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Caterpillar Climbs as Cowen Sees a Megacycle By

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By Dhirendra Tripathi – Caterpillar Stock (NYSE:) rose by 3% Thursday after a Cowen analyst said it was outperform due to a megacycle in infrastructure and construction.

Stock fell below its 8 month lows following an analyst Matt Elkott’s prediction that it would reach $241. This is almost 24% more than the current price of $195.

Elkott anticipates that valuations will reflect secular trends related to what’s sometimes called the fourth industrial revolution: the increasing service revenue and the increased involvement in technology.

Analysts see a 35 billion-dollar revenue potential for Caterpillar in autonomous solutions within the next decade. Analysts expect Caterpillar to earn 33% of total revenue through the U.S. infrastructure bill.

The analyst said the Street isn’t yet appreciating the fact that an expansion of this magnitude would bring with it the first time in 14 years that Caterpillar achieves growth in all the key metrices of revenue, gross and operating margin, and EPS for three consecutive years.

In 2021, revenue will grow by 30 and 15 percent respectively.

This maker of equipment for construction and mining will release its third-quarter results on October 28.

These shares are performing below the wider indices. When the company announced the results for its second quarter in July, it had forecast that there would be softer margins between July and September.

In April and June, the adjusted operating profit margin of the company was 14.1%. This is a higher profit margin than in the previous quarter.

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Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.