Monday, June 17, 2019

Hurco Now Definitely In The Down Cycle

There's really no more "if" or "I wonder" about Hurco (HURC) and what's going on in the machine tool cycle - Hurco's April quarter marked the third straight quarter of year-over-year declines in orders, and revenue comps should soon turn negative. Although I think Hurco is faring better than average so far, it's too soon to really tell, and I think investors should expect year-over-year declines in revenue for both this year and next, though I still expect a return to growth in 2021.

Buying into a downturn is tricky. I was pretty underwhelmed by the near-term potential of these shares back in March, and the shares have dropped about 10% since then - lagging not only industrials in general, but also other machine tool companies like DMG Mori (OTCPK:MRSKY) and Fanuc (OTCPK:FANUY). Although I do believe the shares are undervalued, I don't believe the market has really accepted the probability of a weaker-than-expected second half in the U.S. economy, and I see more downside risk for the shares and the market. With at least a couple more quarters of order correction likely, I think there's still risk here, even though longer-term investors may want to keep an eye out for good entry points.

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Hurco Now Definitely In The Down Cycle

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