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On Tuesday, UBS analysts downgraded Kubota Corp (6326:JP) (OTC:KUBTY) stock rating from Buy to Neutral, adjusting the price target to ¥1,760 from the previous ¥2,420. The downgrade was initiated due to concerns over potential earnings deterioration influenced by U.S. tariff policies. UBS foresees a challenging environment for Kubota, as the company’s cost structure is significantly impacted by tariffs on Japanese exports, particularly in their construction machinery and tractor segments destined for the U.S. market.
The analysts at UBS have revised their earnings per share (EPS) forecasts for the fiscal years ending in December 2025 through 2027, anticipating a decrease of 23-28%. The revisions stem from the potential for increased production costs that Kubota may face. The tariffs imposed on Japan are expected to lead to a steep rise in costs for Kubota, given its reliance on manufacturing in Japan for the U.S. market.
According to UBS, even if Kubota manages to pass on the increased costs to consumers, the risk of earnings deterioration remains high. The analysts suggest that the combination of higher prices and possible reduction in demand as a result of the price hikes could negatively affect the company’s financial performance.
The report further notes the risk that Kubota may not be able to fully transfer the additional costs to its customers. This could result in a financial strain on the company, as absorbing the tariffs could potentially lead to a significant impact on its profitability.
UBS’s downgrade reflects a cautious outlook for Kubota’s near-term financial health, as the company navigates the complexities of international trade and tariff implications. The new price target of ¥1,760 indicates a revised expectation of the company’s stock value in light of these challenges.
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