Baird raises Caterpillar stock rating, hikes target to $395

On Tuesday, Baird analysts upgraded Caterpillar stock from Neutral to Outperform, setting a new price target of $395.00, up from the previous $309.00. The upgrade reflects the firm’s positive outlook on the company’s performance, anticipating fundamental improvements into 2026.

The analysts highlighted several indicators of Caterpillar’s potential upswing. Notably, exiting the first quarter of 2025, dealers maintained lower-than-normal seasonal inventory levels. Additionally, the company experienced much better-than-expected orders and backlog, along with stabilization in dealer retail sales. With a robust market capitalization of $161 billion and an impressive track record of maintaining dividend payments for 55 consecutive years, Caterpillar demonstrates strong fundamental stability.

The easing of tariff impacts was also cited as a contributing factor to the positive assessment. Analysts believe that 2025 could represent a trough year for earnings per share (EPS), with subsequent growth leading to further expansion of the stock’s current P/E ratio of 16.65. This is particularly significant given that Caterpillar’s earnings before interest and taxes (EBIT) margin has demonstrated resilience compared to its machinery peers. Discover more detailed financial metrics and 12 additional exclusive insights with InvestingPro’s comprehensive research report.

The firm’s analysis suggests that these factors combined could help Caterpillar shares to align with the broader S&P 500’s performance. This adjustment would be a recovery from the stock’s underperformance relative to the S&P 500 by approximately 15% over the past year.

Investors are watching closely as these developments may signal a turning point for Caterpillar, whose shares are traded on the New York Stock Exchange under the ticker (NYSE:CAT).

In other recent news, Caterpillar Inc. reported its first-quarter 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $4.25, below the anticipated $4.35, while revenue came in at $14.25 billion, short of the $14.58 billion forecast. Despite these results, Oppenheimer upgraded Caterpillar shares from Perform to Outperform, setting a price target of $395, citing the company’s strong performance and backlog growth. Meanwhile, DA Davidson raised its price target for Caterpillar to $331, maintaining a Neutral stance, acknowledging the company’s resilience amidst tariff challenges.

Additionally, Baird upgraded Caterpillar from Underperform to Neutral, adjusting the price target to $309, recognizing the company’s effective management of pricing and costs. Analysts noted Caterpillar’s strong backlog growth and the reduced business cyclicality due to its services division, which comprises 40% of sales. Caterpillar’s management transition, with Joe Creed taking over as CEO, is expected to maintain the company’s stability. The company is preparing for potential tariff impacts in upcoming quarters, with estimated costs between $250 million and $350 million, while exploring mitigation strategies.

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