Morgan Stanley analyst Angel Castillo maintained a Sell rating on Caterpillar today and set a price target of $350.00.
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Angel Castillo has given his Sell rating due to a combination of factors impacting Caterpillar’s financial outlook. The primary concern is the increased tariffs on steel, aluminum, and imports from India, which have led to a significant rise in expected tariff-related costs for the company. Caterpillar now anticipates a net tariff headwind of $1.5-1.8 billion for 2025, up from previous estimates of $1.3-1.5 billion, and a third-quarter headwind of $500-$600 million, compared to earlier projections of $400-$500 million.
These increased costs are expected to push Caterpillar’s adjusted operating profit margins to the lower end of their target range, approximately 16%. Additionally, the company’s ability to pass these costs onto customers appears limited, further straining profit margins. As a result, Morgan Stanley has lowered its 2025 adjusted EPS estimate for Caterpillar by 2% to $17.13, which is significantly below the consensus. This challenging environment, combined with higher discounting reserves by competitors like Deere, suggests difficulties ahead for Caterpillar, justifying the Sell rating.
According to TipRanks, Castillo is an analyst with an average return of -0.7% and a 49.22% success rate. Castillo covers the Industrials sector, focusing on stocks such as Caterpillar, Oshkosh, and Donaldson Company.