Barclays Sees 50% Upside for Caterpillar

Barclays analyst Andy Kaplowitz believes shares of Caterpillar

could rise 50 percent in the next year and a half. The analyst raised his price target from $107 to $112 and maintained an Overweight rating. Kapolwitz sees an opportunity others are missing as “investors are still under appreaciating the potential EPS upside from CAT's ability to generate cash. Even at current levels, CAT's ~7.8% free cash flow is a discount to the group average closer to 6%.” The potential for the company to generate $15-$17 billion of cumulative free cash flow over the next three years “could allow CAT to repurchase as many as ~35 million shares per year, resulting in ~$1.2 of incremental EPS by the end of 2016,” said the analyst. Shares of Caterpillar have been, and still are in the doghouse for many investors. Kapolwitz's surveys indicated that 13 percent of investors are overweight the stock, and only 16 percent have a positive bias towards the stock. Perhaps taking a contrarian stance, as the analyst suggests, would allow an investor to capitalize on negativity, and acquire the shares before sentiment turns. Shares of Caterpillar are flat in Monday's trading.