Caterpillar Keeps Sliding: Why Evercore ISI Still Sees 40% Upside
Yahoo! Finance ·
Key points
- Caterpillar reported Q3 results on Oct. 29: sales rose 17% to $20.7 billion and adjusted EPS climbed to $7.20 from $4.95, with a record backlog of $78 billion.
- Evercore’s David Raso reduced the target to $833 from $1,045 on Nov. 10 while keeping an Outperform rating, placing the target about 40% above the current price of $594.
- The stock has declined 34% over six months and sits roughly 45% below its June high, with the drop driven by cautious near-term guidance and macro concerns around AI/data-center spending.
- A key near-term risk cited is the potential slowdown in orders from a new Democratic Congress and Texas data-center permit pauses, which could curb equipment demand.
- Analysts’ consensus price target has eased from about $979 at its peak in mid-August, though still sits well above year-ago levels; next-12-month earnings are expected to be about $27.11, rising to $32.25 next year.
- The valuation implies roughly 28x forward earnings for the next year, meaning investors would be paying a premium for Caterpillar’s AI-related power business if the story regains momentum.
- Looking ahead, the late-January 2027 outlook will reveal whether sales to end users remain healthy as dealers reduce inventories, shaping whether the AI/data-center growth narrative can reaccelerate.
Summary
Evercore ISI trimmed Caterpillar's price target to $833 from $1,045 while maintaining an Outperform stance, placing the target about 40% above the current share price. The stock has fallen roughly 34% in six months as investors weigh a cautious Q4 outlook, potential data-center capex headwinds from a Democratic Congress and Texas permit pauses, and lingering AI-growth narratives. Caterpillar’s third quarter showed record backlog and strong earnings, but management guided modest Q4 sales growth amid dealer inventory cuts. The evaluation suggests the stock’s downside is tethered to multiple expansion rather than earnings trajectory, with a potential 40% upside if AI-related demand recovers and macro headwinds ease. The outlook hinges on late-January 2027 guidance and whether end-user demand remains resilient while dealers clear inventories.
This summary was written with AI. The full story has every detail.