(Adds analyst comments, background)
Sept 22 (Reuters) - Caterpillar Inc's (CAT.N) North American machinery sales may be hurt by a likely late-2008 and full-year 2009 downturn in U.S. non-residential construction spending, said Stifel, Nicolaus & Co analyst Barry Bannister, who slashed his price target on the stock to $88 from $107.
The construction and mining equipment company's North American machinery sales has been supported by non-residential spending during the current period of steep declines in residential spending, Bannister said.
"With no recovery in sight for residential spending... and declining non-residential spending in our forecast, we believe Caterpillar's North American sales will be negatively impacted," Bannister wrote in a note to clients.
He maintained his "buy" rating on the stock.
In July, Caterpillar, the world's largest maker of earth-moving equipment, reported a surprising 34 percent jump in second-quarter earnings, even as it characterized the U.S. housing downturn as "the worst environment since the 1930s."
At the time, Caterpillar also said the softness had spread to non-residential construction during the quarter as "banks tightened lending standards for commercial and industrial loans, property prices softened and vacancy rates increased."
Shares of the company were down 81 cents at $65.68 in morning trade on the New York Stock Exchange. (Reporting by Tenzin Pema in Bangalore; Editing by Himani Sarkar)