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Caterpillar stock price forecast: Bank of America sees a 15% upside

By:
on Jan 15, 2023
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  • Bank of America analyst upgrades Caterpillar Inc to "buy".
  • Michael Feniger sees it a good pick despite fears of a recession.
  • Caterpillar stock is already up nearly 60% versus late September.

Shares of Caterpillar Inc (NYSE: CAT) have gained nearly 60% since late September but a Bank of America analyst says it’s still not too late to buy this stock.

Caterpillar stock has upside to $295

Michael Feniger now rates the Caterpillar stock a “buy” and sees further upside to $295 that represents another 15% increase in its share price.

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It’s a bold call considering the U.S. economy looks headed for a recession this year that’s typically a significant headwind for the construction space. Nonetheless, the analyst wrote:

Several unique dynamics from a macro and business cycle perspective can underpin higher trough earnings vs expectations. There’s an underappreciated roadmap that could bring the CAT story to the forefront and drive outperformance.

Over the next couple of quarters, he added, the recent price increases will help shield the construction equipment manufacturer against macroeconomic headwinds.

What other tailwinds could help Caterpillar?

Caterpillar Inc is scheduled to report its Q4 results later this month. Consensus is for it to earn $3.94 a share – up significantly versus $2.69 a share in the same quarter last year.

The Bank of America analyst recommends buying Caterpillar stock also because the company is committed to electric and autonomous vehicles. The note reads:

As macro headwinds ease in 6-9 months and investors look to a new cycle, CAT’s multi-year growth prospects screen positive: capex is higher in a world that’s effectively short copper/oil/gas, long tail of fiscal stimulus drives construction.

Michael Feniger also expects China reopening to be a meaningful benefit for this Fortune 500 company.