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The analyst mentions that 2Q earnings for the machinery group, supply chains, and increasingly demand destruction fears into FY23 continue to dominate investor conversations as backlogs remain well ahead of "normal" levels. Meanwhile, rolling macro indicators coupled with rising interest rates are clouding 2023 demand expectations across a host of equipment.
The supply chain headwinds seem increasingly company-specific (vs. last year), noted Boeschen.
The analyst believes companies with outsized aftermarket exposure, more resilient end-market dynamics into FY23, and/or company-specific margin improvement stories present the most compelling near-term set-ups.
The analyst believes that the combination of demand strength in key verticals is more durable than the market appreciates into FY23 and beyond, given municipal strength and incremental fund flows still to come.
Boeschen sees FSS as among the biggest beneficiaries in his coverage, given its substantial exposure to public revenues and industrial/ transportation infrastructure.
Price Action: FSS shares are trading higher by 4.21% at $36.92 on the last check Tuesday.
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