiated by Deutsche Bank, which rated the company a "Buy" at current levels and set a $24.00/share price target. According to Yahoo! Finance, the White Plains, New York-based firm "designs and manufactures engineered critical components and customized technology solutions for energy infrastructure, electronics, aerospace, and transportation industries. The company operates in four segments: Industrial Process, Motion Technologies, Interconnect Solutions, and Control Technologies." According to StreetInsider.com, "Deutsche Bank noted that the EPS estimates for ITT were all well above the consensus and if these numbers are either met or exceeded the end-result could be quite positive for ITT shareholders."
I think that the continued development of the company's Motion Technologies, Interconnect Solutions and Control Technologies are going be key factors when it comes to the success of ITT, but many investors should also examine the company's earnings history over the last four quarters. In the last 12 months, ITT has surpassed analyst estimates by an average of 14.25%, whereas direct competitor Dana Holding Company (NYSE:DAN) has only managed to surpass estimates by 7.98%.
Illinois Tool Works (NYSE:ITW) had its coverage initiated by Deutsche Bank, which rated the company a "Buy" at current levels and set a $68.00/share price target. According to Yahoo! Finance, the Glenview, Illinois-based firm "manufactures various industrial products and equipment worldwide. Its Transportation segment offers plastic and metal components, fasteners, and assemblies; fluids and polymers; fillers and putties; polyester coatings, and patch and repair products; and truck remanufacturing, and related parts and service. The companys Power Systems & Electronics segment provides arc welding equipment; metal arc welding consumables and related accessories; metal solder materials; equipment and services for microelectronics assembly; electronic components and component packaging; airport ground support equipment; static and contamination control equipment; and pressure sensitive adhesives and components." According to StreetInsider.com, "Deutsche Bank noted that the EPS estimates for ITW are $4.10 this year, $4.55 in 2013, and $5.10 in 2014 and if these numbers are either met or exceeded the end-result could be quite positive for ITW shareholders."
The good thing about ITW is the fact the company has improved EPS by 15.6% in the most recent quarter compared with the same quarter a year ago. The company has also managed to demonstrate a pattern of positive earnings per share growth over the past two years.
Potential investors looking to establish a position in either ITT or ITW should do so with a small to moderate position and add to that position as both companies' developments begin to enhance bottom line numbers. ITT and ITW have very promising potential, especially when it comes to earnings, but I'd still remain cautious in case the ISM's PMI number misses estimates in the next few months.