CAT Stock Sinks After Denying Annual Salary Increases

Caterpillar won't be giving out annual salary increases or bonuses amid COVID-19 headwinds

Caterpillar Inc. (NYSE:CAT) stock's recent rally is reversing course this morning, down 3.7% at $116.04 at last check. The company said it would not give annual salary increases to employees this year in an effort to tighten costs and combat the economic hit it's taken during the coronavirus pandemic. CAT added that it would not pay out bonuses to its employees next year, either.

Not helping CAT's case, Citigroup came in with a price target cut to $125 from $130 this morning. Coming into today, CAT's consensus 12-month price target of $134 sat at a 15.5% premium to last night's close. Most analysts have been cautious on the stock, though. Only four call the blue chip a "strong buy," compared to nine that say "hold," and two deeming CAT a "strong sell."

The options pits are echoing this pessimistic sentiment. CAT sports a 10-day put/call volume ratio of 1.67 at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than 88% of all other readings from the past year, suggesting a much healthier appetite for long puts than usual.

While the security is slipping from the one-month peak of $116.91 it notched yesterday, it's still managing to stay afloat atop the 30-day moving average, marking CAT's second day north of the trendline since mid-January. Despite this recent rally, the Dow component is still off 23.3% for the year.