GS Novak US Industrials and Materials two points 20 Aug 2026

GS Novak - US Industrials Materials two points 20 Aug 2026 Novak · Goldman Sachs · US Industrials & Materials Thu 20 Aug 2026, 11:13am ET

1. ISM – supportive data point this morning – we think this is the one lean to take coming away from Q2 into conference season and end of the year. We are 7 months into an ISM cycle that we would characterize as early innings. 55+ is the sweet spot – a level we reach just two weeks ago. Supportive data from the Philly Fed this morning meaningfully beating expectations, taking a step higher from last month and reaching essentially decade highs. Desk likes PH MMM IR LECO IEX GTES RAL. We think some other short cycle names are a little more difficult at current levels including ITW AME ROK DOV RRX KMT. Reach out to discuss.

Responses to the May Manufacturing Business Outlook Survey suggest an overall expansion in the region’s manufacturing activity. The indicators for current activity, new orders, and shipments all remained above their nonrecession averages this month, and the employment index rose to a multiyear high. Price increases were less widespread this month, but both price indexes remained elevated. The survey’s broad indicators for future activity jumped higher and suggest widespread expectations for growth over the next six months.

2. DE off the call: Further industry softening in Brazil and Europe driving sales to the low end in PPA even with a larger benefit from foreign currency. Highlighting infrastructure, data center, investment in rental fleet driving construction. Global forestry to be down 10% with softer residential end markets specifically North America. EOP programs – sprayers opened in mid-May, planters opened end of June, combines just opened. Modest improvements in orders intake vs. prior year. Collective orders for planters

and sprayers are up mid-single digit vs. the completion of last year’s program. This is different than checks folks have done expecting down year over year.

Despite the implied net income below consensus for Q4, using this as a jumping off point for 2027, consensus does not appear out of line – lots of moving pieces – $6bn of fiscal 2027 consensus adjusted net income looks a bit high but not extreme.

DE, while expensive on trough earnings (low 28x P/E NTM vs. 23-24x historical trough), has really done nothing relative to the broader group over the last 5 years. And it is difficult to find earnings that are clearly troughing – the debate remains around the pace of recovery.

Desk view: We think this strength in the shares today sets the bar high as we get closer to fiscal 2027. EOP up MSD may not be enough to drive EPS up nearly 30%.

Inbounds: CTVA strength … rail follow through … what to do with AAP … FDXF weakness vs. the group … F down 5% … ALGT weakness day 2 … positioning in ROK … INIO down 5% AI/momentum or something else … SOLS why at bottom of the board the last few days …