Caterpillar: China And The Dollar Weigh, But I Dig The Valuation And Chart

Summary:

• I reiterate a buy rating on Caterpillar due to its attractive valuation despite recent relative weakness in the Industrials sector.
• CAT’s Q3 results missed expectations, but management’s share buybacks, strong balance sheet, and growing order backlog provide optimism for future performance.
• Key risks include weaker global growth, high interest rates, and reduced construction market trends, but CAT’s technicals suggest a potential bounce-back.
• With a forward P/E ratio below its historical average, CAT shares are poised for upside, targeting $396 based on normalized EPS and earnings multiples.

The Industrials sector has lost relative strength to the S&P 500 over the past month. Mega-cap tech has dominated, leaving many cyclical areas in the dust heading into the end of 2024. Still, the Industrial Select Sector SPDR Fund ETF (

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