Saturday, 21 September 2019 11:34 GMT

Caterpillar hits 1-yr low on JPMorgan downgrade for oil exposure

(MENAFN - ProactiveInvestors) Caterpillar (NYSE:CAT) fell to the lowest in almost a year after JPMorgan analysts lowered the mining and construction equipment maker for its exposure to oil and gas.

Shares dropped 5.5 percent to $86.67 at 3:17 after hitting $86.60 the lowest intraday price since January 24 2014.

JPMorgan said that mining U.S. construction as well as emerging markets is "where economic growth is likely to be under pressure as a result of lower oil prices." North American construction accounts for about 17 per cent of Caterpillar’s revenue.

Analysts at JPMorgan downgraded Caterpillar to “underweight” from “neutral” and lowered their price target to $80 from $95.

Caterpillar’s direct exposure to oil and gas through services and products used in exploration and production accounts for about $6.5 billion or 12 percent of its total revenues Ann Duignan an analyst at JPMorgan said in a research note.

West Texas Intermediate for February delivery dropped 3.7 percent to $50.76 a barrel at 1:31 p.m. on the New York Mercantile Exchange. It slipped to $49.95 the lowest level since April 29 2009.

Brent for February settlement declined 4.8 percent to $53.71 a barrel on the London-based ICE Futures Europe exchange. The contract touched $52.66 the lowest since May 4 2009. Brent slumped 48 percent last year the most since the 2008 financial crisis.

The firm said U.S. construction equipment demand since 2010 has been strongly correlated with the expansion of fracking and thus expects to see a slowdown in equipment demand in 2015.

“Overall Caterpillar’s combined indirect exposure may be as much as 15 per cent of its revenues—implying that upwards of 30 per cent of its total revenue may come under increasing pressure in 2015-16” said Duignan.

Caterpillar hits 1-yr low on JPMorgan downgrade for oil exposure

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