Should you invest in CAT stock as Biden announces infrastructure deal?

on Jun 25, 2021
  • Caterpillar shares are up 3.15% over the last five days.
  • The stock plunged nearly 15% between 8th June and 17th June, but things could get better soon.
  • President Bident announced on Friday a new infrastructure deal that will boost construction companies.

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Caterpillar Inc. (NYSE:CAT) shares are up more than 3% this week following last week’s sharp decline. The stock could benefit from Biden’s announcement of an infrastructure deal. Construction companies, including heavy machine manufacturers like Caterpillar, will look to capitalize on the $1.2 trillion deal. It features $579 billion of spending above expected federal levels and a total of $973 billion of investment over five years.

CAT is potentially undervalued

The recent pullback in CAT share price is potentially undervaluing the stock based on earnings projections. Analysts expect EPS to grow by 22% next year and at an average of 19% over the next five years. 

Shares now trade at a forward P/E ratio of 18.27 compared to a trailing P/E of 35.90. So now could be a great time to invest in Caterpillar stock.

Source – TradingView

Technical overview: the rebound could continue

Although CAT stock price pulled back 0.5% on Friday, the current rebound seems poised to continue as the market begins to price in the deal announcement. 

Investors can target profits at around $227.49 and $238.32. The key support levels are $208.73 and $197.69.

Bottom line: Now seems to be a perfect time to invest in CAT shares

Caterpillar stock pulled back last week to create a buying opportunity. Therefore, this week’s rebound followed by Biden’s deal announcement confirms an upbeat outlook.