Caterpillar’s Growth Potential in Energy & Transportation Drives Buy Rating

Caterpillar (CAT – Research Report), the Industrials sector company, was revisited by a Wall Street analyst today. Analyst Michael Feniger from Bank of America Securities reiterated a Buy rating on the stock and has a $385.00 price target.

Michael Feniger has given his Buy rating due to a combination of factors that highlight Caterpillar’s growth potential in its Energy & Transportation (E&T) segment. This segment, which accounts for a significant portion of Caterpillar’s sales, is poised to drive the company’s next earnings cycle. The growth in E&T is expected to outpace Caterpillar’s core products, with substantial contributions from engines and turbines used in data centers, power grids, and pipeline expansions. Feniger estimates that these developments could add an incremental $3-3.50 to Caterpillar’s earnings per share, providing diversification and supporting a stronger earnings profile through economic cycles.
Additionally, the Oil & Gas sector, a part of the E&T segment, presents further opportunities for Caterpillar. Despite challenges in the drilling sector, the demand for gas compression and pipeline expansion remains robust, supported by policy changes and international interest in liquefied natural gas. The Power Generation vertical, another component of E&T, is also experiencing rapid growth, driven by increasing power demands from data centers and the need for additional power generation capacity. These factors collectively underpin Feniger’s confidence in Caterpillar’s potential for sustained growth, justifying the Buy rating.

In another report released on June 3, J.P. Morgan also reiterated a Buy rating on the stock with a $395.00 price target.