Shares of Caterpillar look 'cheap': Barron's
Shares of the world's largest construction and mining equipment maker Caterpillar Inc look poised to rise as the economic recovery picks up, financial newspaper Barron's said on Sunday.
Caterpillar rose 2.7 percent to $86.98 on Friday following positive U.S. economic news, which may be a good entry point for investors with a 12- to 24-month horizon, the article said.
The company's stock rose to around $100 in February from $80 in November as markets felt better about the state of the global economy, but have fallen since.
Barron's said further global growth worries could take the shares back down to $80, but said Caterpillar's 2.4 percent dividend yield "should ease the pain. Meanwhile, the stock should hit double digits again."
The stock is trading at an enterprise value - net debt plus market capitalization - of 8.5 times, which is below its historical median of 11.2 times.
Barron's said Caterpillar has made progress on cost cutting and said its inventories have been falling. It also pointed to the fact that Caterpillar made money during the 2008-2009 global recession, and said the company has a strong balance sheet and benefits from being the leader in a business with high entry barriers.
"When companies like that go on sale - and Caterpillar seems cheap - their shares are usually worth a look. At these levels, the stock seems to discount a lot of bad news," the newspaper said.
(Reporting by John McCrank in New York; Editing by Marguerita Choy)