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- Shares of Caterpillar, Inc. (NYSE: CAT) have declined by almost 29 percent, year to date.
- Macquarie’s Sameer Rathod has maintained an Underperform rating on the company, while reducing the price target from $60 to $58.
- Rathod explained that the Underperform rating was maintained due to “the weakening global growth outlook, weaker dealer stats, and continued commentary around price competition.”
According to the Macquarie report the company has lowered its 2015 revenue guidance, while indicating that the 2016 revenue was expected to decline by another 5 percent. Caterpillar also announced that it has started a huge restructuring program to address “the declining outlook.”
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“We think CAT is taking the right steps to prepare for the coming downturn and would be encouraged to see management forgo any additional compensation given the number of job cuts they will have to execute over the coming quarters,” Rathod stated.
However, Rathod also believes that the 2016 revenue guidance could prove to be “too optimistic,” given the expected slowdown in global growth in 2016, along with intensifying competition.
In fact, according to Rathod, the guidance includes “some resiliency of after market,” which is unlikely, given that the end users are expected to become “increasingly strapped for cash, delaying any maintenance capex.”
The oil and gas segment is expected to witness the worst decline, with “little or no improvement in resources,” while the construction segment is expected to see “corrosive competition,” which would impact revenue and margins.
We continue to think oil and gas will face the sharpest declines and that there will be little or no improvement in resources. We also think the construction segment will face corrosive competition, likely eroding margin and revenue.
If the downturn continues, Rathod believes that Caterpillar might consider cutting its dividend in 2017/18 to protect its investment grade credit rating. The EPS estimates for 2015, 2016 and 2017 have been reduced.
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New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.