Bank of America Merrill Lynch wasted no time in recommending clients rush out and buy one of the key companies impacted by the China-U.S. trade war, now in a ceasefire.
The firm upgraded shares of Caterpillar (NYSE:CAT) to buy from neutral and raised its 12-month price forecast on the stock to $163 from $140 in a note on Monday.
"We are still late in the cycle, but two key macro developments lead us to upgrade CAT at 10.9x 2019E EPS and an 8% FCF yield. First, Fed Chairman Jerome Powell seemed less hawkish last week on the future path of interest rate increases, and 2) the US-China agreed to a temporary cease fire on additional US tariff increases," stated the note by analyst Ross Gilardi, who added "We see 20% upside potential.”
In the meantime, Caterpillar may get some direct help from the weekend talks as China agreed to purchase a "substantial" amount of agricultural, energy, and industrial U.S. products.
Caterpillar, a Dow stock, prides itself on having made, "For more than 90 years, … sustainable progress possible and driving positive change on every continent. Customers turn to Caterpillar to help them develop infrastructure, energy and natural resource assets."
With 2017 sales and revenues of $45.462 billion, Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives.
The company principally operates through its three primary segments - Construction Industries, Resource Industries and Energy & Transportation - and also provides financing and related services through its Financial Products segment.
Shares jumped $5.42, or 4%, to $141.09
