This is a bad time to have exposure to oil and gas capex, and fracking machinery in particular, as the vast majority of the North American fleet is idle and there’s really no demand for either new equipment or aftermarket parts. It’s not such a terrible time to be in the mining equipment business, though, and Weir Group’s (OTCPK:WEGRY) (WEIR.LN) strong aftermarket-driven business has held up quite well during this downturn.
Although I was already expecting a weaker outlook for oil/gas when I last wrote about the company, I wasn’t expecting what COVID-19 would ultimately do to the company’s core markets, and the shares have underperformed, including underperforming other mining names like Epiroc (OTCPK:EPOKY). Although I expect healthier demand for mining equipment in 2021, and I think the negative impact of oil/gas is probably more than amply reflected in the share price, it’s going to be an issue for sentiment until management sells the business. I do still see fairly attractive long-term upside here, but in the near-term outperforming the likes of Epiroc and Metso could be difficult so long as oil/gas remains so weak.
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Weir's Strong Mining Business Holding Up Well, But Exiting Oil & Gas Could Take Time
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