UBS believes there is further downside ahead for shares of U.S. machinery firms. In a Monday note, analyst Steven Fisher downgraded all U.S. machinery stocks he covers to a sell rating. The stocks in the sector have pulled back sharply, with Caterpillar, Cummins and Paccar all down around 20% over the past month. Still, Fisher does not expect shares have fully priced in the macroeconomic headwinds the companies face and the subsequent hit to earnings. “We think the recent underperformance primarily reflects the direct impacts of tariffs and a modestly more challenged demand and pricing environment than was reflected in prior expectations,” the analyst wrote. “However, we believe the macroeconomic impacts of the tariffs and continued uncertainty will lead to further deterioration in demand from most end markets, including freight, construction, oil & gas, mining, and industrial activity generally.” Tariff increases will also result in raised costs for companies, which may be passed onto consumers, further inhibiting demand. Fisher added that he does not believe the market bottom is in yet, so stocks could fall further. Indeed, the group was trading lower Monday. Caterpillar, for example, shed more than 3%, and hit a 52-week low intraday. “There is still the potential for a rapid de-escalation in trade tensions/tariffs and Federal Reserve actions, but we think there will be damage from actions already taken and continued uncertainty, and believe the stock prices today reflect too much optimism,” he added. Fisher’s downgrades included the following stocks: Caterpillar CAT 1Y mountain Caterpillar stock over the past year. Fisher downgraded shares of Caterpillar to sell from neutral. His $243 price target represents a potential downside of nearly 16% for the stock. “The lower multiple reflects an uncertain outlook for demand and margins. While CAT’s multiple would typically expand as earnings contract, historically when there are broad macroeconomic concerns and uncertainty to what the downside is, the multiple tends to contract first until the downside is more clear,” he wrote. Cummins Fisher double downgraded shares of Cummins to sell from buy, with his $240 price target — slashed from $400 — implying shares could fall nearly 14%. “Our lower PT reflects lower earnings estimates and a lower multiple,” he wrote. “Our current multiple reflects where the stock traded in early 2020 at the onset of COVID.” Paccar Fisher downgraded Paccar stock to sell from neutral, and lowered his price target to $78 from $108, 14% below where shares of Paccar closed Friday. “Our lower sales estimates reflect our expectation for lower [North American] truck production in 2025/2026,” the analyst wrote. “We expect the lower volumes to pressure price vs. cost, and margins.” United Rentals URI 1Y mountain United Rentals stock over the past year. Fisher downgraded United Rentals shares to sell from neutral and slashed his price target to $485 from $910. This new target implies United Rentals stock could fall 14% from its Friday close. “We think the more cautious view on non-residential construction restrains the multiple now, relative to our prior multiple,” he wrote. Terex Fisher reduced his rating on Terex to sell from neutral. He also cut his price target to $32 from $49, implying a potential downside of 6%. “Our lower sales forecast in Materials Processing reflects expected lower spending from rock crushing and screening customers. We are reducing our margin assumptions to reflect a less favorable price vs. cost outcome and volume leverage impacts,” he said. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
