Why Heavy Equipment Stocks Are Under Pressure Today

Wall Street is running the numbers on the tariffs, and the impact is not good for heavy equipment manufacturers.

Shares of Caterpillar (NYSE: CAT) fell by as much as 7% and Deere (NYSE: DE) by 4% after both companies were hit by downgrades, and Toro (NYSE: TTC) fell as much as 5% in sympathy. The stocks all rallied into the close and were all down about 2% as of 3:30 p.m. ET.

Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »

A difficult operating environment

Heavy equipment manufacturers figure to get hit by tariffs both on the supply and demand sides. The massive tractors, construction, and agricultural equipment they make requires a lot of steel and other raw materials that are subject to tariffs, and their high-priced finished goods sell best when customers are flush with cash.

On Monday, UBS analyst Steven Fisher cut Caterpillar to a sell from neutral and lowered his price target to $243, from $385. Deere was kept at a neutral, but its price target was cut to $440 from $462.

The downgrades are based on concerns that the macroeconomic impact of tariffs, and the uncertainty surrounding trade policy, will erode demand.

Toro is more focused on consumer and industrial-grade lawn care, but could end up pinched by some of the same pressures that are likely to impact the makers of larger equipment. Deere could be especially vulnerable if "reciprocal tariffs" target agricultural exports, leaving farmers with less cash to invest in new equipment.

Is now the time to buy heavy equipment stocks?

In theory, onshoring could work out fine for these companies. If the tariffs are successful in bringing economic activity to the United States, new factories and facilities will be required, creating demand for heavy equipment. But that payoff is likely to be well into the future, and the downsides could hit almost immediately.

These are three best-of-breed operators with a history of surviving in what are highly cyclical industries. Existing investors need not panic about any of these companies failing due to a trade war, but for now, there is little concrete reason to get excited about buying these stocks.

Should you invest $1,000 in Caterpillar right now?

Before you buy stock in Caterpillar, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Caterpillar wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $578,035!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 5, 2025

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Deere & Company. The Motley Fool recommends Toro. The Motley Fool has a disclosure policy.