Key insights
- Bernstein upgraded Eaton and Hubbell due to reduced metal tariff costs, benefiting from their high metal content and eligibility for lower rates. Agricultural and construction equipment manufacturers like Oshkosh and Caterpillar face negative impacts. Jacobs Solutions is highlighted as an undervalued alternative. This shift in tariff dynamics presents a moderate bullish signal for specific industrial stocks.
Investing.com - Bernstein analyst Chad Dillard upgraded Eaton Technologies and Hubbell to top positions among industrial manufacturers following revised Section 232 metal tariffs announced by the Department of Commerce in early April.
The tariff rate dropped to 15% from 50% for companies with special designation status. Eaton (NYSE:ETN) and Hubbell (NYSE:HUBB) are positioned to benefit from lower Section 232 costs due to high metals content in their products and eligibility for the reduced tariff rate.
Paccar (NASDAQ:PCAR) maintains its current position as Section 232 commercial vehicle tariffs supersede the metals tariffs. Agricultural and construction equipment manufacturers face the most negative impact, with Oshkosh (NYSE:OSK), AGCO (NYSE:AGCO), Deere (NYSE:DE) and Caterpillar (NYSE:CAT) ranked in order of exposure, followed by Cummins (NYSE:CMI).
Bernstein noted that Cummins’ ranking may change if truck engines fall under commercial vehicle tariff rules. The firm identified service companies including United Rentals (NYSE:URI), Logan (NYSE:LGN), Jacobs Solutions (NYSE:J) and Quanta Services (NYSE:PWR) as alternative investment options. Jacobs Solutions, with a market cap of $14.8 billion and trading at $126.25, appears undervalued according to InvestingPro analysis. The company has raised its dividend for seven consecutive years and reports next earnings on May 5.
The analysis quantified changes in material cost economics and provided a framework for assessing company exposure to the revised tariff structure. For deeper insights into Jacobs Solutions and other industrial stocks, InvestingPro offers comprehensive Pro Research Reports covering over 1,400 US equities with expert analysis and actionable intelligence.
In other recent news, Jacobs has completed its acquisition of PA Consulting for approximately $1.6 billion. The transaction involved acquiring all remaining shares not previously owned by Jacobs, with the consideration paid mostly in cash and partially in Jacobs shares. To support this acquisition, Jacobs Solutions completed a $1.3 billion senior notes offering, issuing $800 million of 4.750% Senior Notes due 2031 and $500 million of 5.375% Senior Notes due 2036. The proceeds from this offering are intended to finance the cash portion of the PA Consulting acquisition. Additionally, Jacobs has been awarded two contracts by the Illinois Department of Transportation for upgrades to the I-290 Eisenhower Expressway corridor in the Chicago area. These projects include design services and project management for replacing the Indiana Harbor Belt railroad bridge. Furthermore, Jacobs secured a contract under the U.S. Missile Defense Agency’s SHIELD program, which has a ceiling value of $151 billion. These recent developments highlight Jacobs’ ongoing expansion and involvement in significant infrastructure and defense projects.
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