Shares of Caterpillar Inc. pulled back on Monday after UBS analyst Steven Fisher said he no longer recommended investors buy, as the potential for upside relative to downside risk is now “more balanced” after the stand-out performance this month.
The construction- and mining-equipment maker’s stock CAT, -1.31% was down 1.1% in afternoon trading, putting it in danger of snapping a six-session win streak in which it ran up 21.5% to close Friday at a 4 1/2-month high.
Helping propel the stock this month was a big third-quarter profit beat, and the company’s assertion that customer demand remained, healthy, strong and robust.“Our thesis on positive margin inflection is playing out, and we continue to see a positive trajectory for margins and earnings growth from here,” Fisher wrote in a note to clients. “However, with multiples compressing as interest rates rise, the valuation at this time presents a more balanced risk-reward dynamic in our view.
His upside target amid a bull-case scenario is $253, or nearly 17% above current levels: “The bull case is that this is potentially the first of a few quarters in which CAT [Caterpillar] realizes outsized margin improvement driving consensus estimates higher, with multiyear growth still ahead,” Fisher wrote.
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