Trump slaps 30% tariffs on EU, Mexico
On Friday, BofA Securities analyst Michael Feniger adjusted the price target for Caterpillar stock (NYSE:CAT) to $385, up from the previous target of $335, while reiterating a Buy rating for the company. The machinery giant, with a market capitalization of $165.45 billion, has demonstrated strong financial performance with earnings per share of $20.51 over the last twelve months. Feniger highlighted a notable valuation gap between Caterpillar and its peer Deere (NYSE:DE) & Company, despite both companies being projected to achieve similar earnings per share (EPS) in fiscal year 2025, according to Bloomberg estimates.
Caterpillar’s shares have historically moved in close correlation with Deere’s, with both expected to deliver between $18 and $19 of EPS in FY25. However, Caterpillar is currently trading at a 25-30% discount compared to Deere, a departure from their usual parity. According to InvestingPro data, CAT trades at a P/E ratio of 17.06x, while maintaining an impressive track record of dividend payments for 55 consecutive years. Feniger noted that such a discount is not common in past market cycles and suggested that Caterpillar’s stock multiple has room to grow and align more closely with Deere’s valuation.
The analyst also addressed concerns about potential downturns, stating that Caterpillar’s EPS profile appears more resilient compared to previous industrial slumps. This resilience, Feniger argued, justifies a higher price-to-earnings (P/E) multiple for the stock. The new price target of $385 is based on a P/E multiple of 22 times, an increase from the previous 19 times, reflecting the belief that Caterpillar merits a higher valuation due to its robust earnings prospects. InvestingPro analysis indicates that CAT currently trades above its calculated Fair Value, with analyst targets ranging from $283 to $425. Get access to 12 additional exclusive ProTips and comprehensive valuation metrics with an InvestingPro subscription.
In other recent news, Caterpillar Inc. has been involved in several significant developments. The company, along with other firms, secured a $980 million contract for the FEMA generator program, which is expected to last until 2030. This contract was awarded after a competitive acquisition process involving 14 responses. On the earnings front, UBS analyst Steven Fisher upgraded Caterpillar’s stock from Sell to Neutral, with a new price target of $357, citing improved trade discussions with China that have mitigated some risks to earnings. Similarly, Baird analysts raised Caterpillar’s stock rating from Neutral to Outperform, setting a higher price target of $395, driven by better-than-expected orders and a positive outlook for 2026.
DA Davidson also updated its financial outlook on Caterpillar, increasing the price target to $331 while maintaining a Neutral stance. The firm acknowledged Caterpillar’s ability to manage tariff-related margin impacts, projecting that these effects will be fully offset in the following year. Meanwhile, Oppenheimer upgraded Caterpillar shares from Perform to Outperform, with a price target of $395, highlighting the company’s robust demand and margin durability despite global economic uncertainties. The firm’s analysts noted Caterpillar’s diversified sales and consistent share buyback strategy as stabilizing factors. These recent developments indicate a cautious yet optimistic outlook from analysts regarding Caterpillar’s performance amidst various economic challenges.
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