Caterpillar (NYSE:CAT) Shares Down 3.6% Following Analyst Downgrade

Key Points

• Caterpillar shares fell 3.6% to $841.67 after Erste Group Bank downgraded the stock from Buy to Hold, with trading volume about 31% above average.
• Analyst sentiment remains broadly positive, with 14 Buy ratings and 11 Holds producing a “Moderate Buy” consensus and an average price target of $980.57.
• Recent results exceeded expectations, with quarterly EPS of $5.54 and revenue of $17.41 billion, while Caterpillar raised its quarterly dividend to $1.63; however, insider selling and potential rare-earth supply disruptions remain concerns.

Caterpillar Inc. (NYSE:CAT - Get Free Report) fell 3.6% on Tuesday after Erste Group Bank downgraded the stock from a buy rating to a hold rating. The stock traded as low as $824.00 and last traded at $841.67. 3,790,313 shares traded hands during mid-day trading, an increase of 31% from the average daily volume of 2,888,685 shares. The stock had previously closed at $873.28.

Several other research firms have also commented on CAT. Citigroup raised their price target on shares of Caterpillar from $1,020.00 to $1,100.00 and gave the company a "buy" rating in a report on Tuesday, July 14th. Robert W. Baird boosted their price objective on shares of Caterpillar from $1,165.00 to $1,200.00 and gave the stock an "outperform" rating in a research note on Friday, June 26th. DA Davidson increased their price objective on shares of Caterpillar from $650.00 to $845.00 and gave the stock a "neutral" rating in a research report on Monday, May 4th. Rothschild & Co Redburn raised their target price on shares of Caterpillar from $700.00 to $950.00 and gave the company a "neutral" rating in a research note on Thursday, May 14th. Finally, Bank of America lifted their target price on shares of Caterpillar from $930.00 to $989.00 and gave the company a "buy" rating in a report on Friday, May 1st. Fourteen analysts have rated the stock with a Buy rating and eleven have assigned a Hold rating to the company's stock. According to MarketBeat, Caterpillar presently has an average rating of "Moderate Buy" and an average price target of $980.57.

Insider Activity at Caterpillar

In other news, CFO Andrew R. J. Bonfield sold 15,674 shares of the business's stock in a transaction on Wednesday, May 6th. The shares were sold at an average price of $918.71, for a total transaction of $14,399,860.54. Following the transaction, the chief financial officer directly owned 52,935 shares of the company's stock, valued at approximately $48,631,913.85. The trade was a 22.85% decrease in their ownership of the stock. The transaction was disclosed in a document filed with the SEC, which is available at this hyperlink. Also, insider Anthony D. Fassino sold 16,283 shares of the company's stock in a transaction on Monday, May 11th. The shares were sold at an average price of $916.80, for a total transaction of $14,928,254.40. Following the completion of the transaction, the insider owned 46,041 shares of the company's stock, valued at $42,210,388.80. This trade represents a 26.13% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. Over the last three months, insiders have sold 95,773 shares of company stock valued at $87,642,635. 0.33% of the stock is currently owned by corporate insiders.

Key Caterpillar News

Here are the key news stories impacting Caterpillar this week:

• Positive Sentiment: Caterpillar received an upgrade to Zacks Rank #2 (Buy), reflecting greater optimism about its earnings outlook. Zacks also expects the company’s combination of an Earnings ESP and favorable estimates to support a potential quarterly earnings beat. What Makes Caterpillar (CAT) a New Buy Stock Caterpillar Earnings Expected to Grow
• Neutral Sentiment: The upcoming earnings release is the key near-term catalyst. Investors are looking for continued earnings growth and evidence that Caterpillar can exceed analyst expectations, following its latest report’s strong revenue and EPS performance. Caterpillar Earnings Expected to Grow: What to Know Ahead of Next Week's Release
• Neutral Sentiment: After a substantial multiyear rally, valuation signals are mixed: earnings-based multiples appear reasonable, while discounted-cash-flow analysis suggests the stock is approximately fairly valued. This leaves investors demanding continued cash-flow and earnings growth to justify further gains. Caterpillar Stock Looks Slightly Above Fair Value Today
• Negative Sentiment: Erste Group Bank downgraded Caterpillar from Buy to Hold, adding to caution after the stock’s sharp advance.
• Negative Sentiment: China’s new export restrictions on rare-earth materials could raise costs or create delays for components used in Caterpillar’s motors, sensors and control systems. The longer-term development of domestic supply chains may reduce this risk, but near-term uncertainty is a headwind. Caterpillar Faces Rare Earth Squeeze

Institutional Trading of Caterpillar

A number of hedge funds and other institutional investors have recently modified their holdings of CAT. Diamant Asset Management Inc. raised its position in shares of Caterpillar by 68,427.2% in the 1st quarter. Diamant Asset Management Inc. now owns 3,140,603 shares of the industrial products company's stock valued at $2,224,992,000 after purchasing an additional 3,136,020 shares in the last quarter. Ascentis Wealth Management LLC grew its position in shares of Caterpillar by 110,539.0% during the second quarter. Ascentis Wealth Management LLC now owns 2,518,143 shares of the industrial products company's stock worth $2,711,772,000 after buying an additional 2,515,867 shares in the last quarter. Capital International Investors bought a new stake in shares of Caterpillar in the fourth quarter worth $1,225,317,000. Northwestern Mutual Wealth Management Co. increased its stake in shares of Caterpillar by 573.1% in the fourth quarter. Northwestern Mutual Wealth Management Co. now owns 1,504,612 shares of the industrial products company's stock worth $861,947,000 after buying an additional 1,281,087 shares during the last quarter. Finally, Bank of America Corp DE raised its holdings in Caterpillar by 16.0% in the fourth quarter. Bank of America Corp DE now owns 6,738,802 shares of the industrial products company's stock valued at $3,860,457,000 after acquiring an additional 928,974 shares in the last quarter. 70.98% of the stock is owned by hedge funds and other institutional investors.

Caterpillar Stock Down 3.6%

The company has a current ratio of 1.35, a quick ratio of 0.81 and a debt-to-equity ratio of 1.64. The stock has a market capitalization of $387.66 billion, a P/E ratio of 41.89, a P/E/G ratio of 1.74 and a beta of 1.57. The stock's 50 day simple moving average is $929.10 and its 200 day simple moving average is $807.20.

Caterpillar (NYSE:CAT - Get Free Report) last released its earnings results on Thursday, April 30th. The industrial products company reported $5.54 earnings per share for the quarter, topping the consensus estimate of $4.65 by $0.89. The company had revenue of $17.41 billion during the quarter, compared to the consensus estimate of $16.53 billion. Caterpillar had a net margin of 13.33% and a return on equity of 48.21%. The company's revenue was up 22.2% on a year-over-year basis. During the same quarter in the previous year, the firm earned $4.25 EPS. As a group, research analysts predict that Caterpillar Inc. will post 24.87 EPS for the current fiscal year.

Caterpillar Increases Dividend

The company also recently disclosed a quarterly dividend, which will be paid on Wednesday, August 19th. Investors of record on Monday, July 20th will be issued a $1.63 dividend. This is an increase from Caterpillar's previous quarterly dividend of $1.51. This represents a $6.52 annualized dividend and a yield of 0.8%. The ex-dividend date of this dividend is Monday, July 20th. Caterpillar's dividend payout ratio is presently 32.45%.

Caterpillar Company Profile

Caterpillar Inc is a global manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and locomotives. The company's product portfolio includes earthmoving machines such as excavators, bulldozers, wheel loaders and off‑highway trucks, as well as a range of power generation products including generator sets and power systems for industrial and commercial use. Caterpillar serves customers across heavy construction, mining, energy, transportation and related industries with both equipment and integrated technology solutions.

In addition to manufacturing, Caterpillar provides a broad range of aftermarket parts and support services, including maintenance, repair, remanufacturing and fleet management tools.

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