01:01 PM EDT, 10/30/2025 (MT Newswires) -- Caterpillar ( CAT ) faces mixed fundamentals in 2026, despite posting solid Q3 results, Morgan Stanley said Thursday in a report.

On Wednesday, Caterpillar ( CAT ) reported Q3 adjusted earnings and revenue that beat Wall Street estimates. "We remain skeptical the strength will persist into 2026, Morgan Stanley said.

"We see an increasingly negative setup for shares" into 2026 amid "rising evidence of an oversupplied construction equipment market," combined with caution on U.S. non-residential construction activity, the report said.

"We see limited offset to this headwind from manufacturing costs or energy & transportation segment strength, pointing to risk of negative earnings revisions," Morgan Stanley said.

While shares are expected to remain resilient through the company's Investor Day on Nov. 4, analysis indicates the stock is "priced for perfection," the report said.

Morgan Stanley raised its target on Caterpillar ( CAT ) stock to $380 from $350, while reiterating its underweight rating.

Price: 585.07, Change: -0.42, Percent Change: -0.07