Hurco Closes The Fiscal Year Strong, But Not Quite In The Clear Yet

The industrial sector has been a more interesting place of late. While there are still troubling signs for 2023, including higher rates, contracting manufacturing PMI, and weakening business confidence, the market has been more willing to look for "buy the dip" opportunities and the sector has done well over the last three months. That said, there has still been a gap between the broader industrial space and sub-sectors like metalworking where there are still risks about short-cycle weakness and where Hurco (NASDAQ:HURC) has modestly underperformed the sector since my last update (up around 4% versus 11% for industrials) while beating the S&P 500 and other machine tool companies like DMG Mori (OTCPK:MRSKF) and Okuma (OTC:OKUMF) and metal tools company Kennametal (KMT).

Hurco's better-than-expected fourth quarter results are encouraging, but I'm not willing to sound the "all clear" at this point given increasing pressures on smaller manufacturers. That said, I do think the reshoring trend still has legs and I believe management has the company in good shape to weather whatever remains of this downturn. I do still see double-digit annualized return potential from here, but I would again remind investors of the risk of a worse-than-expected short-cycle slowdown in 2023, particularly with numerous quarterly reports and 2023 guidance calls on the way in this sector over the next six weeks.

 

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Hurco Closes The Fiscal Year Strong, But Not Quite In The Clear Yet