Caterpillar sees more weak demand ahead as firms defer capital decisions

Caterpillar (CAT -2.5%) slides to three-month lows as it expects revenues will decline again in 2020 after slipping 8% in 2019, joining several other manufacturers that have warned sluggish conditions likely will carry into next year.

CAT forecasts demand from companies that buy its machines to fall 4%-9% this year; in North America, the company expects construction activity to decline and demand from oil and gas customers to remain weak.

“Customers are being cautious due to global economic conditions,” Caterpillar CEO Jim Umpleby said during today’s earnings conference call.

CFRA downgrades CAT shares to Sell from Hold with a $120 price target, cut from $156, following the Q4 report, citing the outlook for global sales to weaken further and the need for lower production to better match dealer and end-user demand.

“North American construction markets will likely be weaker in 2020 than we previously anticipated,” CRFA’s Elizabeth Vermillion writes. “Within Construction Industries, we expect state and local infrastructure spending to remain solid, but lower dealer inventories will require lower production through most of 2020, offsetting spending benefits.”

CAT’s average Sell Side Rating, Seeking Alpha Authors’ Rating and Quant Rating all are Neutral.


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