CAT - Bernstein 2022 machinery outlook - CAT and PCAR up AGCO down

Bernstein's Machinery analyst taking a relatively balanced view on 2022, with 6 buys out of his 10 stock coverage. The bullish highlights include sector underperformance since May leading to a relative discount to the market (35% multiple discount to the SPY, versus 15% historically); the analyst's view that a 1% increase in inflation leads to a 10% increase in equipment investment (CPI currently 6.8%); restocking to drive 5-10% yoy growth on flat end-market demand. The headwinds for the sector include supply chain issues taking longer to resolve than expected, and a peaking ag cycle. Caterpillar (NYSE:CAT) up to buy on relative performance (laggard), benefit of looser monetary policy in China, and a steel price selloff helping margins. Paccar (NASDAQ:PCAR) also up to buy, as a refreshed portfolio will lead to under-appreciated pricing power and market-share gains; truck cycle will sustain for longer than expected, based on historical cycle duration (31

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Bernstein 2022 machinery outlook - CAT and PCAR up, AGCO down