DA Davidson cuts Caterpillar stock price target on valuation concerns

DA Davidson reduced its price target for Caterpillar Inc. stock to $685 from $882 after reviewing the company's third-quarter 2026 earnings report. Despite the stock's current price of $621.51, which has fallen 10% in the past week and 30% over the past six months, the firm maintains a Neutral rating. Growth rates are accelerating across Caterpillar's segments, with backlogs increasing by 96% year-over-year and end-user sales up 20% in Construction and 36% in Power & Energy.

The analyst pointed to positive comments on the Resource cycle's resurgence, although valuation concerns remain the primary reason for the lowered price target. Caterpillar's P/E ratio stands at 24.37 and its PEG ratio at 0.79, though InvestingPro analysis suggests the stock is overvalued relative to its Fair Value. Despite strong financial results, including adjusted earnings of $7.20 per share and a record quarterly sales figure of $20.7 billion, investors remain cautious due to potential tariff costs and capacity constraints in certain business segments.