Caterpillar Inc. (NYSE:CAT) — This company is the largest maker of earth-moving equipment in the world, as well as a major producer of mining equipment, power generators and engines used in petroleum markets.
An earnings decline is expected this year, with Credit Suisse Group AG (ADR) (NYSE:CS) forecasting EPS will fall to $4.75 from $6.37 in 2014. However, its analysts expect a rebound to $6 per share in 2016 and have an “outperform” rating on CAT stock with a price target of $90.
As potential catalysts, they point to strength in the housing market, demand from small- to mid-sized infrastructure projects and the positive economic impact of lower fuel prices.
Technically, CAT stock has been forming a bullish saucer since late January, following a nine-month fall from a multiyear high over $111 per share in July to a low just above $78 in mid-March. Support for the saucer is at $80 to $82, which represents the 50-day moving average.
Immediate resistance to rallies is at $85. However, in the past five sessions, CAT stock tested this resistance three times and had an intraday break of it on April 15. Shares appear to have solid support at the 50-day moving average with high volume on up days.
A high-volume break through the resistance line should result in a quick trade to $94, which is 12% above the current price. However, longer-term investors should hold CAT stock for a move to over $100 and its dividend of $2.80 per share for a current forward annual yield of 3.3%.
