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Investing.com - Melius Research upgraded Caterpillar (NYSE:CAT) from Hold to Buy on Wednesday, raising its price target to $500.00. The heavy equipment manufacturer, with a market capitalization of $185.4 billion, has demonstrated strong momentum with a 22.9% return over the past year. According to InvestingPro data, the stock’s RSI suggests it’s currently in overbought territory.
The upgrade comes after Melius raised its 2027 estimates for the heavy equipment manufacturer, citing the scale of data center-driven capacity increases in Caterpillar’s engine business.
Melius now positions itself at the top of consensus estimates for 2027, without modeling a construction or mining upcycle, suggesting significant upside potential for the company.
The research firm highlighted Caterpillar’s expanding role in power generation surrounding AI infrastructure buildouts, noting the company’s opportunity includes baseload power and value-added solutions for strained electrical grids—businesses Melius considers superior to backup power alone.
Melius projects approximately 30% upside potential for Caterpillar shares using a 17x price-to-earnings multiple, comparing the valuation favorably to GE Vernova, which currently trades at roughly 25-30x projected 2027-2028 earnings.
In other recent news, Caterpillar Inc. announced a 7% increase in its quarterly dividend, raising it to $1.51 per share. This marks the 31st consecutive year that Caterpillar has increased its annual dividend, highlighting its commitment to returning value to shareholders. In its financial services sector, Caterpillar Financial Services issued $300 million in floating rate notes due in 2027, as part of its ongoing financing activities. Additionally, JPMorgan analysts reiterated their Overweight rating on Caterpillar stock, noting that the financial services division accounted for 6% of the company’s consolidated revenue in the first quarter of 2025. Despite a 1% increase in revenue year-over-year, profit from CAT Financial decreased by 24% due to the absence of a previous insurance settlement and increased credit loss provisions. Meanwhile, Bernstein maintained its Market Perform rating, emphasizing Caterpillar’s strategic positioning to benefit from global energy demand growth. Citi analysts also reiterated a Buy rating, driven by optimism in infrastructure funding and a strong backlog in the mining sector. These developments reflect Caterpillar’s diverse business strategies and ongoing efforts to maintain financial stability and growth.
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