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Rising energy demands and technological advancements are reshaping the machinery landscape, setting the stage for industry giants to innovate and expand. BofA Securities analyst Michael Feniger raised the price forecast for Caterpillar, Inc. (NYSE:CAT) from $517 to $594, while retaining a Buy rating.
The analyst stated that BofA's latest channel check highlights growing confidence in Caterpillar's turbine opportunity.
The analyst expects the machinery sector downgrades to moderate in 2026.
The survey shows continued weak demand, though dealers have made progress managing inventory amid uncertainty, adds the analyst.
The analyst notes that turbine capacity remains limited due to the scarcity of suppliers and the complexity of single-crystal blade technology, which hinders rapid scaling.
Lead times for small turbines now exceed two years, with prices rising moderately, adds the analyst.
Moreover, Feniger says that Solar Turbines (the market leader in small units) benefits from its strong reputation, exchange programs that ensure high uptime, and flexible mobile power systems.
The analyst expects data center demand to become a new growth driver, similar to oil and gas.
Also, Feniger anticipates tightening secondary markets and contract terms to support future margins.
The analyst says that preliminary 2026 views demand growth range from flat to slightly higher.
Feniger expects the CI segment to stay pressured in the second half of FY25, with negative revisions stabilizing next year.
The analyst has updated the estimates and now sees over 10% upside to consensus for 2027, driven by strength in power generation resulting from backlog, capacity additions, and pricing.
This week, the company inked a Scheme Implementation Deed with Australia-based RPMGlobal Holdings Limited to fully acquire it for an equity value of 1.12 billion Australian dollars ($733 million).
The company plans to release third-quarter 2025 results on Oct. 29.
Investors can gain exposure to the stock via Global X Funds Global X Dow 30 Covered Call ETF (NYSE:DJIA) and SPDR Dow Jones Industrial Average ETF (NYSE:DIA).
CAT Price Action: Caterpillar shares were up 0.64% at $530.83 at the time of publication on Wednesday. The stock is trading near its 52-week high of $531.55, according to Benzinga Pro data.
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