Morgan Stanley more than doubled its price target on Caterpillar Inc. to $915 from $430 and upgraded the stock to Equalweight, citing strong first-quarter results and a robust demand outlook fueled by artificial intelligence.
"The upgrade follows Caterpillar’s strong first-quarter 2026 results, which beat expectations largely due to stronger-than-anticipated performance," Morgan Stanley analyst Angel Castillo said in a note. Castillo also pointed to increased capital expenditures from several hyperscale data center operators as a factor that improves the company's growth outlook.
The heavy equipment maker reported first-quarter adjusted earnings of $5.54 per share, easily surpassing the consensus estimate of $4.65. Revenue jumped 22 percent year-over-year to $17.42 billion, beating Wall Street models of $16.53 billion. Following the results, Caterpillar’s shares rallied 9.2 percent to $884.50, extending their year-to-date gain to more than 54 percent.
The results and analyst upgrade highlight a significant new growth driver for Caterpillar, which is benefiting from the buildout of data centers to power AI applications. The company reported a record backlog of $63 billion and noted that sales in its power-and-energy division jumped 22 percent during the quarter, a trend it expects to continue. To meet the demand, Caterpillar is investing $725 million to expand large-engine capacity at its Indiana plant.
The upgrade suggests growing confidence in Caterpillar's ability to capitalize on the AI boom, providing a multi-year revenue stream beyond its traditional construction and mining markets. Investors will watch for the company's virtual shareholder meeting on June 10 for further updates on its capacity expansion and demand forecast.
This article is for informational purposes only and does not constitute investment advice.
