Caterpillar Likely to Face Pricing Uncertainty in H2, UBS Says

Caterpillar (CAT) is likely to face pricing uncertainty in the second half and if markets remain slow competition increases, there’s a possibility of “downside to revenues and margins,” UBS said in a note emailed Tuesday.

Following a strong performance in 2023, the company’s projected guidance suggests no growth in segment profit in 2024. “Between volumes and margins, we think the bigger risk is margins, where the main risk is pricing,” the note said.

While volume decline is already expected by the company in 2024, significant downside is not expected unless substantial inventory reduction is necessary. Although the oil and gas business is strong, there could arguably be room for improvements in mining business  beyond 2024, UBS said.

“We’re not convinced, and we see downside risk for [Caterpillar] after the run to start 2024,” UBS said.

UBS raised its 2024 EPS estimate for the company to $20.40 from $20.15 and 2025 EPS estimate to $21.20 from $20.90.

UBS raised its price target for the company to $245 from $240 and maintained a sell rating.

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