Caterpillar Inc. (NYSE: CAT)
Caterpillar Inc. (CAT), the world’s largest manufacturer of mining and construction equipment was downgraded Friday evening by Goldman Sachs from Neutral to Sell. Goldman also lowered its price target from $67 to $51, a 24% price target cut and a 16% cut from closing price on Friday. Caterpillar is feeling the effects of a weak global commodity market, and would need to adjust their spending on equipment moving forward.
Goldman Comments on Caterpillar Inc. Downgrade
“We downgrade CAT to Sell from Neutral with a 12-month price target of $51 (13% downside). We see 35% downside to consensus 2017 EPS driven by our view of structurally lower global infrastructure investment in the early stages of an extended commodity deflation cycle. We see 35% downside to consensus 2017 earnings per share driven by our view of structurally lower global infrastructure investment in the early stages of an extended commodity deflation cycle … We see a sustained right-sizing of commodity capex allocation in this cycle due to challenging producer returns and balance sheets – factors that we expect to drive lower cycle over cycle machinery demand and utilization.” Business Insider
CAT Technical Analysis
CAT gapped down in price yesterday to $59.00, down from the prior day’s close of $60.98, which is a 3% decrease in price. Taking a look at the daily chart we can see that the last time CAT traded below this price level was on January 20th when it traded at $58.81. Taking a closer look at the daily chart we can see that CAT has been on an overall decline dating back to November 3rd when it traded at $74.75. CAT is trading near its 52 week low price of $56.36. CAT has a float of 580.87 million shares and is trading 1.25 times the normal daily trading volume. CAT did reach pre market lows of $58.20, but bounced back $0.80 a the open, or equivalent to 1%. For trading purposes, my entry short would have been $58.90 looking for a run down to $58. My stop loss would have been $59.10, fearing anything above that and the stock would start to fill in the gap down.
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The companys Construction Industries segment offers backhoe, small wheel, skid steer, multi-terrain, compact track, medium and compact wheel, and track-type loaders; mini, wheel, and track excavators; track-type tractors; and select work tools, motor graders, telehandlers, soil compactors, and pipelayers, as well as its related parts for the heavy and general construction, rental, mining and quarry, and aggregates markets. Its Resource Industries segment provides electric rope and hydraulic shovels; draglines; drills; highwall and longwall miners; hard rock vehicles; articulated, large mining, and off-highway trucks; large wheel loaders; wheel tractor scrapers; wheel dozers; machinery components; and electronics and control systems for use in mining and quarry applications. The companys Energy & Transportation segment offers reciprocating engines; reciprocating engine powered generator sets; integrated systems and solutions for the electric power generation industry; and turbines and its related services, centrifugal gas compressors, diesel-electric locomotives and components, and rail-related products and services. Its Financial Products segment provides retail and wholesale financing primarily for Caterpillar equipment, machinery, and engines; offers property, casualty, life, accident, and health insurance; insurance brokerage services; and purchases short-term trade receivables. The companys All Other segments remanufactures engines and components; provides business strategy, and development, management, manufacturing, marketing, and support primarily for paving, forestry, industrial, waste, and Cat products. The company was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. The company was founded in 1925 and is headquartered in Peoria, Illinois. Yahoo Finance