Analyst Note| Dawit Woldemariam |
Caterpillar reported second-quarter results above our expectations, leading us to raise our fair value estimate to $176 from $163. Our valuation reflects stronger revenue and margin expectations in the near term. We forecast Caterpillar’s sales to exceed $48 billion in 2021, largely due to a continued recovery in construction markets. Caterpillar’s construction business performed well, thanks to strong residential construction. In addition, non-residential construction showed improvement in the quarter. We maintain our view that heavy construction will see strong growth over the next couple of years.