12/21/2018 MACHINERY / MULTI-INDUSTRYCaterpillar Announces Officer Changes:Caterpillar Inc. announced that Zach Kauk, vice president ofthe Excavation Division, is leaving the company to pursue other opportunities. Replacing Kauk will beTom Frake, current vice president of Global Power Solutions Division (GPSD). Both moves are effectiveimmediately. Tom's deep expertise in both the machine and engine businesses, as well as his broadglobal experience during his more than three decades at Caterpillar, will position him well to lead theexcavation team, said Tom Pellette, Caterpillar group president of Construction Industries. We thankZach for his significant contributions and years of service to Caterpillar and our customers. Areplacement for Frake will be named soon.ABI Highlights for November:Architecture firm billings growth expanded in November by a healthymargin, according to the AIA. AIA’s ABI score for November was 54.7 compared to 50.4 in October. Withthe strongest billings growth figure since January and continued strength in new project inquiries anddesign contracts, billings are closing the year on a strong note. “Despite some concerns about a potentialeconomic downturn, architecture firms continue to report strong billings, inquiries, and new designcontracts,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “For the coming year, concernsabout the economy among architecture firm leaders tend to be balanced by their concerns about a lackof qualified employee prospects.” AG EQUIPMENTAGCO – Management Meeting Takeaways: Following AGCO's Analyst Day, we had the opportunity tohost meetings with Andy Beck, SVP and CFO, and Greg Peterson, VP of IR.Reiterates LT Targets: AGCO's analyst day was as expected. Management continues to invest organically in new products(IDEAL and launch Fendt globally), deliver on its global platform strategy, and optimize its globalpurchasing efforts and manufacturing. Over time, this should help AGCO achieve its longer term targetsof 10% margins reflecting initiatives highlighted above along with some help from volume. In themeantime, despite flattish markets, AGCO continues to improve margins modestly while positioning thecompany to capitalize on the upturn. We believe organic growth vs. acquisitions continues to be thefocus in the near term. Also, similar to peers, Precision AG continues to grow in importance; however,AGCO remains more reliant on outside partners vs. in-house, driving customer stickiness and helping toimprove farmers’ overall productivity. FCF should continue to be solid concentrated on internalinvestments, dividend and share repo.Details on 2019 Guide:For 2019, AGCO provided its initial guideof $4.60 in EPS which was slightly ahead of street expectations. Below the line, AGCO benefits from alower tax rate at 32-33% vs. 35-36% in 2018 and other expense down $10M y/y. AGCO guided to 2- 2.5% price increases in 2019, with net pricing (price increases less net change in material cost inflation)expected to be positive 60-70bps on a consolidated basis. Similar to DE, industry sales are forecastlargely flat with an upward bias to SA and NA and Europe largely flat. FCF continues to be solid.Regionally, AGCO expects a margin improvement of 50-75bps in NA and APA but significantly higherthan 75bps in SA. The commentary on the order book was similar to Q3 with NA flat, SA higher andEurope still slightly lower y/y but improved from Q3'18 marginally. (Link to Note)Deere to Launch Startup Collaborator Program:Deere & Company is launching the StartupCollaborator program in its Intelligent Solutions Group to enhance and deepen its interaction with startupcompanies whose technology could add value for John Deere customers. Our focus for the StartupCollaborator is specifically on startups that want to work with John Deere in real-world customerenvironments to determine the technology readiness of their innovations, said John Stone, senior vicepresident of Deere's Intelligent Solutions Group. Stone said the Startup Collaborator provides flexibilityfor Deere and startup companies to test innovative technologies with customers and dealers without amore formal business relationship. Startups also gain affiliation with and mentoring from a world leader inprecision agriculture. Innovation has been at the heart of John Deere for more than 180 years, Stoneadded. The Startup Collaborator welcomes innovative companies into a program that could help usdrive improved results for our customers. Three leading startups working to transform agriculture arealready part of the program:Bear Flag Robotics– A California company developing autonomoustechnology for farm tractors and implements to reduce operational expense and increase worker safety.Hello Tractor- A Nigerian company with a strong understanding of agriculture in Sub- Saharan Africathat has developed an application to manage tractor fleets for small holder farmers.Taranis– An Israelicompany that developed an automated field scouting service based on sub-millimeter aerial imageryutilizing deep learning for problem detection and analysis in agriculture. TRUCKS / TRANSPORTSNAV Q4’18 Earnings:Navistar International Corporation announced fourth quarter 2018 net income of$188 million, or $1.89 per diluted share, compared to fourth quarter 2017 net income of $135 million, or$1.36 per diluted share. Navistar reported net income of $340 million, or $3.41 per diluted share for fiscalyear 2018, versus net income of $30 million, or $0.32 per diluted share, for fiscal year 2017. Fourth12/21/2018 quarter 2018 adjusted EBITDA increased 20 percent to $322 million, versus $268 million one year ago.Fiscal year 2018 adjusted EBITDA increased 42 percent to $826 million, versus $582 million in 2017.Full-year adjusted EBITDA margins increased to 8.1 percent, up from 6.8 percent for 2017. This marksthe company's sixth consecutive year of annual growth in adjusted EBITDA on both a dollar andpercentage basis. Revenues in the quarter increased 28 percent, to $3.3 billion, compared to fourthquarter 2017. The revenue increase was largely driven by a 45-percent increase in the company's Corevolumes, which represent its sales of Class 6-8 trucks and buses in the United States and Canada.Revenue for fiscal year 2018 was up 20 percent to $10.25 billion, compared to $8.6 billion in fiscal year2017, attributable to annual revenue growth in all four operating segments. Class 8 retail market sharegrew to 13.5 percent in fiscal year 2018 versus 11.8 percent in fiscal year 2017. Navistar finished fourthquarter 2018 with $1.42 billion in consolidated cash, cash equivalents and marketable securities, andwith $1.36 billion in manufacturing cash, cash equivalents and marketable securities. For the year, thecompany generated $307 million of manufacturing free cash flow.EU November Truck Data:November EU HCV registrations were down 0.5%, while YTD is still up 4.7%vs. the prior year.Our Take:We note this slight deceleration follows a 7.7% increase in October vs. theprior year, on similar comps for both months.EU Countries Agree to 30 pct Cut in Truck CO2 Emissions:PerReuters : Ministers from EuropeanUnion countries agreed on Thursday to reduce carbon dioxide (CO2) emissions from trucks and busesby 30 percent by 2030, albeit with the potential to review this in 2022, the EU's Austrian presidency said.Environment ministers struck the deal, balancing the interests of Germany and the continent's largestauto sector with other countries, such as Sweden, which pushed for a sharper cut.The countries,collectively known as the Council, will still have to negotiate next year with the European Parliament,which envisages a tougher 2030 target of a 35 percent cut. The government representatives also agreedon Thursday to an interim target of a 15 percent reduction by 2025, relative to 2019 levels. Theparliament is pushing for 20 percent. The EU currently has no limits on emissions from heavy-dutyvehicles, unlike other countries such as the United States, China, Japan and Canada. Trucks account foralmost one quarter of the bloc's transport-related emissions. Curbs on the transport sector, the only onein which emissions are still rising, aim to help the bloc meet its overall goal of reducing greenhousegases by at least 40 percent below 1990 levels by 2030 under the Paris climate accord. The EU agreedon Monday on targets for cutting emissions from cars and vans. The European AutomobileManufacturers' Association (ACEA) has lobbied for far lower reduction targets for trucks of 7 percent by2025 and 16 percent by 2030. ACEA has said that the potential for electrifying truck fleets is far lowerthan for cars and that it would only really work for short trips within cities, but not for long-haul transit.Volkswagen's (VW) truck brand MAN has warned the new CO2 limits could cost tens of thousands ofjobs. Germany is home to the largest truck producer, Daimler. Other manufacturers in Europe includeVolvo, Italy-based Iveco, Paccar and Scania, also part of Volkswagen.REVG Q4’18 – Earnings First Blush: REVG Misses Again:REVG missed Q4'18 estimates againlargely tied to supply chain challenges and other headwinds with the company reporting adj. EBITDA of$39M, well below consensus estimates of $60M. Sales of $660M were down 3.5% y/y and 7% belowconsensus estimates with the shortfall tied to weak performance from the F&E segment. F&E sales weredown 21% y/y to $251M with the company noting ongoing supply chain challenges, which adverselyaffected the timing of ambulance shipments as well as temporary labor inefficiencies at two Fire facilities.F&E margins also underwhelmed at 7.4%, down from 12.4% last year. Commercial sales were in linewith expectations at $182M or up 3% y/y though adj. EBITDA margins of 5.3% fell short of ourexpectations due to tariffs and material availability (impacted the timing and profitability of certain productshipments), and unfavorable product mix as a result of higher volumes of shuttle bus units sold. On thepositive, Recreation posted solid performance with sales growing up 25% y/y to $235M and adj. EBITDAmargins of 9.3%, up from 7.7% last year. Also in Q4 REVG recorded a $35.6M impairment charge($12.8M in Commercial and $20.5M in corporate) as part of a planned disposition and write-down ofcertain assets. These assets include the Revability mobility van business (annual sales of $40M andREVG signed agreement to sell on Dec. 19th).FY’19 Below the Street:For FY'19, REVG sees revenueof $2.4-2.6B ($2.5B at the midpoint), versus consensus at $2.538B. Adjusted net income is seen at $66- 84M ($75M at the midpoint) below consensus at $86M, and adjusted EBITDA is seen at $150-170M($160M at the midpoint) also below consensus at $183M. REVG is expecting net cash provided byoperating activities to be $110-130M ($120M at the midpoint) and capital expenditures to be $25-30M.Interest expense is seen at $29-31M and REVG expects an effective tax rate of 25-27%. Additionally,REVG expects to generate $40M of total cash in FY19 from stated initiatives, including the divestiture ofcertain businesses and activities, including the Revability mobility van business, one Regional TechnicalCenter, and the Company's rental fleet. Looking ahead, REVG expects improvement in various issuesthey faced in FY18, including chassis availability and raw material supplies. Finally, consistent withcommentary at the CS Industrials conference and planned sale of the mobile van business, we expect12/21/2018 portfolio optimization to be a theme in 2019 with 40% of the business generating subpar margins /returns. (Link to Note)Gary Horvat Named Navistar Vice President Of eMobility:Navistar International Corporationannounced it has appointed Gary Horvat as Vice President of eMobility, focused on the company'seMobility Vision and Strategy, to lead this new business group. Horvat joins Navistar from Proterra, Inc.,a leading innovator in electric transportation, where he served as Chief Technology Officer. He will reportto Persio Lisboa, Navistar's Chief Operating Officer. Gary brings great depth in the development ofelectric vehicles and just as importantly, has a clear understanding of the role eMobility will play inaddressing customers' requirements moving forward, Lisboa said. We look forward to benefiting fromGary's leadership as we continue to invest in this critical capability. Horvat will be responsible forbuilding Navistar's eMobility team and for aligning its technical and commercial initiatives across thecompany's product lines. At Proterra, Horvat was responsible for all engineering and technologydevelopment for their company's electric bus product line. Accomplishments included setting a worldrecord for the longest range of any electric vehicle. Prior to joining Proterra, Horvat served as vicepresident, Powertrain at Denso International, where he was responsible for the development andapplication of powertrain and electrical components. Before his work at Denso, he was vice president,Product Development at Fisker Automotive, where he was responsible for improvements to thatcompany's extended-range electric vehicle. Horvat joined Fisker after a 26-year career at GeneralMotors, where he served most recently as executive director, Engineering Operations. He holds adoctor's and bachelor's degree in Industrial Engineering and a master's degree in ManufacturingEngineering, all from Cleveland State University.Volvo Group Divests Majority Stake in WirelessCar:The Volvo Group signed an agreement to divest75.1% of the shares in its wholly-owned subsidiary WirelessCar to the Volkswagen Group. The salesprice amounts to SEK 1.1 billion. The divestment will, at the time of closing of the transaction, result in apositive impact on operating income of approximately SEK 1.5 billion and a positive cash flow effect ofSEK 1.1 billion. Closing of the transaction is expected during the first half of 2019. WirelessCar providesconnected vehicle services and solutions to global producers of passenger cars. We are committed toremaining the leader within the field of connectivity and connected services. This agreement will enableus to fully focus our resources and efforts on connected solutions for commercial vehicles, says JanGurander, Deputy CEO of the Volvo Group. WirelessCar has over 3 million active connected cars acrossthe globe and revenues for 2018 are expected to reach approximately SEK 0.5 billion. WirelessCar isbased in Gothenburg, Sweden, with offices in USA and China. The completion of the transaction issubject to customary authority approvals.WABCO Signs $950 Million Long-Term Agreement with Global Manufacturer to Supply itsLeading Braking, Advanced Driver Assistance Systems and Efficiency Technologies:WABCOHoldings Inc. announced that it has signed a $950 million long-term agreement with one of the world’stop manufacturers of commercial vehicles. Under the eight-year agreement, WABCO will equip two ofthe original equipment manufacturer’s (OEM) brands with its leading braking, advanced driver assistancesystems (ADAS) and efficiency technologies. Representing a further industry endorsement of WABCO’sglobal leadership in braking system platforms, this latest multi-year agreement confirms WABCO as theOEM’s sole supplier for electronic braking systems (EBS) in Europe and anti-lock braking systems (ABS)in Brazil. WABCO will also supply conventional valves to support both braking systems. WABCO willfurther provide air-disc brakes (ADB), electronically controlled air suspension (ECAS), actuators, and itsnext generation, cost-optimized, lighter integrated pedal units (IPU). Additionally, WABCO will supply aircompressors for the OEM’s engine brand while supporting the expansion of the engine’s availability inthe U.S. and Brazil with local production and global engineering capabilities. During the course of theagreement, WABCO will also supply its next generation Optimized Power Reduction (OPR) single-pistoncompressor and its new clutch solution offering enhanced fuel efficiency. As part of the wide-rangingagreement, the OEM is also confirmed as WABCO’s lead customer for its next generationOnGuardACTIVETM Advanced Emergency Braking System (AEBS) solution with series productionplanned for 2019. Featuring a new radar sensor which offers the commercial vehicle industry’s longestradar detection range, as well as the widest near-range field of view, WABCO’s OnGuardACTIVE cannow provide up to full autonomous emergency braking on moving and stationary vehicles from a highwayspeed up to 80 km per hour – even in poor visibility conditions. WABCO is the industry’s originalequipment manufacturer (OEM) independent leader for collision mitigation systems and ADAS, withmore than 450,000 OnGuard safety systems sold world-wide. As its full system supplier of EBS andADAS, WABCO will additionally equip the OEM’s new electric vehicles. WABCO is also closelycollaborating with the OEM on its platooning program. WABCO and the OEM are additionally bothcontributing to the ENSEMBLE innovation consortium, co-funded by the European Union, which isseeking to develop and demonstrate multi-brand truck platooning in Europe. “We are honored that thismajor global OEM continues to place its faith in WABCO to deliver pioneering innovations and high- quality standards which offer real differentiating value for its leading truck brands,” said Nick Rens,。。。。。。