There’s too little business momentum to justify Caterpillar’s current valuation, according to UBS. Analyst Steven Fisher downgraded the construction equipment manufacturers’ shares to sell from neutral, and cut his price target to $225 (from $230), implying 5% potential downside. The 2023 earnings estimate was cut 2% due to “higher expected pension expense,” a note to clients on Friday said. “We don’t think there is enough cyclical momentum to justify the current valuation,” Fisher wrote. “While we don’t think the cycle is over, we don’t expect substantial earnings growth (or upward estimate revisions) for 2024-25.” “Backlog growth has been decelerating and appears set to roll over, and end market momentum is flattening in parts of construction and oil & gas,” Fisher added. “After 27% EPS growth in 2022, we expect growth to slow to 16% in 2023E, and 4% in 2024, with 2025 roughly flat. The multiple should compress as this deceleration is realized.” UBS said that Caterpillar faces a slowdown in demand in the near future. Fisher noted that oil and gas investment, a large accelerator of growth in recent quarters, has plateaued as commodity prices have weakened. Residential building, which accounts for roughly a quarter of the company’s construction segment, has been stalling, Fisher added. “We continue to expect growth from CAT’s end markets, but at a considerably slower pace (energy transitions including diversification of European gas sources, reshoring and advanced manufacturing, infrastructure stimulus, and mid-late decade commodity demand), but expect growth to flatten out in 2024,” wrote Fisher. The analyst added that backlogs rolling over from the previous quarter will also serve as negative catalysts for growth. Caterpillar shares were down 1.6% on Friday morning following the downgrade. The stock is ahead 0.6% in 2023 after rallying 15.9% in 2022. —CNBC’s Michael Bloom contributed to this report.