CAT - Caterpillar Agco Esab are top machinery picks at JPMorgan

Caterpillar ( NYSE: CAT ), Agco ( NYSE: AGCO ) and Esab ( NYSE: ESAB ) on Thursday were named as top stock picks in the machinery industry by analysts at JPMorgan.

“With the base case assumption that global real GDP growth will slow to about 2% in 2023, followed by slight improvement in 2023 (albeit still below 2022 growth), we are updating estimates across our coverage,” Tami Zakaria, analyst at JPMorgan, said in a January 12 report.

Caterpillar’s ( CAT ) “upside potential is underappreciate by investors” with the maker of heavy machinery and construction equipment deriving most of its revenue from non-residential construction, mining and oil and gas, according to JPMorgan. The bank added Caterpillar to its Analyst Focus List of investment ideas.

AGCO’s ( AGCO ) stock is less expensive than its historical average price-to-earnings ratio and larger agricultural machinery rival Deere ( NYSE: DE ), and “we view it as a long-term margin and sales growth story independent of cyclical support as management laid out several initiatives to outgrow industry volumes.

Swedish American company Esab ( ESAB ) is trading at a discount to bigger rival Leco ( NASDAQ: LECO ), JPMorgan said.

The bank removed Illinois Tools Works ( NYSE: ITW ) from its Analyst Focus List, while keeping an Overweight rating on the stock. JPMorgan also downgraded agricultural machinery company CNH Industrial ( NYSE: CNHI ) to Neutral from Overweight after its recent gains.

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