Morgan Stanley cuts Caterpillar price target after bookings and dealer-inventory concerns

Morgan Stanley lowered its Caterpillar target

Morgan Stanley kept an Equal-weight rating on Caterpillar but cut its price target to $675 from $915, the November 4 report said. The revised target was about 4% above Caterpillar’s $647.39 closing price on October 29, according to the report.

Morgan Stanley attributed the change to concerns that had exceeded Caterpillar’s own long-term outlook, arguing that the stock needed stronger beat-and-raise quarters. This was the analyst’s assessment, not a company forecast or reported operating result.

The market reaction followed the October 29 report

Caterpillar’s shares fell 9.25% in a day after its third-quarter report on October 29 and were 40% below a $1,073 peak, according to Yahoo Finance data cited in the report. The source did not specify the exchange or whether the price was measured at an intraday point or at the close.

The broader performance remained positive over longer periods: the report said shares were up 9.84% in 2026, 10.28% over one year and 169.57% over three years.

Strong results were paired with weaker order indicators

Caterpillar’s third-quarter presentation reported sales of $20.7 billion, up 17%, adjusted profit per share of $7.20, up 45%, and a record backlog of $78 billion. Power and Energy sales rose 18% to $8.8 billion, with the report linking that performance to data-center and artificial-intelligence demand.

Bookings, however, fell about 11% from the prior quarter to $25.6 billion, below the more than $29 billion expected by large investors. The fourth-quarter outlook was also described as modestly below expectations, partly because of manufacturing and inflation costs, including $600 million in tariff costs.

Dealers were expected to reduce inventory

Caterpillar expected dealers to cut inventory by about $1.6 billion in the fourth quarter, up from $1 billion. Morgan Stanley said this de-stocking, together with uncertainty around the durability of the data-center power cycle, had become a central concern for its revised view.

The report did not establish that dealer inventory reductions had already occurred beyond the company’s stated expectation.

Segment performance remained mixed

Construction sales rose 18% to $8.0 billion on solid North American demand, while Resource Industries sales increased 15% to $4.6 billion despite minor commissioning delays. An Associated Builders and Contractors survey conducted from September 21 to October 5 showed a construction backlog indicator of 8.7 months, its highest since July 2025, driven by data-center projects.

Those figures show that demand indicators were not uniform across Caterpillar’s businesses, although they do not by themselves establish the cause of the share-price decline.