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Eaton (NYSE:ETN), Trane Technologies (NYSE:TT) and Wesco International (NYSE:WCC) on Friday were upgraded by analysts at financial-services firm J.P. Morgan. They changed some ratings on electrical equipment and multi-industry stocks as they introduced estimates for fiscal 2025.
“Performance of the last 18 months was driven by a combination of growth and earnings revisions and we see the same for the next year, except we see a reversion in the leaders on this front, and somewhat of a change in leadership,” Stephen Tusa, analyst J.P. Morgan, said in an October 6 report. “We agree there are plenty of headwinds when it comes to cost of capital and a deteriorating consumer, but the industrials have some unique drivers from mega projects that are real, and will be hitting positively over the next three years.”
Eaton Upgrade
Eaton (ETN) was upgraded to Overweight from Neutral because the power-management company “stands out as one of the most sustained growth stories with the best revision potential going forward,” according to J.P. Morgan. “Even if the multiple contracts a bit, we expect it to remain above average at a 10% premium, enough to get it back to close to highs in a group and economy in which growth is likely to be challenged.”
Trane Technologies Upgrade
Trane Technologies (TT) was upgraded to Neutral from a previous investment rating of Underweight.
“Trane (TT) stock has performed well year-to-date and earnings here have held up better than we expected, mostly on price/cost, though management execution has also been solid,” according to J.P. Morgan. “End-market exposures in residential/transport remain and commercial unitary is now an emerging risk.”
The analysts said they prefer Trane (TT) to peer company Carrier Global (NYSE:CARR), whose planned acquisition of a manufacturing unit of Germany’s Viessmann Group adds more uncertainty to its outlook.
Wesco Upgrade
Wesco International (WCC) was upgraded to Overweight from Neutral.
“For 2024, we see a return to [a low- to mid-single-digit percentage] organic growth supported by exposure to megaprojects, utility and data centers, but model further margin normalization,” according to J.P. Morgan. “In 2025, we believe EPS could inflect higher as organic sales growth is sustained in that [low- to mid-single-digit percentage] range.”
Carrier Downgrade
In contrast to upgraded companies, Carrier Group (CARR) was downgraded to Underweight from Neutral.
“The stock has materially outperformed the group over the last six months (up 17% versus the group up 2%, +1,500 basis points) and the past year (up 45% versus group up 22%, +2,300 basis points), extended in our view as risks emerge at Viessmann given volatility in subsidies and in EPS for the combined simplified enterprise,” according to J.P. Morgan. “Trane (TT) is a better way to play the similar exposures in Resi, Commercial, and Transport and remains more attractive from a free cash flow-based valuation.”
More about Carrier, Eaton, Trane
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