Caterpillar and Deere Get Analyst Upgrades, Could Move Higher

Key Points

• Analysts recently raised price targets on Caterpillar and Deere stocks; is it time to buy?  
• Caterpillar has had a strong year but it still looks like it has room to run.
• Deere stock has struggled in 2024 but has a set-up to be a solid momentum stock.  

Earnings season is a time when analysts may update their rating and/or price target on a stock. Usually this happens the day of, or shortly after, a company reports earnings. An upgrade or a price target increase is generally bullish. However, when analysts upgrade a stock before an earnings report, investors should really take note. 

That’s the case for Caterpillar Inc. NYSE: CAT and Deere & Co. NYSE: DE. Both stocks received upgrades on October 9. Caterpillar received two price target increases. Citigroup NYSE: C raised its price target on CAT stock from $380 to $445. Truist Financial Co. NYSE: TFC went even higher, raising its target from $399 to $456. 

Deere received three separate upgrades. Citigroup increased its price target from $395 to $420. Truist went from $443 to $496 and JPMorgan Chase & Co. NYSE: JPM also weighed in, boosting its target from $360 to $420.  

These are two giants among industrial stocks, and both were trading near a 52-week high when they received the upgrades. Investors may wonder if they have the green light to chase these stocks higher. Macroeconomic indicators suggest it may be a wise investment. 

Industrial Stocks are in the Middle of a Bullish Trend 

There’s no doubt that the priorities of the federal government will be different depending on who makes it to the White House. However, no matter which candidate wins the election, it should favor industrial stocks.  

For example, the funds from the 2021 Infrastructure Investment and Jobs Act are still flowing into the economy. One area of spending that both parties are committed to is onshoring by U.S. companies. Putting aside the controversial issue of tariffs, corporations are realizing the need to shorten supply chains.  

The takeaway is that both parties will support infrastructure spending, but perhaps for different ideological reasons. But as an investor, you can question why but don’t dwell on it too long. This is a trend that still has years to run.

There’s also the issue of sustainability. Updating the national electric infrastructure will be a project that takes years, if not decades. Furthermore, the push towards renewable energy will continue regardless of which candidate is in office.  

A third area of the U.S. economy that will benefit from increased infrastructure spending is home construction. If falling interest rates have the desired effect of stimulating the economy, this is an area that will grow with or without proposed assistance for first-time home buyers.  

Caterpillar Approaching a Significant Technical Marker 

Caterpillar stock is up approximately 35% in 2024 and more than 50% in the last 12 months. In the two months since the company’s August 5 earnings report, CAT stock is up 26.8%. That price movement approximates the 35% jump the stock made from the middle of January to April 5, 2024. 

The midpoint of the two upgraded price targets is around $450. If the stock moves to that level, it would be about a 41% increase from August 5. With CAT stock already trading about 13% above its consensus price target, investors may be cautious about chasing it higher. Fortunately, the company reports earnings on October 29. At that time, investors should get a better sense of why analysts are turning bullish on the stock.  

Deere Needs Strong Earnings to Move it Out of the Crosshairs 

In the past month, both political parties have singled out Deere & Company. Donald Trump is threatening the company with tariffs of up to 200% after the company announced plans to move some of its manufacturing to Mexico. However, that move also drew the ire of Senator Bernie Sanders, who criticized the job losses that would occur if the move is made.  

The news comes at a time when Deere is struggling with a longer-than-average replacement cycle for agricultural products. The company’s revenue and earnings are both down year-over-year, and that’s a trend that’s likely to continue when Deere reports earnings in November. This is reflected in DE stock, which is up just 2.8% in 2024. However, the stock is up 12.5% in the last three months, and the Truist price target of $496 gives the stock a 22% upside, which, combined with the company’s dividend, could make Deere a positive momentum stock into 2025.