Caterpillar recently announced that it may face a prolonged sales decline. The stock lost considerable ground on the day of this news. Looking at the Caterpillar's chart, it seems like weakness is set to continue. Caterpillar's sales have declined by 30% in Q2 2020. That's a very substantial decline. Given that the company sells very high-priced capital equipment that last a long time, demand for this equipment may recover slowly.
Exhibit: Caterpillar's Sales Were Down 30% Compared To Q2 2019.
I have also done a trend analysis on TradingView that seem to indicate further weakness to come in the stock.
Exhibit: Caterpillar's chart is reflecting its weak fundamental.
(Source: Author's chart on TradingView)
Morningstar's analyst report on July 31 2020 makes a couple of interesting points:
- Many end markets served by the company are not directly affected.
- Given the rally in gold, that may spur more mining.
All this may not be enough to save the company from a prolonged downturn.
