Mircea Dobre, vice president of equity research at Milwaukee-based Robert W. Baird & Co. Inc., says the worst may be over for the mining sector.
Mining equipment manufacturers like Milwaukee-based Joy Global Inc. and Caterpillar Inc., which has a significant presence in the area, have been struggling for several quarters as the mining industry has stagnated.
But Dobre has upgraded both companies on the evidence that commodities have hit rock bottom. Commodities are still in a deflation cycle, but the deflation has become broad-based across commodity sectors, she said.
While demand is still soft for mining equipment and OEM commentary is very negative, CAT has never underperformed the broader market for five consecutive years going back to 1930. This year would make five consecutive years of underperformance for the mining magnate.
“Mining and commodity cycles last a long time, and the news is still bad – we acknowledge that,” Dobre said in a letter to investors Monday. “But, there are signs the worst might be over and history shows that being early pays off.”
