Caterpillar's (CAT) valuation, free cash flow strength, and exposure to power-related growth could help it reach a new peak in earnings per share ahead of Deere (DE), BofA Securities said in a note Monday.

The brokerage updated its 2025-2027 estimates for Caterpillar but said it remains slightly below consensus for 2025, pointing to near-term headwinds including machinery pricing, tariff exposure, and delayed gains in equipment and transportation amid ongoing capacity expansion.

BofA sees the early stages of a new EPS upcycle emerging for Caterpillar in late 2025, supported by a recovery in resource-related spending after a two-year downturn and continued growth in power, pipelines, gas, and data centers. The firm reiterated a buy rating and raised its price objective to $460 from $385.

For Deere, the firm trimmed its 2026-2027 EPS forecasts by 9%, reflecting continued weakness in the farm equipment segment. It expects another down year in 2026, partially offset by a likely pickup in production following deep build-rate cuts over the past 12 to 18 months. BofA modeled 2025 net income at $5.26 billion, in line with Deere's guidance.

While the brokerage said Deere is positioned to gain share over the long term, it reiterated a neutral rating and lowered its price target to $500 from $556, citing cycle caution and expectations that 2026 earnings will fall short of consensus.

Price: 415.44, Change: +3.24, Percent Change: +0.79