Key Takeaways

Caterpillar ( CAT ) stock rose after Baird Equity Research analysts upgraded the stock to "outperform" and lifted their price target to $395 after the easing of tariffs on China on Monday .

The reduction of tariff impacts in the long term likely will make 2025 a "trough" year for Caterpillar's earnings per share , which "should allow the stock to catch up with the S&P 500 after underperforming by [about] 15% over the past year," the analysts wrote Tuesday.

The new price target, up from $309, moves Baird above the $356.25 analysts' average compiled by Visible Alpha. The analysts join six others with a "buy" or equivalent rating , compared with five "holds" and one "sell" rating.

Caterpillar Seen as Bellwether for Construction Industry

The stock, typically seen as a bellwether for the construction industry at large, posted disappointing first-quarter sales late last month , and gave two outlook ranges for the year—one with and the other without the full impact of tariffs.

Lower tariffs on China will limit the negative impact to Caterpillar's costs and also "allow for improved visibility for customers looking to invest/deploy capital," the analysts wrote, as the macroeconomic outlook becomes more certain.

Caterpillar shares were up 3.5% in recent trading to above $354. They have trended higher in the weeks after the latest earnings report, bringing them to just about 2% below where they started the year.

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