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Caterpillar Stock: Credit Suisse Is Optimistic About Fundamentals 

Caterpillar stock

Caterpillar (NYSE: CAT) stock price has been accelerating the upside momentum despite poor sales reports. The upside momentum is supported by investor’s confidence in improving fundamentals for the following quarters of 2020. The trade deal between the two largest economies is among the biggest catalyst for CAT share price.

The trade deal shows that Beijing is now bound to purchase an additional $5bn of US agricultural products over the next two years. The growth in agriculture activities means additional sales for machinery makers in the coming years.  Mr. Trump said, “That will result in greater prosperity for farmers all across the land.”

CAT Caterpillar Inc. daily Stock Chart

Credit Suisse Expects More Upside for Caterpillar Stock

Credit Suisse is among the bulls. The firm anticipates CAT share price to crawl higher in the coming days amid trade deal and the potential growth in buying from U.S. dealers. The firm lifted the CAT share price target to $173, indicating upside compared to the current price of $150.

Credit Suisse analyst Jamie Cook said, “Dealers are viewing 2020 as a short and shallow correction and – more importantly – manageable.” The firm believes CAT is committed to dividend increases and share repurchases. On the other hand, J.P. Morgan analyst Ann Duignan predicted that CAT is among the U.S. Machinery stocks that are likely to benefit from an improving global economy.

Sales Growth Trend is Likely to Improve

The company has been witnessing a steady decline in sales over the past few months. Its last month’s machine sales stood at the lowest level in fiscal 2019. According to Form 8-K, resources industries sales declined 3% for November while construction industries grew 2%.

Fortunately, the market analysts are expecting an improvement in sales trends in the coming days. This is because of the potential growth in the global economy following the trade deal between the two largest economies. In addition, the company’s cash returns are likely to enhance the investor’s sentiments. CAT plans to increase the quarterly dividend by a single-digit rate in 2020. Overall, Caterpillar stock is likely to receive support from future fundamentals.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.