Caterpillar dive may push these stocks into ditch

Published Thu, Sep 24 201512:11 PM EDT

Caterpillar shares plunged as much as 8 percent Thursday as the company slashed 2015 sales guidance by a billion dollars and said it will lay off 4,000 to 5,000 employees. Investors are wondering what the implications of Caterpillar's negative pre-announcement are and how it will affect stocks in and outside the construction and mining equipment sector. "We are facing a convergence of challenging marketplace conditions in key regions and industry sectors, namely in mining and energy," said Doug Oberhelman, Caterpillar chairman and CEO, in the press release. CNBC Pro asked market experts and ran some quantitative analysis to find which securities have the most to lose after Caterpillar's guidance cut. "The Caterpillar news is another signal how commodities remain in a persistent state of oversupply. Anything related to commodities is still facing headwinds," said George Pearkes of Bespoke Investment Group. Some analysts pointed directly to the negative implications for the mining equipment-related companies. "Caterpillar's guide down is negative for the equipment rental space (i.e., United Rental /Ashtead Group) as it suggests CAT's dealers are struggling. It's also negative for mining-cap equipment companies ( Joy Global / Deere ) as it suggests the global slowdown in China is bleeding into the U.S.," wrote Gordon Johnson of Axiom Capital in an email. "Given how perverse the situation is in China, we feel this is just the beginning of a major correction lower," he added. Read More Global slowdown fear accelerates; How to trade it Johnson initiated on Caterpillar Thursday morning with a "sell" rating and a $28 price target before the guidance cut. "Our take is that the first and foremost trade on this theme is to be short of emerging markets. We are short emerging markets," said Jeremy Hill, managing partner at Old Blackheath. The iShares MSCI Emerging Markets ETF fell almost 2 percent through midday trading Thursday. Read More The trade if Goldman's oil plunge call is right CNBC Pro ran a screen on what happens when Caterpillar shares fall more than 7 percent in five days. There have been 49 such occasions in the last 10 years. Below are some of the worst performers in the S & P 500 and their average return over those five days, according to Kensho, a quantitative tool used by hedge funds. Cummins is a maker of truck engines for the construction, mining and transportation markets.

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Caterpillar shares plunged as much as 8 percent Thursday as the company slashed 2015 sales guidance by a billion dollars and said it will lay off 4,000 to 5,000 employees.

Investors are wondering what the implications of Caterpillar's negative pre-announcement are and how it will affect stocks in and outside the construction and mining equipment sector.

"We are facing a convergence of challenging marketplace conditions in key regions and industry sectors, namely in mining and energy," said Doug Oberhelman, Caterpillar chairman and CEO, in the press release.

CNBC Pro asked market experts and ran some quantitative analysis to find which securities have the most to lose after Caterpillar's guidance cut.