Caterpillar was among the worst-performing stocks Monday on the benchmark Dow Jones Industrial Average, falling 5 percent after JPMorgan analysts downgraded the equipment maker, citing the effects of falling oil prices.
JPMorgan analyst Ann Duignan lowered the price target to $80 a share, down from her previous estimate of $95 a share.
At a time when the price of Brent crude, the global oil benchmark, has fallen more than 50 percent since mid-June last year, Duignan said 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 revenue, according to a Financial Times report.
The company also has indirect exposure to mining, U.S. construction and emerging markets, where growth is expected to be pressured by lower oil prices.
North American construction accounts for about 17 percent of Caterpillar’s revenue, and of that, Duignan estimates that 5 percent “may be leverage to oil and gas states.”
Canadian Oil Sands, which is also expected to experience a slowdown in demand, represents about 3 percent of total revenue.
“Overall, Caterpillar’s combined indirect exposure may be as much as 15 percent of its revenue — implying that upwards of 30 percent of its total revenue may come under increasing pressure in 2015-16,” Duignan said.
The stronger dollar is another factor that could hurt Caterpillar’s competitiveness.
Shares of Caterpillar fell to $87.03 and are down nearly 21 percent in the last six months.