Shares of Caterpillar (CAT)  rose 1.8% in Monday morning trading to $94.53 after Barclays upgraded the heavy machinery company to "overweight" suggesting that the mining industry will boost its profit coming off of a global downturn in mining.

"There's an assumption embedded in this upgrade that if things are this bad and nothing is broken, something will revert up," Barclays analyst Robert Wertheimer wrote in a research note. "We are making a specific argument that it should be mining."

The global mining pullback hit hard at Caterpillar, which is now in the process of cutting up to 10,000 jobs all over the world. Its 2016 full-year earnings ($3.46 per share) and revenue ($35.77 billion) were both depressed, and Barclays projects more carnage ahead in 2017: earnings of $2.90 per share on revenue of $35.13 billion.

Demand for aftermarket mining equipment parts is due to recover, Wertheimer argued. Mines over-ordered equipment during pricing booms for raw materials. When prices dropped and mine production lagged, mines would cannibalize their excess equipment for parts. Predictably, sales of both Caterpillar aftermarket parts and new equipment both suffered (why buy a new bulldozer when you can just rip parts off an old one?).

Of course, raw materials prices are beginning to recover. Copper, iron and gold have all trended upwards in recent months and production is due to rise.

And gold is on a tear too. The yellow metal has been hyper-sensitive to U.S. political machinations in recent weeks, and Monday was no different. President Donald Trump's Super Bowl Sunday interview with Bill O'Reilly raised more questions about his attitude towards Russian President Vladimir Putin. The President didn't help his cause Monday morning when he sent out a tweet deriding negative polls about his approval rating as "fake news."

While the Dow Jones Industrial Average and Nasdaq opened at record highs on Tuesday, the precious metal nudged upward. February gold COMEX futures rose .11% to $1233.60 an ounce.

"Unless Caterpillar has permanently lost share on those mining trucks and shovels aftermarket, most of the factors that led to lower parts consumption must eventually reverse," Wertheimer wrote. "Longer repair intervals could be permanent. Even the lost opportunity from parked trucks eventually comes back as more hours are put on existing trucks and shovels."

Barclays projects Caterpillar's full-year earnings to nearly double in 2018 to $5.50 per share on $41.15 billion in revenue. It hiked its price target on the stock Tuesday 10% to $110.

"Absolute upside is more of a bull case than base case at this point, but it is real," Wertheimer wrote. "With so many end markets depressed there should be years of different pockets of revenues unfolding upwards."

CAT Chart CAT data by YCharts

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