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On Thursday, DA Davidson issued a report indicating a downturn in sentiment for machinery stocks, particularly for Caterpillar Inc. (NYSE:CAT), after conducting checks with U.S. construction equipment dealers. Analyst Michael Shlisky pointed out that heavy-equipment retail sales did not meet expectations in the first quarter of 2025 and predicted that this trend would persist into the second quarter. The analyst also noted a significant decrease in optimism for 2025 and 2026. This aligns with InvestingPro data showing a significant 19.7% revenue decline for CNH Industrial (NYSE:CNH) in the last twelve months, with analysts anticipating further sales decline this year.
The checks, which involved approximately 20 U.S. dealers representing various major brands, were completed in late March. Dealers expressed concerns over tariffs and other political uncertainties, marking a considerable shift from the post-election period when a change in administration had initially sparked a wave of optimism. According to InvestingPro analysis, CNH Industrial’s stock shows heightened sensitivity to market conditions with a beta of 1.7, suggesting above-average volatility in the current uncertain environment.
As a result of these findings, DA Davidson has adjusted its stance on Caterpillar Inc., moving its stock rating to ’NEUTRAL’ from its previous ’BUY’ status. This adjustment reflects the firm’s high exposure to the current downward trends, as identified by the dealer checks. In comparison, other companies in the sector such as Deere & Company (NYSE:DE), CNH Industrial (NYSE:CNHI), and Toro Company (NYSE:TTC) are seen as less affected, with Deere maintaining a ’BUY’ rating and CNH and Toro holding ’NEUTRAL’ ratings.
Shlisky’s analysis suggests that the construction equipment sector is facing increasing uncertainty, which could impact the performance of related stocks. Caterpillar’s downgrade serves as an indicator of the challenges that the industry may continue to face in the near term.
In other recent news, CNH Industrial N.V. has extended its €3.25 billion credit facility to 2030, ensuring long-term financial stability and operational flexibility. This extension, formalized with Citibank Europe Plc, reflects confidence in the company’s strategic direction, although there are currently no outstanding borrowings under this facility. Meanwhile, CNH Industrial Capital LLC, a subsidiary of CNH Industrial, has priced a $500 million note offering at 4.750% due in 2028, with proceeds aimed at supporting general corporate purposes. In terms of analyst activity, Baird downgraded CNH Global’s stock from Outperform to Neutral, citing cautiousness about near-term growth prospects. Similarly, S&P Global revised its outlook on CNH Industrial to negative due to a significant revenue contraction in the agricultural equipment sector. Despite these challenges, CFRA raised the stock target for CNH Industrial to $13, maintaining a Hold rating, while noting a significant decline in fourth-quarter revenue for 2024. CNH Industrial’s guidance for 2025 anticipates continued pressure, with expected declines in net sales for both the Agriculture and Construction segments.
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