Zinger Key Points
- BofA cut Caterpillar's price forecast to $414, citing pricing pullbacks and softer 2025 guidance.
- Goldman Sachs maintains a Buy rating, emphasizing CAT's growth potential through high-return products and tech services.
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BofA Securities analyst Michael Feniger cut the price forecast on Caterpillar, Inc. CAT from $452 to $414 while retaining a Buy rating.
Yesterday, the company reported mixed fourth-quarter FY24 results. Total sales and revenue were $16.215 billion, missing the consensus of $16.411 billion, and adjusted earnings of $5.14 per share came above the consensus of $4.99.
For 2025, sales are expected to decline ~1% due to unfavorable pricing, with a slight headwind in other income from lower interest income and currency effects.
The analyst noted that adjusted EPS was better than expected, but underlying operating profit performance underwhelmed.
Feniger says that CAT is facing a pricing pullback after strong gains in favorable supply-demand conditions.
Construction pricing fell 4.6% in the fourth quarter (vs. -2.1% in the third quarter), with similar headwinds expected in the first quarter of 2025. The analyst adds that dealers reduced machine inventory by $1.6 billion in the fourth quarter, creating a headwind in the first half of FY25.
Feniger adjusted the estimates based on the softer 2025 guidance, with the EPS estimate cut to $19.25 from $21 for 2025 and $23 from $25 for 2026.
Oppenheimer analyst Kristen Owen maintained a Perform rating and says that although CI and RI demand remain challenges into 2025, the positive contribution from data centers is helping offset the impact on the EPS outlook and supporting valuation.
The key risk is margin performance, as negative pricing and under-absorption leave little room for error if demand softens, adds the analyst. Owen expects a volatile 2025 amid policy uncertainty, AI advancements, and a stronger commodities backdrop.
Goldman Sachs analyst Jerry Revich reiterated the Buy rating on the stock, as the company is well-positioned to grow unit profitability cycle over cycle. The analyst raised the price forecast from $442 to $456.
This growth will be driven by increasing content, a market shift toward CAT’s high-return products in Energy & Transportation, and expanding technology-enabled service growth, per the analyst.
Price Action: CAT shares are down 0.79% at $372.02 at the last check Friday.
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