Caterpillar cut to Sell equivalent at Evercore with earnings risk seen in 2025

Caterpillar (NYSE:CAT) -1.2% in Wednesday’s trading as Evercore ISI downgrades shares to Underperform from In-Line with a $365 price target, seeing Q3’s earnings and sales miss as a potential precursor to downside earnings risk in FY 2025, when management eventually addresses elevated construction equipment channel inventory.

Weaker emerging markets in response to a new Trump presidency may weigh on global bellwether Caterpillar (CAT), and oil and gas capex reaction to Trump’s “drill baby drill” policies might underwhelm amid relatively low commodity prices, according to Evercore analysts led by David Raso.

With Caterpillar (CAT) shares trading at nearly 19x Evercore’s FY 2025 EPS estimate, Raso thinks the stock likely will struggle to keep up with the sector over the near- and medium-term.

Illinois Tool Works (ITW) also is cut to Underperform with a $255 PT, seen as an excellent operator and margin expansion machine but the lack of organic sales growth, particularly in its international markets, may make 2025 a harder than average year for margin expansion.

Evercore also lowered Eaton (ETN) to In-Line from Outperform with a $389 price objective in a “valuation breather call.”