Schaeffer's Trading Floor Blog

Analyst Downgrades: Caterpillar, Verizon Communications, and Johnson & Johnson

Analysts downwardly revised their ratings on CAT, VZ, and JNJ

by 11/12/2012 9:20 AM
Stocks quoted in this article:

Analysts are weighing in today on construction equipment manufacturer Caterpillar Inc. (NYSE:CAT - 84.95), telecom issue Verizon Communications Inc. (NYSE:VZ - 42.64), and pharmaceutical company Johnson & Johnson (NYSE:JNJ - 69.87). Here's a quick roundup of today's bearish brokerage notes.

  • CAT was downgraded to "neutral" from "overweight" and received a price-target cut to $90 from $109 at J.P. Morgan this morning, which could steepen the security's year-over-year loss of roughly 12%. Call players seem to be unfazed by this technical weakness, however, as the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 1.33. In other words, calls bought to open have outstripped puts during the past few months. This ratio is just four percentage points shy of a yearly peak, as traders have been buying calls over puts at a near annual-high clip.

  • Despite climbing nearly 14% over the past 52 weeks, VZ saw its price target lowered to $51 from $52 at Macquarie ahead of the open. Short-term options traders seem wary of the stock, as well. VZ's Schaeffer's put/call open interest ratio (SOIR) checks in at 2.18, signaling puts more than double calls among the front three-months' series of options. This ratio resides in the 87th percentile of its annual range, meaning near-term options players have been more bearishly aligned toward the security just 13% of the time during the past 12 months.

  • JNJ was cut to "hold" from "buy" at Jefferies today, a move that could chip away at the stock's year-to-date gain of close to 7%. The security has outperformed the broader S&P 500 Index (SPX) by more than seven percentage points over the past 40 days, but that doesn't seem to be dissuading the skeptics. Short interest on JNJ accounts for a healthy 5.2% of the equity's available float -- or the equivalent of nearly 14 days' worth of pent-up buying pressure, at the stock's average pace of trading.

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