Caterpillar's stock has fallen nearly 30% over the past six months, but HSBC expects a significant rebound. On November 2, the bank reiterated its $1,150 price target. That target implied about 85% upside from the stock's price at the time.
The decline followed Caterpillar's third-quarter earnings report. Revenue slightly missed expectations, while cautious guidance overshadowed an earnings beat and a record $78 billion order backlog. Investors were also disappointed that the company did not raise its full-year guidance after the strong quarter.
HSBC's optimistic outlook rests on several potential earnings drivers: surging demand for power-generation equipment from AI data centers, global infrastructure projects, and Caterpillar's high-margin services business. The company's substantial backlog supports these drivers.