The Dow Jones Industrial Average outperformed the Nasdaq and S&P 500 Tuesday, and that was in no small part because of Caterpillar. The heavy-equipment maker was the best-performing stock in the Dow following another round of positive comments from analysts.
JPMorgan analyst Tami Zakaria on Tuesday raised her price target to 650 from 505 and kept an overweight rating as the analyst updated profit estimates.
The stock closed with a 4.5% gain at 527.47. Caterpillar provided the biggest boost to the price-weighted Dow industrials Tuesday. Early Wednesday, shares leaned another 1.3% higher in premarket trade.
JPMorgan trimmed its 2025 earnings-per-share estimate to $17.86 from $18.13. But the 2026 estimate was raised to $20.09 from $20, even with tariff risks baked into the new forecast.
In a note to clients, Zakaria said Wall Street estimates do not fully appreciate management's ability to drive margin improvement. Caterpillar, she added, is a beneficiary of material-cost inflation because its customers in mining and oil and gas are looking to spend more on equipment.
JPMorgan also views Caterpillar as "the biggest winner of an extended U.S. construction cycle." It has named the construction equipment and gas-turbine maker one of its top stock picks for 2026.
Meanwhile, Bernstein on Tuesday raised its price target to 502 from 447 and kept a market perform rating. Analysts expect Caterpillar to beat third-quarter views and to issue soft guidance that raises street estimates, according to TheFly.com.
Three analysts have raised their price targets on Caterpillar so far this week. On Monday, UBS raised its target to 506 from 450 and maintained a neutral rating.
UBS, Other Analysts Raise Caterpillar Targets
UBS cut its earnings-per-share estimate for this year and next to $17.25 and $19.95, respectively (vs. $17.65 and $20.50) to reflect higher tariff impacts. But it raised its 2027 EPS estimate to $23 from $22.15, mainly due to improved profitability in some segments.
"We expect power demand to drive backlog and continued growth and margin support" in the company's energy and transportation business, analyst Steven Fisher said in a note to clients.
"We think there is more to learn around CAT's tariff mitigation actions, and consensus expectations are that CAT will partly recover these impacts in 2026," the analyst added. But new tariffs pose a headwind. "The macro backdrop is also fragile and uncertain, but there's still structural investment driving a base of demand, and expected interest rate cuts and tax policy to support a reacceleration."
Last week, other analysts also raised their price targets on Caterpillar, sensing increasing demand from power generators that is overshadowing tariff concerns.
Caterpillar stock broke out on Sept. 17 from a base-on-base formation. Shares are up 20% from the 441.15 buy point. Under IBD trading rules, investors can take at least some profits once they have a 20% profit on the trade. That may be a prudent step before the company reports earnings, likely in early November.
Caterpillar has a Composite Rating of 91 and a 21-day average true range (ATR) of 2.61%. The average true range, available on IBD MarketSurge, gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq still in a power trend, investors can buy stocks with ATRs up to 8%, though they should not be too concentrated in such stocks.
