Caterpillar Shares Down 1.5%, J.P. Morgan Downgrades To Underweight

Caterpillar Inc. shares fell about 1.5% in premarket trade Monday, after J.P. Morgan downgraded the stock to underweight from netural on concerns about the company's direct exposure to oil and gas and indirect exposure to mining, U.S. construction and emerging markets. The machinery maker's exposure to oil and gas is about $6.5 billion, or about 12% of total revenue, analysts wrote in a note. The company supplies turbines to offshore rigs, as well as reciprocating engines and transmissions for on-site drilling. It also provides construction equipment that is used in infrastructure development, along with aftermarket and services. "Its indirect exposure may be greater than anticipated," said the note. "Our analysis suggests that since 2010 US construction equipment demand has been strongly correlated with the expansion of fracking and, as a result, we would expect to see a slowdown in equipment demand in 2015." Caterpillar also has exposure to Canadian Oil Sands and to the Middle East, said the note. Shares have fallen 5.6% in the last three months, while the S&P 500 has fallen 0.03%.