Caterpillar takes hit after Goldman downgrade

Industrial equipment manufacturer Caterpillar's stock took a hit Monday when Goldman Sachs analysts outlined a pessimistic outlook.

Sales of the type of industrial machinery Caterpillar (CAT) specializes in will suffer a blow from excess capacity in the marketplace and lower capital expenditures from customers amid a tepid global economy, Goldman said.

The Goldman analysts downgraded Caterpillar shares from neutral to sell, setting a 12-month price target of $51.

The manufacturer's stock fell 3.5% to $58.87 as of 10:27 a.m. Monday.

The decline came amid a protracted period of difficulty for Caterpillar, which announced in October that it would shed 5,000 jobs by the end of 2016.

The company in 2015 spent an estimated $800 million in restructuring costs — the bill for cutting jobs and production capacity.

One challenge for Caterpillar is that the company's commodities customers "are still completing long-lead time projects" with existing equipment, Goldman's Jerry Revich said in a note to investors.

Customers in countries that specialize in commodity exports, which represent 25% of Caterpillar sales, are slashing capital expenditures amid a "broader slowdown in government and private investment," Revich said.

The sluggish economies of South America are taking a particularly sharp toll on Caterpillar's revenue. South America sales will fall by double-digits through 2017, Goldman estimated.

Sales in Africa and the Middle East are also weak.

In October, Caterpillar CEO Doug Oberhelman called the market for his company's goods "extremely challenging for most of the key industries we serve."

The company projected a 5% decline in revenue in 2016, compared to 2015.

Follow Paste BN reporter Nathan Bomey on Twitter @NathanBomey.