JPMorgan Sees an Opportunity to Own Caterpillar Shares

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Following the Caterpillar (NYSE:CAT) Dealer Finance Conference in Las Vegas this week, JPMorgan analysts told investors that end-user demand remains broadly positive.

The analysts provided bullish commentary in a note to clients, raising the firm’s price target on Caterpillar to $220 per share from $205, maintaining an Overweight rating.

They stated that based on their conversations at the conference, “end user demand remains broadly positive, especially for large equipment, while some dealers cited a ‘few cancellations’ in resi-focused smaller equipment orders.” In addition, deliveries were said to have improved in the summer months but not enough to replenish inventory to historical levels.

“Most participants we spoke to expect ‘some’ volume growth next year assuming the backlog is delivered as cancellations remain low vs. average,” wrote the analysts. “Customers haven’t notably pushed back on price increases as inventory shortages across other OEMs provide few alternatives while used equipment prices have surged.”

They added: “From a stock perspective, we seen an opportunity to own CAT as expectations remain muted around sales and margins into the 3Q print given a disappointing 2Q and a lack of specifics in guidance.”