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 fro