On Monday, shares of Caterpillar, Inc. (NYSE: CAT) rallied, after the farm and mining equipment maker got upgraded at BMO Capital, who said the new approach by management makes the company a whole different animal that could eventually lead to doubling of the stock price.
Analyst Joel Tiss raised his rating after three consecutive years of being at market perform, a day before Caterpillar released its second quarter results. Because of this, the stock got boosted to $125 from $110.
The stock CAT, rallied 1.23% during midday trade, enough to make it the biggest percentage gainer among the Dow Jones Industrial Average’s DJIA, adding 8 points while the Dow’s price was shedding 51 points.
Tiss stated the primary three reasons he turned bullish on Caterpillar as the unfolding cyclical recovery and potential benefits for the company, the significant cost cutting program, and the new management team that will expand profitability and shareholder returns.
The second quarter results are expected to rise, earnings per share are expected to go to $1.26 from it’s current $1.09, and revenue is projected to increase to $10.95 billion from $10.34 billion. In the first quarter the company reported a year to year rise after eight consecutive quarters of declines.
As valuations have been rising for a lot of industrial companies, Tiss believes that Caterpillar’s stock could trade at a valuation between $208 and $224, doubled the current price of $107.82
A strong rebound in demand is likely in 2018 at the earliest, but TIss believes that “if this pattern repeats, the shares could trade to our upside scenario.”