Caterpillar: Margins Have Room to Grow, Says Goldman

[Stocks-to-Watch]

Some investors might be fretting over a slowdown in China, but there’s strong demand for construction and mining equipment elsewhere in the world, and Caterpillar (CAT) could benefit in a big way, writes Goldman Sachs analyst Jerry Revich in a note adding the shares to Goldman’s “Conviction List”.

Revich sees Caterpillar’s incremental margins accelerating in 2012 even as sales growth slows, a strong outlook for the company’s commodity investment business, and a strong environment for locomotive capital expenditures.

And the outlook for construction businesses may be better than the market is discounting.

“[T]he cyclical outlook is more balanced than the market is discounting for Construction Industries as S America is in the midst of a fleet and infrastructure build-out and N America is early in the cyclical recovery,” Revich write.

Goldman now sees caterpillar rising to $118 per share; it as recently trading at $96.21, up 0.1% for the day.



Original Article Source by Barrons.com