Is CAT on Its Last Life? - Caterpillar (NYSE:CAT)

Self-described long-term Caterpillar Inc. CAT bulls at Barclays asked this morning whether the global machinery maker's stock is going to roll over and die or is poised for another run higher. Barclays stayed on the bull side, arguing that Caterpillar can do better in the current environment. Here's why.

High dividend yield, lower capex and high free-cash yield. Barclays argued that the trifecta of indicators – dividend yield, capex and free-cash yield – have been "good buy signals" when around current levels.

But, there's more Caterpillar can do. Barclays said that Caterpillar should be more aggressive in restructuring and smarter in its capital allocation. The analysts recommended "more aggressive buybacks and a smaller footprint," suggesting that these could add 10 percent to 2016 EPS estimates.

Caterpillar will do well in "re-inflation" story. As global monetary policy remains dovish, Barclays said it expects Caterpillar shares to do well. In fact, the analysts noted that "small positive changes" in any weak business segments could "translate to sizeable incremental margin upside."

Barclays reiterates its Overweight rating on the stock with a $90 price target. Caterpillar is pinned at $81 at the open, more than 10 percent below Barclays price target.

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