NEW YORK (TheStreet) –- Shares of industrial earth-moving giant Caterpillar (CAT) lost almost 4% last week following a recent downgrade to neutral from buy from Bank of America analyst Ross Gilardi, who also lowered his price target on the stock to $121 from $125.
It is the latest sign that many on Wall Street are becoming less enthused about the mining and construction industry in general and Caterpillar in particular. But this could provide investors with a buying opportunity. Here's why.
The stock, at close to $104, is up 14.5% on the year to date. This is an improvement from Caterpillar's 3% gain in all of 2013, compared to the 30% gain in the S&P 500, according to Bloomberg. The company has a strong yield of 2.6%.
Read More: Warren Buffett's Top 10 Dividend Stocks
Even with Gilardi's downgrade, his $121 price target still suggest gains of more than 15%. Caterpillar, which has always been a strong play on the global economic recovery, is worth that bet.
While the 3% year-over-year revenue decline in the most recent quarter was discouraging, full-year earnings are projected to grow close to 8.5% year over year. Next year's earnings are projected to grow by close to 15%. The trend is clear: Caterpillar has not forgotten how to make money.
So even though the company lowered its full-year revenue guidance to a range of $54 billion to $56 billion (down from $56 billion), rivals like Mohawk Industries (MHK) and Joy Global (JOY) haven't fared any better. For that matter, neither has Deere (DE) , whose revenue declined 5%.