Construction spending continues to decline with no end in sight yet, therefore construction industry stocks continue to tank. But there are bits of good news in the sector. Gehl Company (Nasdaq: GEHL), a small construction company in terms of both products and balance sheet, offers some upbeat news. True, FY 2007 net sales declined 6% to $457.6 million, but the company did report income from continuing operations of $25 million, or $2.00 per diluted share. What is more encouraging is that Gehl's market share in the domestic market continues to increase despite an overall contracting market. International sales of smaller-sized skid loaders and telehandlers, two of Gehl's best-selling products, grew 31% over 2006 sales by volume, accounting for 29% of Gehl's total sales for FY 2007.

Gehl managed to hold administrative expenses essentially flat in FY 2007, while improving gross margins. Income from financing contracts declined as expected in a slowing market, and bad debt expenses increased by $3.7 million as clients defaulted on their payments. Gehl CEO William Gehl remains optimistic that FY 2008 net sales will be in the $405-$425 million range, with increasing emphasis on international sales. The company is enhancing its international supply-chain distribution network. The company's order backlog is up 142% to $95 million, so Gehl anticipates FY 2008 diluted earnings per share (EPS) of $0.95 to $1.20. Given the growing construction industries in Brazil, China and India, Gehl's smaller-sized equipment just may fit their bill. The stock is currently trading at $14 and change.

Shares of Deere & Co. (NYSE: DE) rose $1.85 to $146.80 after the company reported Q4 EPS results above the consensus estimate.

Deere, the world's largest agricultural machinery company, reported Q4 EPS of $1.88, well above the Reuters consensus estimate of $1.54. Deere earned $1.20 in Q4 2006. The company reported Q4 revenue of $6.12 billion, compared to the Reuters consensus estimate of $5.24 billion.

Deere said profits from tractors, harvesters and combines almost tripled to $388 million on strong demand for advanced machinery from Brazil and Eastern Europe. In addition, the company said higher U.S. farm incomes helped boost North American sales of tractors and combines.

Ever wonder how your local construction company can afford those big earthmovers and cranes it uses all over town? The odds are it does not own them at all. It rents. A leader in sales and rental of the heavy equipment is headquartered in Baton Rouge.

H&E Equipment Services (NASDAQ: HEES) provides heavy construction and industrial equipment, dealing in industrial lift trucks, aerial platforms, cranes and earthmovers. It rents and sells new and used equipment and also provides repair and maintenance services. Customers include construction contractors, manufacturers, public utilities, municipalities, maintenance contractors and other large industrial concerns. The firm serves nearly 28,000 U.S. accounts.

H&E surprised the Street last week, when it reported Q3 EPS of 53 cents and revenues of $270.6 million. Analysts had been expecting 45 cents and $243.3 million. Management also guided FY07 revenues to $0.995-$1.0 billion ($944.12M consensus) and announced a $100 million stock repurchase program. The CEO noted that a recent mid-Atlantic acquisition was expected to generate" significant growth opportunities." HEES shares broke through 30-day/50-day moving average resistance on the news and has now begun to form a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy," three "buys" and one "hold." Analysts see a 17% growth rate, through the next year. The HEES P/E ratio (10.61), Price to Sales ratio (0.78), Price to Book ratio (2.55), Price to Cash Flow ratio (4.36), Sales Growth rate (32.58%), EPS Growth rate (17.78%), Return on Assets (7.94%), Return on Investment (12.87%) and Return on Equity (27.32%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 50% of the outstanding shares. Over the past 52 weeks, the stock has traded between $15 and $30.59. A stop-loss of $16.70 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

With the markets in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio. CNH [Case New Holland] Global (NYSE: CNH) is worth an evaluation.

CNH is the second biggest manufacturer of agricultural equipment behind Deere (NYSE: DE), and also is a major manufacturer of construction equipment.

Like Deere, CNH is riding the global agricultural wave: emerging market development is increasing demand for agricultural products as food and as energy. (Example: corn for ethanol.)

Further, CNH has established brands in Case and New Holland, a reliable distribution network, and demonstrated marketing proficiency. Further, continued, strong demand for agriculture and construction equipment in Latin America represents a solid revenue tailwind.

The downside points? Above-average debt and a slowing domestic (Europe) market for Amsterdam-based CNH are on analysts' radar screens, but those are not large enough to offset the company's solid operational prospects, moving forward.

(Note: Technical analysis agnostics stop reading here; all others continue.)

Technically, CNH's chart looks good. The stock's only serious breach of its 50-day moving average occurred during the August 2007 market sell-off, and CNH has been above its 200-day moving average for about a year.

Stock Analysis: CNH Global is a moderate-risk stock not suitable for low-risk investors. With a p/e of 30, CNH is selling for an above-average price, hence investors should wait for a pull-back to $58-$60 before purchasing shares, if the market presents the opportunity. Sell / Stop Loss: $39.

With the markets in a choppy/consolidation mode (or perhaps worse), it's best to consider including a few defensive stocks in your portfolio. Deere and Co. (NYSE: DE) is worth an evaluation.

Deere is well-positioned to take advantage of several long-term, secular trends. Chief among these are: strong international agricultural and international construction/building markets, and an expanding consumer equipment sales segment.

Solid, enduring growth in international agricultural markets is the standout fundamental here, with the business line's revenue growth expected to offset slumps in equipment sales for the correcting U.S. housing market. Other positives: DE's costs remain under control, its balance is strong, and agriculture equipment market conditions suggest the company has modest pricing power. Increased use of renewable fuels are likely to add to demand for DE's equipment, assuming at least one renewable fuel gains traction as a practical, affordable alternative to petroleum-based energy.

Fastenal Company's (NASDAQ:FAST) reduction of its growth estimates for 2007 from 20.2% to 16.9% may not have been encouraging for some -- analysts at Robert W. Baird maintained a neutral rating but reduced the target price from $46 to $43 -- but Morningstar sees good things for the company.

Morningstar has selected FAST's Will Oberton as the CEO of the Year for 2006, on the basis of the company's financial track record, corporate governance, history of creating shareholder value, and growth potential.

A supplier of manufacturing and construction equipment and supplies, FAST got its start some 40 years ago as a producer of fasteners, and now has about 2,000 stores in North America. It has reported compounded earnings at almost 30% annually since its IPO in 1987, while generating returns on invested capital of more than 20%. And the company's share price has kept pace with its financials, also compounding at about 30%.

Oberton has been aggressive about improving FAST since he became CEO, with programs such as overhauling its stores to increase traffic and sales, to centralizing accounts-receivable collection and bringing more of the company's transportation needs in-house. Some of these initiatives have hurt the company's margins over the past few quarters, which may be why Wall Street soured on Fastenal a bit last year.

Besides FAST's long-term growth potential, Morningstar also picked Oberton for his model corporate stewardship, citing the company's superb financial disclosures, reasonable compensation, and minimal option issues. In short: he's not an overpaid, rock-star CEO.