Benzinga | Oct 8, 2021 10:44AM EDT

Wells Fargo Initiates Coverage On 5 Machinery Stocks With Mixed Ratings

* Wells Fargo analyst Joseph O'Dea initiated coverage of machinery companies Parker-Hannifin, Stanley Black & Decker, Otis Worldwide, Dover, and Ingersoll-Rand.

* Parker-Hannifin Corp (NYSE:PH) was initiated with an Overweight rating and a price target of $337, implying an upside of 16%.

* O'Dea says that Parker-Hannifin shares appear to have "succumbed" to cycle positioning that's driven its largest relative valuation discount versus the EEMI group in at least ten years. He anticipates better-than-group average earnings growth over the next two years.

* Stanley Black & Decker, Inc. (NYSE:SWK) was initiated with an Overweight rating and a price target of $227, implying an upside of 27%.

* O'Dea mentions that the stock's underperformance year-to-date reflects a market view on tools and storage demand that is "overly pessimistic."

* With the shares trading at a 30% discount to electrical equipment and multi-industry peers, Stanley offers a "compelling value with a favorable risk/reward setup."

* Otis Worldwide Corp (NYSE:OTIS) was initiated with an Underweight rating and a price target of $72, implying a downside of 13%. The analyst identifies his opinion as a "valuation call with optionalityon China property market uncertainty."

* O'Dea says his call is not a cautious view on medium-term targets as he believes OTIS can grow revenue in a low- to mid-single digits percentage range and grow operating profit at a mid-single-digit or higher rate; he doesn't see "meaningful upside surprise risk" and sees better value in other building technology stocks.

* Dover Corp (NYSE:DOV) was initiated with an Underweight rating and a price target of $152, implying a downside of 4%.

* The analyst states that "cyclical factors" give him some pause as he anticipates some deceleration in the Manufacturing PMI growth trends, leading to relative valuation compression in the EEMI group.

* O'Dea adds that while 2023 consensus EPS estimates look "relatively reasonable," they also "lean slightly high."

* Ingersoll Rand Inc (NYSE:IR) was initiated with an Equal Weight rating and a price target of $54, implying an upside of 5%.

* O'Dea is "impressed" by cycle management and business portfolio management in what amounts to "a lot of progress" in a short amount of time. He adds that sights appear to be set on "meaningful" capital deployment to M&A.

* Price Action: PH shares are trading higher by 0.41% at $290.86, SWK higher by 0.52% at $178.54, OTIS lower by 1.94% at $82.74, DOV lower by 1.73% at $157.01, and IR lower by 0.93% at $51.22 on the last check Friday.