Caterpillar is poised for higher profits from mining, Jefferies says

Caterpillar (NYSE:CAT) is poised to increase earnings as two of its major segments – energy and mining – rebound from what analysts at financial-services firm Jefferies describe as “close to trough levels.”

The next growth cycle for the mining industry could double sales for Caterpillar’s (CAT) Resource Industries segment and add $5 to $7 a share to the company’s earnings, according to an October 1 report from Jefferies. The firm estimates that Caterpillar’s (CAT) earnings will be $21.68 a share for full-year 2024.

“Global mining capex forecasts are up 50% over the next five years,” Stephen Volkmann, analyst at Jefferies, said in the report. “Anecdotally, equipment fleets are very old, and electrification and automation should provide additional tailwinds.”

The transition from fossil fuels to greener energy and electric power is driving demand for excavated minerals such as lithium, cobalt and copper. This growth comes as Caterpillar’s (CAT) exposure to coal mining has declined, according to Jefferies.

The firm raised its price target on Caterpillar to $455 a share from $430 a share previously, based on an estimated multiple of 20 times earnings per share for 2025.