Caterpillar Can Crawl To $127 On Machinery Biz Strength

Caterpillar’s construction and machinery revenues saw an uptick in 2010 led by improved macro-economic conditions boosted by demand from emerging markets and the company’s acquisitions of EMD and Bucyrus International.

The hovering concerns around European debt crisis and sluggish U.S. growth, however, can push down Caterpillar’s machinery revenues in the second half of 2011, while also impacting competitors like Deere and Co., Komatsu, Terex, Hitachi Construction Machinery, Cummins, and GE Energy.

Despite the macroeconomic headwinds, we believe that Caterpillar’s long-terms prospects are strong as it’s in a position to satisfy the growing demand from emerging economies by leveraging its acquisitions.

While we estimate Caterpillar’s share of global machinery market will increase from 31% in 2011 to around 38% by the end of our forecast period, Trefis members expect an increase from around 34% to 42% during the same period. The member estimates imply an upside of near 10% to the Trefis price estimate for Caterpillar’s stock.

We currently have a Trefis price estimate of $116 for Caterpillar’s stock, about 60% above the current market price.

Source: Forbes