CNH Industrial (CNHI -0.5%) is upgraded to Buy from Neutral and AGCO (AGCO -0.3%) is upgraded to Neutral from Underperform at BofA Merrill Lynch, which expects agricultural equipment margins to surprise to the upside across the space over the next 12 months, citing improvement in the used equipment market, stabilizing demand patterns in North America and renewed growth in Brazil.
BofA's upgrade of CNHI follows the firm's 25%-30% upgrades to its EPS estimates, while less bullish on AGCO due to lack of better margins in SOuth American even as the company has improved its cost structure.
The firm hikes its stock price target for CNHI to $15 from $10.50 and for AGCO to $70 from $58.
Deere (DE -0.1%) is initiated with a Buy rating and $126 price target at Stifel, which sees the company as the top manufacturer of agricultural and construction machinery.
Stifel says the markets for Agricultural and Turf and Construction and Forestry have been under considerable pressure since 2013-14, yet DE has managed decrementals in the mid-20% range, and many of these markets now appear to be firming.
Stifel believes these firming markets coupled with the cost takeouts set the stage for considerably improved results when the firm sees markets beginning to turn in 2018.
The firm also starts coverage of AGCO (AGCO -1.3%) with a Hold rating and $64 price target, saying it prefers to wait to get more aggressive until receiving more clarity on the inflection of large ag equipment.
"Greatest probability" of guidance raise for CAT and OSK; sees probability of guidance cut for MTW. CMI, MTW and TEX will miss estimates and OSK, PCAR and ALSN results to be in line.
"Most expect widespread beats/raises this quarter, particularly for names exposed to N.A. Class 8 truck/construction; "while we are equally optimistic about 1Q trends, we are not convinced that share prices will follow."