This has been a challenging downturn so far for suppliers of construction and mining equipment. Unlike most recessions, in which customers continue to operate at lower levels, this downturn saw a dramatic curtailment of activity. While parts and service demand has held up better for Komatsu (OTCPK:KMTUY) than new equipment, it has still been a sharp deterioration, and the outlook for the recovery is cloudy at best, particularly with weak trends in North America and Europe and an ongoing shift away from coal as a fuel source for electricity.
When I wrote about Komatsu a quarter ago, I had mixed feelings about the company, with the long-term/recovery valuation looking relatively appealing but the short-term outlook looking pretty poor. Since then the shares have appreciated some (up around 10%), but they’ve lagged peers and rivals like Caterpillar (CAT), Epiroc (OTCPK:EPOKY), and Hitachi Construction Machinery (OTCPK:HTCMY). I still see some upside in the valuation, but I’m more interested in mining companies with less reliance on coal than Komatsu.
Read the full article here:
Komatsu Still Offers Heavy Machinery Recovery Upside, But It Could Take Some Time
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