Truist Securities Picks Caterpillar and Deere as Top Machinery Stocks

Truist Securities has highlighted two key players in the machinery sector amid ongoing concerns about demand and earnings momentum. The firm maintains a Buy rating on both Caterpillar and Deere, citing multiple growth drivers across various markets.

Caterpillar leads the discussion as one of the most debated names in machinery. Investors question whether the company can sustain its earnings and backlog upside. Power demand is exceeding expectations, and Caterpillar is evaluating facility repurposing to expand backup-power capacity. This suggests continued strength in orders and backlog. Truist Securities notes potential underappreciated upside from the oil and gas sector, which could boost margins in the Power & Energy segment. Construction demand remains robust, and mining original equipment presents another opportunity following significant restructuring.

Deere ranks second among machinery stocks. Truist Securities suggests it is time to invest in farm equipment names. Recent stock performance reflected positioning as investors sought shelter when power stocks fell out of favor. The debate in farm equipment has shifted from whether the group can move past the trough to the magnitude of the recovery. In late August, Deere reported its North American planter and sprayer early order program was up mid-single digit. Demand could strengthen further given that corn prices have moved above $5.00 per bushel from roughly $4.00 when the program opened. While Deere remains the most debated name on valuation, Truist Securities believes current earnings are still below trough levels and operating leverage remains underappreciated.