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Oct. 20, 2020, 1:32 p.m. EDT

Caterpillar stock jumps toward a record after UBS analyst boosts target by 38%

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Tomi Kilgore

Shares of Caterpillar Inc. rallied Tuesday toward a record high, after UBS analyst Steven Fisher raised his price target by 38%, citing expectations that infrastructure stimulus will be coming soon.

Fisher’s move comes a week before the construction and mining equipment maker reported third-quarter results.

The stock /zigman2/quotes/203434128/composite CAT +0.26% surged 2.1% in afternoon trading, putting it on track to close above the Jan. 22, 2018 record close of $170.89.

Caterpillar’s stock is by far the Dow Jones Industrial Average’s /zigman2/quotes/210598065/realtime DJIA +0.13% best performer so far in October, with a month-to-date gain of 14.7%. The next best Dow stock is Traveler Companies Inc.’s /zigman2/quotes/206313935/composite TRV -1.16% with a 8.7% gain. In comparison, the Dow has gained 2.8% this month.

UBS’s Fisher raised his price target on Caterpillar’s stock to $180, which is 5.2% above current levels, from $130. He reiterated the neutral rating he’s had on the stock since March 18, when it upgraded it from sell.

“We think there is a greater likelihood of infrastructure stimulus being implemented now than there has been over the past decade due to current macro and political conditions,” Fisher wrote in a note to clients. “Historical moves suggests [Caterpillar’s stock] should outperform the broader market as infrastructure optimism either translates into actual spending or a presumption of spending.”

Fisher said, however, that he believes the stock’s recent outperformance suggests investors have largely priced in a material increase in U.S. construction machinery demand. While further gains are possible, he said a “lower stock price entry point would better allow for several layers of uncertainty in the outlook,” therefore the neutral rating.

Caterpillar is scheduled to report third-quarter results on Oct. 27, before the market opens. The company is expected to report earnings per share of $1.17 on revenue of $9.71 billion, according the FactSet.

The stock has declined on the day earnings were reported in eight of the past 10 quarters, for an average decline of 4.8%. The two times it gained, was for an average of 0.7%.

The stock has rallied27.1% over the past three months and 15.8% year to date, while the Dow has gained 7.0% the past three months and inched up 0.1% this year.

/zigman2/quotes/203434128/composite
US : U.S.: NYSE
$ 175.08
+0.45 +0.26%
Volume: 976,859
Nov. 27, 2020 5:00p
P/E Ratio
29.08
Dividend Yield
2.35%
Market Cap
$95.11 billion
Rev. per Employee
$525,797
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
29,910.37
+37.90 +0.13%
Volume: 178.10M
Nov. 27, 2020 2:07p
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/zigman2/quotes/206313935/composite
US : U.S.: NYSE
$ 134.44
-1.58 -1.16%
Volume: 537,957
Nov. 27, 2020 5:00p
P/E Ratio
15.39
Dividend Yield
2.53%
Market Cap
$34.05 billion
Rev. per Employee
$1.03M
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