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Caterpillar Upgraded; Bernstein Sees Machinery Cycle Progressing in '22

Caterpillar shares rise as Bernstein upgrades the company to outperform.
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Caterpillar  (CAT) - Get Caterpillar Inc. Report climbed on Wednesday after a Bernstein analyst upgraded the industrial equipment maker to outperform from market perform and boosted his price target to $240 from $200.

Shares of the Deerfield, Ill., company at last check rose 2.5% to $203.17.

Bernstein analyst Chad Dillard, said "concern about the end of the machinery cycle in 2022 was overdone."

"Although the slope of its secular growth trajectory remains an outstanding question," Dillard said in research note, "the cycle is calling CAT's name and the path is clearing for the stock to outperform over these next 12 months."

The analyst said the bottom line is "that the market is treating CAT like it is late cycle, despite the fact that >75% of the business is mid-cycle or earlier and it will be a key beneficiary of a rebound in China/global growth."

Earlier this month, Deutsche Bank analyst Nicole Deblase boosted her price target on Caterpillar to $242 from $233 while keeping a buy rating on the shares.

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Deblase said she did not expect supply-chain and price/cost headwinds to alleviate in the second half of 2022 for the multi-industry sector.

When balancing the omicron variant, inflation and forthcoming interest rate hikes, DeBlase said she was still "constructive" on the macro outlook but said a "more selective stock positioning framework" was warranted.

Also earlier this month, Cowen analyst Matt Elkott listed Caterpillar as one of the best ideas for 2022, saying the company was "well-positioned for broad recovery.

"As the largest manufacturer of construction equipment, CAT is well positioned to benefit from infrastructure spending in the US and India," Elkott said. 

In October, Caterpillar posted stronger-than-expected third-quarter earnings as a rebound in construction equipment demand, as well as surging commodity prices, helped boost the company's bottom line.

In that same month, analysts at JPMorgan reiterated their overweight rating on Caterpillar and calling the company's stock their "top pick into 2022."