Caterpillar's Stock Slumps After RW Baird Downgrade Back To Neutral

By Tomi KilgoreMarketWatch Pulse

Caterpillar Inc.'s stock slumped 1.7% in premarket trade Friday, after RW Baird downgraded the maker of mining and farming equipment, as commodities prices have failed to stabilize as previously expected. Analyst Mircea Dobre cut his rating to neutral, nearly four months after raising to outperform. He cut his stock price target to $77, which is 3.4% above Thursday's closing price, from $89. Dobre said his view that commodities prices were finding a bottom "is failing to gain traction," as China-driven macro volatility has led to another leg down in prices. "Against this backdrop, upside from [Caterpillar's] resources business appears increasingly unlikely, while peer [original equipment manufacturer] commentary and results are suggesting that fundamentals can actually get worse rather than better in the near term (a combination of volume declines and price compression)," Dobre wrote in a note to clients. The stock has dropped 13% over the past three months, while the Dow Jones Industrial Average has lost 8.6%.

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