Morgan Stanley (NYSE:MS) has turned bullish on the machinery industry, upgrading its sector rating to "attractive" for 2025. The investment bank cites improved clarity on key equipment cycles, supported by economic trends and potential policy impacts under the Trump administration.

Key Themes for 2025

Morgan Stanley highlights three main drivers expected to shape machinery sector performance:

1. Equipment Cycle Positioning:

   • North American commercial vehicles and agricultural equipment are poised to lead the recovery.
   • Construction equipment, however, remains the most vulnerable.

2. Valuations:

   • Select stocks in the sector are trading at favorable multiples, providing opportunities for long-term gains.

3. Political Impacts:

   • A Trump presidency could introduce macro and geopolitical risks such as trade uncertainties, inflation, and a stronger U.S. dollar. However, domestic-focused firms with pricing power are seen as resilient.

Upgraded Stocks

Morgan Stanley has raised its ratings on CNH Industrial NV (NYSE:CNH) and Timken Company (NYSE:TKR) to "overweight," reflecting confidence in their de-risked profiles and potential for growth.

Revised Price Targets:

• CNH Industrial: Target price lifted to $16.5 from $11.
• Timken Company: Target price increased by $11 to $93.

Both are identified as "value" plays, well-positioned to capitalize on improving market dynamics.

For deeper financial insights into companies like CNH and Timken, the Full Financials API provides detailed balance sheets, income statements, and cash flow analysis.

Other Notable Calls

Morgan Stanley reaffirmed its “overweight” ratings on Cummins (NYSE:CMI), Paccar (NASDAQ:PCAR), Wabtec, Deere (NYSE:DE), and Martin Marietta (NYSE:MLM). These companies are expected to benefit from:

• Strong end-market demand.
• Favorable pricing environments.
• Resilient operational models.

Conversely, the brokerage maintained an “underweight” stance on Caterpillar (NYSE:CAT), Terex (NYSE:TEX), Lincoln Electric, and Donaldson, citing headwinds in global demand and valuation concerns.

Winners Under Trump

Morgan Stanley sees U.S.-focused rental equipment firms like United Rentals (NYSE:URI) and WSC, as well as aggregates players like Martin Marietta and Vulcan (NYSE:VMC), as clear beneficiaries under Trump's potential infrastructure policies. Their domestic sales exposure and pricing power make them strong candidates for outperformance.

Investors tracking broader sector dynamics can leverage the Sector Historical Overview API to analyze historical performance trends and cyclical shifts within the machinery industry.

Risks to Watch

While bullish on the sector overall, Morgan Stanley flagged several risks:

• Geopolitical Uncertainty: Trade policy changes and potential tariffs under Trump's administration.
• Macro Trends: Inflationary pressures and currency fluctuations, particularly a strong U.S. dollar.
• Construction Equipment: Continued weakness in global demand could weigh on companies in this segment.

The Bottom Line

Morgan Stanley's upgraded outlook reflects a cautiously optimistic view of the machinery sector for 2025, bolstered by strategic opportunities in commercial vehicles, agricultural equipment, and U.S.-focused companies. While risks tied to macroeconomic trends and policy uncertainty remain, selective plays like CNH, Timken, and rental equipment firms offer strong growth potential.