Caterpillar Inc. (NYSE:CAT) stock traded lower in Wednesday’s premarket session amid recent analyst forecast cuts, a premium valuation, and regulatory scrutiny ahead of the company’s third-quarter earnings report.
Citigroup on Monday maintained its Buy rating but cut Caterpillar’s price forecast to $950 from $1,100, extending a recent string of target reductions while keeping a constructive view on the stock.
Valuation Comes Into Focus Ahead Of Earnings
Caterpillar is expected to report third-quarter earnings on Oct. 28.
Analysts forecast EPS of $6.19, up from $4.95 a year earlier, on revenue of $19.13 billion versus $17.64 billion in the prior-year period.
The stock trades at a P/E ratio of about 33.3x, putting greater focus on whether upcoming results and guidance can support its expanded valuation.
Recent regulatory scrutiny has added another consideration. On Oct. 7, Caterpillar shares fell after the Federal Trade Commission and U.S. Department of Agriculture sought public comments on competition in agricultural equipment manufacturing and distribution.
The agencies opened an inquiry into problems in those markets, including possible anticompetitive behavior. Investors may worry that the move signals more government intervention to come.
Wall Street Sentiment
Caterpillar still carries a Buy consensus rating, with an average price forecast of $988.86.
On Monday, Citigroup maintained its Buy rating but lowered its price forecast to $950.
Truist Securities also maintained a Buy rating on Oct. 5 while reducing its price forecast to $1,100.
Earlier, Freedom Broker upgraded Caterpillar to Buy on Sept. 10, setting a price forecast of $980.
Caterpillar Technical Analysis
Caterpillar shares are trading 6.5% below their 20-day simple moving average (SMA), 7.3% below the 50-day SMA and 12.5% below the 100-day SMA.
The stock is also 5.3% below its 200-day SMA, signaling weakness across multiple time frames.
Moreover, the 20-day SMA has crossed below the 50-day SMA, a bearish signal that suggests fading momentum.
The moving average convergence divergence (MACD) indicator remains below its signal line, while its negative histogram points to continued selling pressure.
However, the 50-day SMA remains above the 200-day SMA, suggesting the longer-term trend has not fully reversed.
Traders are watching support at $754.50. A break below that level could increase selling pressure. On the upside, resistance stands near $828, where the stock could face renewed selling.
ETF Exposure
Caterpillar holds significant weight in several major exchange-traded funds, including the State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), with a 9.23% allocation.
The State Street Industrial Select Sector SPDR ETF (NYSE:XLI) and VanEck Industrials TruSector ETF (NASDAQ:TRUI) each have a reported 6.96% allocation.
These holdings expose the stock to changes in ETF investment flows.
Caterpillar Price Action
CAT Price Action: Caterpillar shares fell 1.55% to $760.78 during Wednesday’s premarket trading, according to Benzinga Pro data.
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