Why Caterpillar Stock Crawled Higher on Thursday

As nearly any investor can attest, one trading day can mean quite a difference for a stock.

So it was with industrial vehicle maker Caterpillar (NYSE: CAT) on Thursday; after being sold off following disappointing quarterly earnings posted the day before, the stock staged a mini-rally to close almost 2% higher. This was thanks to a pair of post-earnings analyst recommendation upgrades, which brought a fresh wave of optimism to the stock.

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Two analyst upgrades

Of the two, the more bullish was the upgrade enacted by Oppenheimer pundit Noah Kaye. In his view, Caterpillar now rates an outperform (buy, in other words), up from his previous tag of perform (hold). Kaye's price target is $395 per share, anticipating considerable upside of nearly 26% on the stock's most recent closing level.

According to reports, Kaye felt that Caterpillar's first-quarter performance was better than many expected despite the company's double miss on analyst revenue and profitability estimates. He wrote that this shows the company's business is resilient, especially considering the relatively wobbly state of the global economy. He also feels that the company's share buyback policy will support the stock price.

A more cautious upgrade came from Baird's Mircea Dobre, who only lifted his Caterpillar recommendation to neutral from underperform (i.e., sell) while raising his price target by $9 per share to $309. Although the company isn't priced compellingly enough for a buy, according to reports, Dobre feels there is some potential in the energy and transportation and data center segments of its market.

Worth a look?

At the end of the day, Caterpillar's business is cyclical and heavily dependent on the fortunes of the industries it serves. Yet management is good at socking away for rainy days, and the company's business is robust enough to survive the inevitable dips. This doesn't look like a big money-spinning stock to me, but it could notch some decent gains in the near future.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.