Jefferies Downgrades Machinery Stocks

Jefferies reshuffled its ratings for machinery and industrial stocks on Thursday, citing concerns over high valuations and market sentiment around industrial trends.

Key Downgrades

Deere & Co (NYSE: DE)

Jefferies cut Deere from Buy to Hold after a significant stock price increase following its fourth-quarter 2024 earnings results. The stock is currently trading at a price-to-earnings (P/E) ratio of 24, aligning with historical high valuations. Analysts indicated that this pricing suggests a cyclical trough may occur, leaving little room for further expansion. They warned that the agricultural sector could face risks due to increasing tariff conflicts with China. Despite the downgrade, the long-term outlook remains positive, maintaining a 2025 price target of $510, suggesting a 12% upside from current levels.

PACCAR (NASDAQ: PCAR)

PACCAR was also downgraded due to its shares trading at nearly 10 times the 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which is at the upper end of its historical range. Jefferies noted that while recent industry trends are positive, potential delays in 2027 emission regulations could impact expected sales growth.

Kennametal (NYSE: KMT)

Kennametal was downgraded to Hold, citing a strong stock rally following the November elections. Currently trading at just under 9 times Jefferies' 2025 EV/EBITDA estimates, analysts noted improved expectations for shorter-cycle coverage post-election but cautioned about risks to the company’s guidance.

Upgrades

In contrast, Jefferies upgraded SiteOne Landscape Supply (NYSE: SITE) and Timken (NYSE: TKR) to Buy while identifying Caterpillar (NYSE: CAT) and Parker-Hannifin Corp (NYSE: PH) as top large-cap picks.