UBS Caterpillar (CAT.US): Construction Inventory Build Drives Upside; Raising PT and Estimates Post Q1
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UBS has raised its target price and earnings estimates for Caterpillar following a strong first quarter, driven primarily by an unexpected build in construction equipment inventory. The firm notes that dealer inventory levels remain below historical averages, and the restocking cycle is expected to persist through the second half of 2026, supporting continued sales growth.
First-quarter results showed an 8% year-over-year revenue increase, exceeding market expectations by 2%, with the construction segment serving as the primary catalyst. Consequently, UBS has lifted its 2026 earnings per share forecast from 12.50 USD to 13.20 USD, representing a roughly 5.6% upward revision. The target price has been raised from 280 USD to 310 USD, based on an 18 times multiple applied to the updated 2026 EPS estimate.
UBS maintains its Buy rating, asserting that the current inventory cycle and robust infrastructure spending will act as core catalysts. Management guided for 5% to 10% full-year revenue growth in 2026, and UBS projects results will land at the upper end of this range. A free cash flow yield of approximately 4.5% further supports ongoing share repurchases and dividends. Risks include higher interest rates potentially suppressing construction activity and raw material cost volatility.
Key exhibits
Exhibit 1
