Piper Jaffray Starts Coverage on Caterpillar as a “Neutral”; Mining Segment, China Weakness are Concerns (CAT)


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Construction and mining equipment maker Caterpillar Inc. ( CAT ) on Wednesday received some tepid commentary from analysts at Piper Jaffray.

The firm initiated coverage on CAT with a "Neutral" rating and a $90 price target, noting the company's mining segment could show weakness in coming quarters. That target suggests a 6% upside to the stock's Tuesday closing price of $84.75.

A Piper Jaffray analyst commented, "Increasingly efficient operations and a recovering U.S. construction market are positives - but these are offset by a shaky outlook in the lucrative 'Resource Industries' (mining) segment. Persistent weakness in China is also a concern. In a historical context, CAT's recent valuation range of 8-9x forward EPS is heavily depressed - but given the likelihood of downward estimate revisions following the Q3 call, we think CAT's multiple looks lower than it actually is."

Caterpillar shares fell 95 cents, or -1.1%, in premarket trading Wednesday.

The Bottom Line
Shares of Caterpillar ( CAT ) have a 2.45% dividend yield, based on last night's closing stock price of $84.75. The stock has technical support in the $79-$80 price area. If the shares can firm up, we see overhead resistance around the $90-$91 price levels.

Caterpillar Inc. ( CAT ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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