3M (NYSE:MMM) is upgraded to Overweight from Equal Weight and a $194 price target at Barclays, part of the firm's more optimistic outlook in the U.S. multi-industry sector that prompts several stock upgrades.
Now is an attractive entry point for the overall group, Barclays believes, based on a view that the negative earnings revision cycle is nearing an end, greater visibility on key end-markets - particularly non-residential construction and general capital spending - and a recovery in emerging markets; $50-plus oil and potential M&A activity helps too, the firm says.
Barclays says 3M is the largest emerging market exposed name it covers (at 35% of sales), and it believes an emerging market recovery is taking place, particularly in places where 3M has been hit hard, notably Brazil; also, the recent rally in emerging market currencies will help 3M in an outsized manner.
In addition to 3M, Barclays upgrades WABCO Holdings (NYSE:WBC), ITT Industries (NYSE:ITT), Rexnord (NYSE:RXN) and Rockwell Automation (NYSE:ROK) to Overweight from Equal Weight; however, the firm downgrades Actuant (NYSE:ATU) and Terex (NYSE:TEX) to Underweight from Equal Weight.
Barclays analyst Robert Wertheimer begins coverage of the U.S. machinery sector with a negative view, seeing consensus estimates too high across the board with revenue for the current cycle already peaking for most of the sector.
The analyst expects a sharper than expected downturn for North American trucks, with another peak level eight years away; the tractor supercycle is only two years in a downturn, while the prior two supercycles saw seven consecutive down years in machinery sales, Wertheimer says.
Of the 15 companies in the firm's sector coverage universe, only two are rated Overweight: United Rentals (URI +1.5%) and Allison Transmission (ALSN +0.4%).
Started with Equal Weight ratings: Actuant (ATU -1.2%), AGCO (AGCO +1%), Caterpillar (CAT -1%), Joy Global (JOY -2.9%), Lincoln Electric (LECO -0.8%), Manitowoc (MTW -1.9%), Terex (TEX -0.7%) and WABCO (WBC -1.2%).
Rated Underweight: Deere (DE -0.3%), CNH Industrial (CNHI +1.5%), Cummins (CMI -0.8%), PACCAR (PCAR -1%) and Navistar (NAV -2.9%).