Why Caterpillar (CAT) Shares Are Trading Lower Today

What Happened?

Shares of construction equipment company Caterpillar (NYSE:CAT) fell 3% in the afternoon session after an analyst at Morgan Stanley downgraded the stock to "Underweight" from "Equal-weight," citing concerns over the company's valuation and weakening fundamentals. The analyst warned the stock was "priced for perfection" amid deteriorating pricing trends and margin pressures, and cut the price target to $350. This downgrade followed the company's recent second-quarter earnings report, which missed analyst expectations. In that report, Caterpillar revealed its earnings per share fell 21% from the previous year, hurt by lower revenues and higher costs. The company's operating profit margin also dropped significantly compared to the same period last year.

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What Is The Market Telling Us

Caterpillar’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 6 months ago when the stock dropped 5.9% on the news that the company reported weak fourth-quarter results: Its revenue missed, and its EBITDA also fell short of Wall Street's estimates. Management said that "lower sales volume was primarily driven by lower sales of equipment to end users." Overall, this quarter could have been better.

Caterpillar is up 15.7% since the beginning of the year, and at $416.38 per share, it is trading close to its 52-week high of $438.02 from July 2025. Investors who bought $1,000 worth of Caterpillar’s shares 5 years ago would now be looking at an investment worth $3,086.

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