UBS reaffirmed its Sell rating on Caterpillar (NYSE:CAT) while significantly lowering its price target to $243 from $385, citing growing concerns over macroeconomic pressures that could undercut the company's earnings trajectory.

While Caterpillar has already started to lag due to weakening demand and softer pricing trends, UBS sees further deterioration ahead, particularly as tariffs and economic uncertainty weigh on construction, oil & gas, and mining sectors. The firm views these segments as especially vulnerable given their sensitivity to global economic momentum.

UBS forecasts Machinery, Energy & Transportation (ME&T) revenue to decline 7% in the second half of 2025, in stark contrast to Wall Street’s expectation of a 2% rise. The firm is also significantly more cautious than consensus on 2026 earnings, projecting results 28% below current Street estimates.

Given Caterpillar’s status as a barometer for global industrial health, UBS believes continued macro softness justifies a more bearish outlook, with downside risks outweighing potential near-term catalysts.