Caterpillar Inc. (CAT) jumped on Thursday, Sept. 20, after Baird Equity Research upgraded the construction machinery company to Outperform, citing robust demand.

The Deerfield, Ill.-based company should see demand growth continue in 2019, Baird analysts, including Mircea Dobre, wrote in a research note.

"While some end markets (China, US light construction equipment) are closer to peak, most of CAT's demand is still at or below mid-cycle levels (we estimate more than 60% of sales at mid-cycle or below)," Dobre said. "Capital deployment remains a catalyst (potential greater than $6 billion), 2019 multiple rerating closer to a mid-cycle level should drive shares above $190."

Baird raised its price target on the stock from $155 to $191.

Shares of Caterpillar rose 2.4% to $156.35 at 9:45 a.m New York time. The stock is down 3% year-to-date as the industrial company often comes under pressure as trade tensions escalate.

The U.S. and China have been implementing tit-for-tat tariffs on each country's products. Most recently, the Chinese government announced that it would impose tariffs on $60 billion in U.S. exports after the Trump administration said it was readying tariffs on $200 billion worth of Chinese goods.

"'Trade wars' and related uncertainty along with 'peak growth' have been factors behind the multiple derating now look increasingly priced in; as multiples bottom we expect fundamentals will once again drive stock action: the near-term picture is still robust as demand remains solid, pricing is coming through to support second half of 2019 margins with raw materials plateauing," the Baird analysts said.

Alongside Caterpillar's rating hike, Baird upgraded Manitowoc Company Inc. (MTW) and Helios Technologies (SNHY) to Outperform and raised the price targets to $32 and $65, respectively.

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