Caterpillar's Stock Surges After BMO Capital Says Business Has 'passed The Lows'

By Tomi KilgoreMarketsMarketWatch Pulse

Shares of Caterpillar Inc. climbed 1.2% in premarket trade Monday, after the agriculture and farming equipment maker was upgraded at BMO Capital, citing an improving profit outlook as the cyclical recovery for industrial companies continues. Analyst Joel Tiss raised his rating to outperform after being at market perform for at least the last three years. Tiss said there were three primary reasons for finally turning bullish on Caterpillar: "the unfolding cyclical recovery" and its potential benefits for the company; "the significant cost-cutting program underway" and the "new management team that is expected to concentrate on expanding profitability." He raised his stock price target to $125, which was 17% above Friday's closing price of $106.59, from $110. Tiss said he still believes the mining and energy markets still have a difficult road ahead, which suggests it may be unlikely to see a robust demand surge in the near term, "but there are signs we have passed the lows in many areas." The stock has rallied 14.9% year to date through Friday, while both the SPDR Industrial Select Sector ETF and S&P 500 has gained 10.5%.

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