Wells Fargo sees Caterpillar continuing to roar higher and emerging as an artificial intelligence play. The bank initiated shares of the agricultural equipment manufacturer with an overweight rating. Analyst Jerry Revich also introduced a price target of $675, which implies upside of 22% from Caterpillar’s Thursday close. “CAT is positioned to benefit from hyperscalers diversifying their grid reliance to turbines,” he wrote. “Over the past year, xAI, Stargate, and Meta project permits have demonstrated building momentum for turbines as a solution to utility power diversification.” CAT YTD mountain CAT YTD chart He also highlighted the U.S. construction equipment cycle transitioning to production recovery from destock as a positive for Caterpillar. Machine inventories in North America have slipped 10% year-over-year, signifying that current equipment deliveries are not enough to meet market demand, Revich wrote. “Used equipment inventories typically lead values & ultimately CAT stock,” he added. Revich also sees Caterpillar’s price and cost structures improving, providing yet another tailwind for next year. “With used inventories now tight and new equipment inventories now at historical average levels, we expect used values to improve in coming quarters — providing a tailwind for new equipment pricing as we’ve seen in prior cycles,” he wrote. “We believe CAT remains positioned to continue to compound unit profitability over the next cycle.” Caterpillar shares have ripped 52% higher this year. Analysts are spilt on the stock, however. Of the 28 who cover Caterpillar, 14 rate it a buy or strong buy, per LSEG. Another 14 assigned hold or underperform ratings.
