Caterpillar (CAT) shares may have more room to run as investors look past a cautious 2026 outlook and focus on improving longer-term fundamentals, Bank of America's Global Research said in a note to clients Friday.

Power and energy remain a key support, with Bank of America analysts noting Caterpillar is "part of every conversation" in power generation tied to data centers, pipelines and gas infrastructure.

While the bank sees headwinds like tariffs likely to keep a lid on margin expansion, a recently announced 2GW natural gas generator order, along with solid year-over-year growth in power and oil and gas sales, reinforces its confidence in projections of out-year growth.

Bank of America maintained its buy rating and raised its price target to $735.

Price: 665.96, Change: +1.37, Percent Change: +0.21