UBS downgrades Caterpillar as tariff and macro woes to drag earnings down

Investing.com -- UBS downgraded Caterpillar Inc (NYSE:CAT) to Sell from Buy and slashed its price target to $243 from $385, warning that macroeconomic risks linked to tariffs and weakening global demand are not yet fully reflected in the stock.

Caterpillar, often viewed as a bellwether for the broader industrial economy, is vulnerable to a slowdown in key end markets such as construction, oil&gas, and mining. These sectors could weaken further as uncertainty mounts over U.S. trade policy and global growth prospects dim.

The brokerage said it expects further earnings downside as second-order impacts from tariffs and recessionary pressures weigh on demand across construction, oil&gas, and mining markets.

UBS now sees Caterpillar’s 2026 earnings per share falling more than 25% below consensus.

CAT is a macro bellwether, and with a view that macro momentum is negative, we see downside for the stock, UBS wrote.

It cited a 7% year-over-year drop in Machinery, Energy&Transportation sales expected in the second half of 2025, compared with the Street’s forecast of a 2% gain.

UBS cut its 2025 EPS estimate to $17.00 from $19.95, and its 2026 estimate to $16.25 from $21.95, reflecting lowered revenue forecasts and margin pressure.

The firm applied a 15x multiple to its new 2026 EPS forecast, down from 17.5x previously, citing greater uncertainty around demand and earnings visibility.

While UBS acknowledged potential upside from infrastructure spending or a rebound in global growth, it sees these as unlikely under current conditions.

It also flagged growing skepticism among investors about the sustainability of demand from data center-related power generation.

Recession concerns alone could be enough to pressure CAT shares, regardless of what the company reports near-term, UBS said.