Caterpillar Stock Slips as Analysts Worry About ‘Bloated’ Inventories

Key Takeaways

• Caterpillar shares fell Monday as Morgan Stanley analysts downgraded the stock and lowered their price target.
• The analysts pointed to “bloated channel inventories that now need to be de-stocked.”
• The downgrade comes after Caterpillar shares hit an all-time high last month after the Chinese government announced stimulus measures.

Shares of Caterpillar (CAT) slid 2% Monday as analysts at Morgan Stanley downgraded the stock and lowered their price target, citing pressure on the company’s construction industries segment.

“We now see rising evidence of a potential de-stocking downturn” for U.S. construction equipment, the analysts wrote, adding Caterpillar faces “bloated channel inventories that now need to be de-stocked. As a result, we see even more risk of downward earnings revisions.”

The analysts downgraded the stock to “underweight” from “equal-weight” and lowered their price target to $332 from $349, nearly 16% below Caterpillar’s closing price Monday of $393.95.

Of the 11 analysts covering Caterpillar tracked by Visible Alpha, just four held a “buy” or equivalent rating as of Monday, with a consensus price target of $360.55.

Concerns Come After Shares Hit Record High

The downgrade comes after Caterpillar shares hit an all-time high last month on hopes the company could benefit from an expansion in China’s housing market in the wake of stimulus measures announced by the Chinese government.

The construction equipment company is widely considered a bellwether stock as a proxy for domestic and global economic expansion or contraction.

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