Investment bank Evercore ISI has downgraded its stock rating on Caterpillar (CAT, Financial) to "underperform," setting a price target of $365. The downgrade is attributed to declining earnings and sales in the third quarter, which are seen as potential indicators of profit risks in the fiscal year 2025. This situation arises as the company may face increased inventory levels in its construction equipment channels.
Analysts led by David Raso pointed out potential pressure on Caterpillar due to weaknesses in emerging markets, especially following policy changes under a new presidential administration. Additionally, with relatively low commodity prices, the oil and gas sector’s capital expenditures might not respond favorably to policies supporting oil and gas exploration.
Furthermore, the analysts noted that Caterpillar's stock price is nearly 19 times their estimated earnings per share for fiscal year 2025, suggesting it might struggle to keep pace with the industry in the short to medium term.
Evercore ISI also downgraded Illinois Tool Works (ITW) to "underperform" with a target price of $255. Despite its strong operational performance and profit expansion capabilities, the company is seen as lacking organic sales growth, particularly internationally, which could affect its profit expansion in 2025.
Lastly, Evercore ISI adjusted its rating on Eaton (ETN) from "outperform" to "market perform" with a price target of $389.
