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BMO Capital upgraded Caterpillar Inc (CAT) - Get Caterpillar Inc. Report to "outperform" from "market perform" with a $125 price target based on earnings power that could propel the company's stock to a conceivable upside of $208 to $224, or roughly double its current stock price.

BMO said it thinks Caterpillar will lay out a five-year plan at an investor event in September detailing earnings that could approach BMO's $16 EPS forecast. Profit improvement will stem from three factors: cyclical recovery with potential company benefits, significant cost-cutting already underway and a new management team expected to focus on expanding profitability.

"We also see more runway for Caterpillar's cost-cutting initiatives of lowering headcount, improving sourcing and shuttering or consolidating more than 30 factories since initiating a large-scale restructuring plan in Q3 2015," BMO wrote.

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Caterpillar stock traded 1.7% higher on Monday morning.

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