Caterpillar stock is set for its lowest close in months
Machinery manufacturer Caterpillar Inc. (NYSE:CAT) is 3.6% lower at $138.68 -- the biggest Dow loser today -- after receiving a downgrade at BofA-Merrill Lynch to "neutral" from "buy," and a price-target cut to $156 from $172. The brokerage firm cited slowing retail sales as a reason for the bear not, along with the stock's weak performance since the company said its first-quarter performance would be the "high water mark" for the year in a post-earnings conference call on April 24.
CAT is now down 12% year-to-date, suffering a series of lower highs since the Jan. 16 record peak of $173.24. In fact, the shares just fell below the 200-day moving average for the first time since mid-2016, and are on pace for their lowest settlement since Nov. 29. Still, 12 of the 20 analysts in coverage have "strong buy" ratings in place, and the average 12-month price target stands all the way up at $170.83 -- now an almost 23% premium to current levels.
In the options pits, traders have been leaning bullish, too. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the security with a 10-day call/put volume ratio of 1.55, ranking in the 84th percentile of its annual range. This indicates that calls have been purchased over puts at a faster-than-usual clip over the past two weeks. Likewise, Caterpillar stock's Schaeffer's put/call open interest ratio (SOIR) of 0.82 is in the 7th percentile of its annual range, implying that short-term traders are much more call-heavy than usual right now.
It's also worth noting that the industrial concern sports a Schaeffer's Volatility Scorecard (SVS) of 88 out of 100. This means the equity has tended to register bigger price swings than its options premiums have priced in over the past 12 months.