Caterpillar (CAT) Could See 50% Upside Over Next 12-18 Months, Barclays Says
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Price: $363.52 +0.07%
Rating Summary:
18 Buy, 21 Hold, 5 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
Rating Summary:
18 Buy, 21 Hold, 5 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 11 | New: 14
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Caterpillar (NYSE: CAT) is modestly higher Monday following bullish comments from Barclays analyst Andy Kaplowitz.
Kaplowitz reiterated an Overweight rating and lifted its price target to $112 (from $107), saying while they have been relatively positive on CAT they see the stock approaching a larger inflection point "as investors warm up to CAT's cash potential, and as CAT's earnings respond to improving construction, potentially better-than-expected oil & gas markets, and a bottoming of mining demand."
The analyst said taken together, CAT could earn up to $10.00 of EPS in 2016, which they believe could support as much as 50% upside to current CAT shares over the next 12-18 months.
Kaplowitz said some investors are still under appreciating the potential EPS upside from CAT's ability to generate cash. "Even at current levels, CAT's ~7.8% FCF is a discount to the group average closer to 6%, and we think CAT has the potential to generate as much as $15-17bn of cumulative free cash over the next three years. That could allow CAT to repurchase as many as ~35mn shares per year, resulting in ~$1.20 of incremental EPS by the end of 2016 (vs. our new 2015 estimate of $7.00).
Even with the recent move higher, the analysts believes CAT stock is under-owned and they think it is positioned for a good run with a further rise in investor enthusiasm. "The data from our conference last month indicate as such, with only ~13% of investors polled being overweight CAT, and only ~16% having a positive bias towards the stock (vs. an average of 21% and 42%, respectively)."
The firm raised its 2015 EPS estimate from $6.70 to $7.00 and the price target is based on a multiple of 16x this number.
For an analyst ratings summary and ratings history on Caterpillar click here. For more ratings news on Caterpillar click here.
Shares of Caterpillar closed at $99.39 yesterday.
Kaplowitz reiterated an Overweight rating and lifted its price target to $112 (from $107), saying while they have been relatively positive on CAT they see the stock approaching a larger inflection point "as investors warm up to CAT's cash potential, and as CAT's earnings respond to improving construction, potentially better-than-expected oil & gas markets, and a bottoming of mining demand."
The analyst said taken together, CAT could earn up to $10.00 of EPS in 2016, which they believe could support as much as 50% upside to current CAT shares over the next 12-18 months.
Kaplowitz said some investors are still under appreciating the potential EPS upside from CAT's ability to generate cash. "Even at current levels, CAT's ~7.8% FCF is a discount to the group average closer to 6%, and we think CAT has the potential to generate as much as $15-17bn of cumulative free cash over the next three years. That could allow CAT to repurchase as many as ~35mn shares per year, resulting in ~$1.20 of incremental EPS by the end of 2016 (vs. our new 2015 estimate of $7.00).
Even with the recent move higher, the analysts believes CAT stock is under-owned and they think it is positioned for a good run with a further rise in investor enthusiasm. "The data from our conference last month indicate as such, with only ~13% of investors polled being overweight CAT, and only ~16% having a positive bias towards the stock (vs. an average of 21% and 42%, respectively)."
The firm raised its 2015 EPS estimate from $6.70 to $7.00 and the price target is based on a multiple of 16x this number.
For an analyst ratings summary and ratings history on Caterpillar click here. For more ratings news on Caterpillar click here.
Shares of Caterpillar closed at $99.39 yesterday.
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