Caterpillar Inc. (CAT) Should Start Mining for a Solution after Bank of America Merrill Lynch’s Downgrade

Mining projects are said to be experiencing a slowdown, which will bring down Caterpillar Inc. (NYSE:CAT)‘s stock price. The company has been downgraded, from to ‘Neutral’ from ‘Buy’, by Bank of America Merrill Lynch, informed Jim Cramer on CNBC. The new price target is $121, down from $125, meaning that the company will face some difficulties in the 12 – 18 months range, due to global factors causing mining to drop. However, this does not mean that Caterpillar Inc. (NYSE:CAT) is underperforming or committed some kind of error, it so happened that the circumstances combined in such a disruptive manner.

Caterpillar Inc. (NYSE:CAT) enjoyed a fruitful 2014, showing more than 16% year-to-date growth and rallying for the fourth place in the Dow Jones Industrial Average. However, with the spread of the latest news, the company might have entered troubled waters. It’s now trailing the list of 30 companies with almost the biggest decline of about 1.5%.

“Watch my initials JJC [iPath Dow Jones UBS Copper Total Return Sub-Index ETN (NYSEARCA:JJC)], it seems to go down every day, it’s not me, it’s copper. I also know that […] iron ore has peaked, it’s gonna be like multiple years bad […],” said Jim Cramer.

Beside these external factors pulling Caterpillar Inc. (NYSE:CAT)’s stock, Bank of America Merrill Lynch’s team mentioned the negative growth in China and the recession in Brazil as also being influential to the downgrade decision.

There might be a possibility in which the company, gets back on the rails and starts enjoying lifts in its stock price, but it’s less than likely due to the grandeur of the industry it’s tied to. In other words, the events that could overturn the current unfavorable situation for Caterpillar Inc. (NYSE:CAT) will be depicted by analysts and specialists with enough time to make further predictions and re-analyze the state of affairs. All that’s left is to play the waiting game for those that wanted to buy the stock or rush to get out of the stock for those investors that are not willing to wait till the machinery manufacturer will get back on its feet.

Disclosure: none