Barclays' analysts wrote in a note yesterday that the global construction equipment company could generate enough free cash flow to buy back 35 million shares in three years, adding up to $1.20 of earnings per share by 2016. Barclays' analysts also boosted their price target to $112 from $107, according to the Analyst Ratings Network.
The stock rose more than 2% today after climbing yesterday. Sentiment on the stock is 76% bullish, according to StockTwits' analytics.
Some cashtaggers said that the climb was overdone. It wasn't as though the company announced a new revenue source, they argued. And Caterpillar could decide it wants to do something else with its free cash besides repurchase shares.
Caterpillar management's testimony before congress this week tempered enthusiasm for a projected buyback. Caterpillar executives told a senate panel that the company pays its fair share of taxes, even if much of Caterpillar's profits go through a Swiss subsidiary with a much smaller negotiated tax rate than the prevailing U.S. corporate tax rate.
The Senate committee responded by blasting the company for setting up a tax shelter.
Taxes are a major issue for U.S. corporations. The United States will charge about 40% this year, according to data compiled by audit and tax advisory firm KPMG. Switzerland, for comparison's sake, has a tax rate of just under 18%. Places such as Ireland, Cyprus, Gibraltar, Lithuania, Latvia, Jordan and Kuwait have a rate under 15%.
At the time of publication, the author held no positions in any of the stocks mentioned.
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