The outlook for Caterpillar is getting better and investors should scoop up the stock, according to Baird. The firm upgraded shares of the construction equipment giant to outperform from neutral and upped its price target to $395 from $309, which reflects 15.3% upside from Monday’s close. Baird’s upgrade comes after President Donald Trump announced a 90-day tariff reprieve on tariffs targeting Chinese imports. As a global industrial giant, Caterpillar can be vulnerable to changes in global trade policy. “The easing of tariff impacts adds weight to 2025 as a trough EPS year and is likely to drive additional multiple expansion (particularly as EBIT margin has proven more resilient vs. Machinery peers), which should allow the stock to catch up with the S & P 500 after underperforming by ~15% over the past year,” Mircea Dobre wrote Tuesday. CAT 1M mountain CAT, 1-month Caterpillar shares have lagged the broader market in 2025, losing more than 5% loss compared to the S & P 500’s 0.6% slide. However, they are up nearly 17% as trade tensions appear to thaw. Dobre thinks that easing trade tensions could serve as a demand catalyst, especially given that the company noted in its latest earnings call that it expects to face a cost headwind of between $250 million and $350 million as a result of Trump’s tariffs. “De-escalation with China lowers the cost drag,” the analyst wrote. “Removing trade-related unknowns should allow for improved visibility for customers looking to invest/deploy capital.” Dobre also sees inventory pressures receding, which could also boost shares. Analysts are split on Caterpillar. LSEG data shows that 12 out of 28 have a strong buy or buy rating on the stock. Fifteen, however, have a neutral view with a hold rating.
