U.S. Markets closed

Morgan Stanley Starts Coverage Of Electrical, Multi-Industry Stocks Threatened By Tech Advances

Hannah Genig

Morgan Stanley highlighted technology’s persistent threat to the industrial cycle, as well as the demand for capital goods within the electrical equipment industry, in a broad intiation of electrical equipment and multi-industry stocks Tuesday. 

“These violent delights have violent ends,” the firm's analysts said. 

The Analysts

Analysts from Morgan Stanley initiated coverage of 14 electrical equipment and multi-industry stocks and assumed coverage of three. 

The Thesis

Advancements are driving the efficiencies that raise the threshold for capital equipment purchases, thereby flattening the industrial cycle, according to Morgan Stanley. 

The sector is marked by "shrinking barriers to entry in fast-growing niches in industrial technology and software,” the note said. “We believe this makes revenue growth more important in a sector that has prioritized margin expansion since the Great Recession.”

The cycle is maturing, according to Morgan Stanley, which is out tactically positive in the near-term for the majority of the group. 

Overweight

  • Honeywell International Inc. (NYSE: HON): Morgan Stanley said the company is a solid balance of upside potential and secular performance using an emerging software platform.

Price Target: $175.

  • Emerson Electric Co. (NYSE: EMR): EMR should demonstrate outsized benefit from productivity spending and cyclical momentum, according to Morgan Stanley. 

Price Target: $85.

  • Stanley Black & Decker, Inc. (NYSE: SWK): SWK is a prime example of an effective market outgrowth with internal investments, the analysts said. 

Price target lifted from $161 to $164. 

  • Ingersoll-Rand PLC. (NYSE: IR): IR represents a mix of value, lower volatility and upside margin execution, according to Morgan Stanley. 

Price Target: $111.

Price target lowered from $136 to $133. 

Morgan Stanley assigned Equal-weight valuations to companies such as Parker-Hannifin Corp. (NYSE: PH), Johnson Controls (NYSE: JCI), Allegion PLC (NYSE: ALLE) and Colfax Corp. (NYSE: CFX).

Underweight

  • Lennox International Inc. (NYSE: LII): Morgan Stanley analysts consider LII’s business fundamentals to be in the later stages and its valuation to be "less favorable." 

Price Target: $201.

  • Rockwell Automation (NYSE: ROK): ROK’s markets have lost some outgrowth potential, as certain headwinds limit the company’s ability to grow in software verticals, according to Morgan Stanley. The stock was downgraded from Equal-weight and its price target was lowered from $192 to $163. 

Related Links: 

Analyst: United Technologies, Honeywell Remain Leaders In Competitive Aerospace Market

Johnson Controls Has 'Persistently Underwhelming' Growth, Cash Generation, RBC Says In Bearish Turn

Latest Ratings for HON

Date Firm Action From To
Aug 2018 Morgan Stanley Initiates Coverage On Overweight
Jul 2018 Citigroup Maintains Buy Buy
Jul 2018 JP Morgan Maintains Overweight Overweight

View More Analyst Ratings for HON
View the Latest Analyst Ratings

See more from Benzinga

© 2018 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.