From Financial Modeling Prep: 2024-10-14 15:52:00

Caterpillar (NYSE:CAT) shares fell over 2% after Morgan Stanley downgraded the stock to Underweight, citing concerns over potential inventory destocking in the Construction Industries segment. The price target was lowered to $332 from $349 due to oversupply risks and competition intensifying in the U.S. construction equipment market.

Morgan Stanley analysts predict that as supply chains normalize, oversupply could trigger destocking, impacting Caterpillar’s earnings. The firm’s 2025 earnings per share estimate for the company is now 10% below consensus, reflecting a cautious outlook. Despite strong year-to-date performance, the current 18x earnings multiple is seen as overly optimistic, creating a negative risk-reward balance.

Challenges in the Construction Industries segment may outweigh potential earnings boosts from large-scale projects and cost improvements in manufacturing, according to Morgan Stanley. They anticipate pressure on margins as revenue estimates decline, increasing the risk of downward earnings revisions.



Read more at Financial Modeling Prep:: Morgan Stanley Downgrades Caterpillar, Shares Down…