Hurco Treading Water As The Cycle Turns

The last few months have done little to dispel concerns that short-cycle industrial demand is slowing, and that certainly hasn't helped small machine tool manufacturer Hurco (NASDAQ:HURC). While the shares have held up okay relative to the broader industrial space and other shorter-cycle names like DMG Mori (OTCPK:MRSKF), Fastenal (FAST), Kennametal (KMT), and Sandvik (OTCPK:SDVKY) (though Kennametal has done better) since my last update, the reality is that the current outlook is not particularly strong for an already-overlooked short-cycle industrial.

In light of the last Hurco earnings report and reports from other companies and third-party information sources (like the Japanese Machine Tool Builders' Association or JMTBA), I've pulled forward my expectations for Hurco's cyclical correction. The shares do still look undervalued and positioned for a double-digit long-term annualized return, but it's hard to see investors getting excited about short-cycle names again until mid-2023 at best, as the rate cycle has yet to play out and inflation remains stubborn, while business confidence erodes.

 

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Hurco Treading Water As The Cycle Turns