Are there deals for bargain-hunting investors in machinery right now?
Due to our belief that a global economic slowdown reduces earnings growth rates in 2009 and beyond, we have no buy recommendations in our machinery coverage. Even in the machinery sub-sectors that investors tend to prefer – mining-machinery and agriculture – orders could be at risk to changes in the commodity markets. If commodity prices buckle under weaker global growth, producers may invest fewer dollars in the machinery equipment necessary to boost output. In addition, producers could decide to delay or postpone projects, which would affect the timing of revenue realization. Essentially, a global growth slowdown leaves very few hiding places for investors in the machinery sector. We expect the industry median P/E multiple to contract as the market discounts tougher times ahead. Mario Ricchio is a senior analyst covering the machinery sector for Zacks Equity Research.
