Why Analysts Are Still Chasing Caterpillar

January 27, 2017 by Paul Ausick

Among the 30 DJIA stocks, only The Boeing Co. (NYSE: BA), up 7.7%) and International Business Machines Corp. (NYSE: IBM), up 7.27%, are having a better 2017 than Caterpillar Inc. (NYSE: CAT). And only by E. I. du Pont de Nemours and Co. (NYSE: DD) matches Cat’s 6.31% share price rise.

Caterpillar beat quarterly and full-year earnings estimates, but came up a bit short on revenues when it reported results on Thursday. The company also lowered its earlier 2017 forecast to account for a strengthening of the U.S. dollar. The company now expects full-year revenues of $36 to $39 billion ($37.5 billion at the midpoint of the range) and profit per share of $2.90, excluding restructuring costs of about $500 million. Analysts had forecast 2017 EPS at $3.04 and revenues of $37.99 billion.

The revenue miss and the soft forecast has not slowed the bulls, however. The company’s December retail sales, though still down, are rising and infrastructure spending from the Trump administration is judged to herald better sales for the company’s heavy construction equipment.

Analysts at Wells Fargo raised the company’s rating from Market Perform to Outperform and maintained its valuation range. Other analysts made similar moves:

  • Baird raised its price target from $94 to $97 with a Neutral rating
  • Barclays raised its price target from $96 to $100 with a rating of Equal Weight
  • Citigroup raised its price target from $98 to $100 with a Neutral rating
  • Deutsche Bank raised its price target from $104 to $108 with a Buy rating
  • RBC raises price target from $82  to $85

Caterpillar traded at $98.51 early Friday afternoon after posting a new 52-week high of $99.46 earlier in the day. The 52-week low is $59.80 and the consensus analyst target price is $90.07.

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