Al Root

Wall Street is growing more positive about Caterpillar stock, anticipating that the company's profit margins will rise when sales start growing again.

Tuesday, Evercore ISI analyst David Raso upgraded Caterpillar to Buy from Hold. At the start of 2025, Raso rated shares Sell. His price target went up to $476 from a recent $365 a share.

Cat shares were up 0.7% in early trading at $415.47, while the S&P 500 was down 0.1% and the Dow Jones Industrial Average was up 0.2%.

Raso said in a research note that Caterpillar's margins on construction equipment are resilient, positioning the company to achieve better earnings as sales volume increases. And there is reason to expect sales volume to rise because Caterpillar has been producing less equipment than its dealers are selling to reduce its inventories.

Earnings should start to beat Wall Street expectations by the end of the year, Raso said.

Caterpillar has done a good job holding its ground in terms of margins as sales slip. Operating profit margins in 2025 are expected to be about 17%, down from 21% in 2024, partly because sales are expected to decline slightly in 2025 after also falling in 2024. The last time Cat sales fell for two consecutive years was 2019 and 2020. Operating profit margins were about 11% in 2020 after that downturn.

Wall Street sees a return to growth in 2026, with sales at almost $69 billion, up 6% compared with 2025. Wall Street projects operating profit margins of almost 19%.

Raso's upgrade continues a trend of analysts growing more positive about the stock. Overall, 54% of analysts covering the stock rate shares Buy, according to FactSet, up from 33% a year ago. The average Buy-rating ratio for stocks in the S&P 500 is about 55%.

The average analyst price target is up to about $454 a share. A year ago, it was about $353.

Investors also seem to expect better times ahead. Coming into Tuesday trading, Cat stock was up about 14% year to date and up about 20% over the past 12 months.

Barron's wrote positively about Cat stock in September, when shares were at about $380, believing that a rebound was coming.

Write to Al Root at allen.root@dowjones.com

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August 19, 2025 10:33 ET (14:33 GMT)

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