Shares in Caterpillar (CAT), the world’s largest manufacturer of construction and mining equipment, have surged over 46% year-to-date (YTD). However, Bank of America (BofA) (BAC) sees even more upside in the months ahead, pointing to possible gains from the company’s energy business.
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Why BofA Remains Bullish on Caterpillar
BofA analyst Michael Feniger on Friday reaffirmed his Buy rating on Caterpillar’s shares and raised his price target by 13% to $930, which is above the company’s one-year high of $845.27 and suggests approximately 11% upside from the CAT closing price of $835.24 on Thursday.
For context, Caterpillar operates out of Irving, Texas, and also manufactures and sells diesel and natural gas engines as well as industrial gas turbines. Its Energy & Transportation segment handles products such as generator sets, turbines, diesel-electric locomotives, and rail-related products for the marine, oil and gas, industrial, and electric power generation industries.
Analyst Sees Recovery in Oil and Gas Portfolio
Feniger remains bullish on Caterpillar’s energy unit even though he notes that the company’s power business has been the main driver of investor excitement about its power and energy operations. This is thanks to expected growth in diesel and gas generator-set engines and gas turbines used to power data centers.
While the BofA analyst sees short-term pressure on Caterpillar’s sales in the Middle East, he expects the company’s oil and gas portfolio to mark a recovery in 2027, further cementing equipment demand beyond the power business.
Feniger noted that Caterpillar’s portfolio has “an inherent hedge” that helps to shield the business across various business cycles.
Is Caterpillar Stock a Buy or Sell?
Across Wall Street, Caterpillar’s shares remain a Moderate Buy based on analysts’ consensus rating. This breaks down into 11 Buys, five Holds, and one Sell issued over the past three months.
However, the average CAT price target of $769.94 suggests about 8% downside risk.
