Caterpillar Tariff Impact Less Severe Than Anticipated: Analyst

Bank Of America Securities analyst Michael Feniger reiterated a Buy rating on Caterpillar, Inc. CAT and a price forecast of $335.

The company reported a 9.8% year-over-year decline in sales and revenue to $14.25 billion, missing the consensus of $14.66 billion.

Adjusted EPS of $4.24 came below the consensus of $4.35.

The analyst says that first-quarter performance was soft (adjusted EPS of $4.25 vs. $4.03), and pricing was disappointing (CI -5.5%, RI -1.6%).

Caterpillar’s backlog increased by $5 billion quarter-over-quarter, reaching a new high of $35 billion, notes the analyst.

Feniger says that retail sales turned positive, showing a +3% growth compared to the -2% in the fourth quarter of 2024 and the -6% in the third quarter of 2024.

The analyst writes that tariffs are undoubtedly a headwind, with the primary debate focusing on the effectiveness of mitigation and potential demand destruction.

Nevertheless, the analyst’s analysis of CAT’s tariff cost breakdown, record backlog, and diversified end-market exposure suggests that the potential downside is less severe than he had anticipated in the scenario analysis.

The analyst says that Caterpillar is taking a cautious, “wait and see” approach to mitigation, unlike other OEMs, which are open to price increases and capacity shifts.

CAT’s merchandising program, yielding retail sales results in a tough macro, likely explains the lack of price increase signals, adds the analyst.

Investors can gain exposure to the stock via Amplify CWP Enhanced Dividend Income ETF DIVO and Global X Funds Global X Dow 30 Covered Call ETF DJIA.

Price Action: CAT shares are up 1.35% at $313.45 at the last check Thursday.

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