Citi raises Caterpillar stock price target to $430, maintains buy

On Friday, Citi analyst Kyle Menges updated the firm’s stance on Caterpillar Inc. (NYSE:CAT), raising the price target from $420.00 to $430.00 while reiterating a Buy rating on the shares. The adjustment follows Caterpillar’s fourth-quarter results, prompting changes to the company’s earnings projections. The machinery giant, currently valued at $181 billion, has seen its stock decline 8% over the past week, though InvestingPro data shows it maintains a strong financial health score of "GREAT."

Menges revised the first-quarter 2025 adjusted earnings per share (EPS) estimate to $4.36, down from $5.10, and the full-year 2025 adjusted EPS to $20.00, a decrease from the previous $22.15 forecast. The adjustments are primarily due to lowered volume and margin assumptions for Caterpillar’s Construction Industries (CI) and Resource Industries (RI). Trading at a P/E ratio of 17.8x, the stock appears reasonably valued relative to its growth prospects, according to InvestingPro analysis, which reveals 10+ additional key insights available to subscribers.

The analyst noted that opinions are divided after Caterpillar’s recent earnings release, with the market considering both risks and potential upsides. While acknowledging that CI and RI segments are likely to face pressure in the coming 6 to 12 months, Menges pointed out the downside risks to pricing, margins, and channel inventories for 2025.

Despite these concerns, Caterpillar is still viewed by Citi as the preferred investment to capitalize on a potential recovery in global construction and mining sales in 2025. The firm anticipates a resurgence in U.S. construction spending in 2026 and 2027.

The new price target of $430 reflects a slightly higher valuation multiple, as Menges maintains a positive outlook on the stock. The Buy rating is sustained, indicating Citi’s confidence in Caterpillar’s future performance despite near-term headwinds.

In other recent news, Caterpillar has seen significant activity from various analysts. UBS raised Caterpillar’s stock price target to $355 but maintained a Sell rating. This follows the UBS analyst’s examination of past cycles, estimating a challenging first half of 2025 for Caterpillar due to adjustments in North American construction and a halt in oil and gas expansion. Similarly, Evercore ISI downgraded Caterpillar’s stock from ’In Line’ to ’Underperform’, citing potential earnings risks and competitive pressures. On the other hand, DA Davidson raised its price target for Caterpillar to $350 from $337.

Caterpillar also experienced a 4% year-over-year decrease in Q3 sales, totaling $16.1 billion, primarily due to weaker performance in the Construction Industries and Resource Industries segments. However, the company maintained a steady adjusted operating profit margin of 20% and an adjusted profit per share of $5.17.

In terms of executive changes, Caterpillar announced that Chief Human Resources Officer Cheryl H. Johnson will retire in April, marking the end of her seven-year tenure with the company. Caterpillar Financial Services Corporation also successfully issued $1.25 billion in Medium-Term Notes, providing additional capital to support its operations. These are recent developments in the company’s operations.

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