07-08-2025
Caterpillar shares are ‘priced for perfection,' says MS as it downgrades stock
-- Caterpillar shares are 'priced for perfection,' according to Morgan Stanley, which downgraded the stock to Underweight from Equal-weight saying there are signs of eroding profitability and growing downside risks, which stock rally hasn't baked in yet. The stock has rallied more than 50% since April, even after a Q2 miss and a mixed full-year outlook that showed strong sales but thinner margins.
'We believe the negatives point to a steady deterioration in the fundamentals and skew the risk to the downside,' analysts at Morgan Stanley said. Its $350 price target implies limited upside from current levels, with downside risks of as much as 50% in a bearish Stanley now expects Caterpillar's 2025 earnings to come in 4% below consensus. Caterpillar (NYSE:CAT) reported a $2.5 billion sequential rise in backlog and saw improved volumes, particularly in its Power Generation (HM:PGV) segment, helping to support sentiment. But Morgan Stanley called the volume strength a 'head fake,' suggesting it may reflect temporary demand or order pull-forwards rather than sustained momentum.
The firm sees key indicators, like price and margin trends, as flashing warning signs of a weakening U.S. non-residential construction market. It also flagged the company's full-year guidance, which assumes a sharp rebound late in the year, as overly articles
Caterpillar shares are 'priced for perfection,' says MS as it downgrades stock
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