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Investing.com — Caterpillar Inc (NYSE:CAT) rose over 7% Tuesday after Jefferies analyst Stephen Volkmann upgraded the stock to Buy from Hold, increasing the price target to $260 per share from $215.
The analyst told investors in a note that his prior Hold rating reflected “constrained capex and ESG themes in both mining and oil and gas markets,” which account for around 40% of Caterpillar revenue.
However, the analyst now believes the “recent turmoil in Eastern Europe fundamentally reshapes global commodity markets, driving structurally higher pricing and after years of underinvestment capacity additions and supply diversification will be necessary in both mining and oil & gas sectors, though new projects will take time.”
Volkmann went on to say that he also sees Deere (NYSE:DE) outperforming as Russia will “likely be mostly locked out of global commodity markets for the foreseeable future, and capacity for mined, energy and ag commodities will have to be expanded elsewhere to compensate.”
“To be clear, we don’t expect much change in commodity market spending in the near- term,” he explained, adding that they are pegging the company’s earnings power at $25 per share “over the next several years.”
