Construction behemoth Caterpillar (NYSE:CAT) saw its shares fall Tuesday after UBS double downgraded the shares, citing slowing global construction demand.
The agency downgraded Caterpillar from buy all the way to sell and lowered its 12-month price target to $125 from $154 a share.
According to UBS analyst Steven Fisher, "We believe 55% of CAT's end markets will peak in 2019, pressuring revenue and margins in 2020 as demand declines.
"We expect 2020 EPS to decline 8% YoY, as continued growth in mining and buybacks will not be enough to offset headwinds in construction and oil & gas."
Caterpillar shares dropped 19% as the U.S. and China faced off on tariffs and concern started to creep into the market that global growth was slowing, regardless of the outcome of trade talks. The shares bounced back in 2019, up 11% through Monday.
"We forecast an 8% decline in [construction] sales (consensus ~flat) and ~100bps of margin compression in 2020 (consensus -30bps) driven by lower demand in NA, China, & EMEA," Fisher said.
Other recent developments with CAT involved occupants of its boardroom. Tom Pellette was announced earlier this month to become Senior Vice President of Caterpillar, while Ramin Younessi will be moved to Group President of Construction Industries. Billy Ainsworth was named Group President of Energy & Transportation. Those assignments, and several more besides, will take effect March 1.
Shares in CAT plunged $5.29, or 3.7%, soon after Tuesday’s opening bell, to $136.12.
