BofA Securities analyst Michael Feniger maintained a Buy rating on Caterpillar Inc. ( CAT ) with a price forecast of $385.

On Monday, the analyst held an event featuring Caterpillar Group President of Construction Industries Tony Fassino.

Feniger writes that despite ongoing uncertainties and his impression that tariff mitigation primarily involves cost flexibility rather than pricing adjustments, certain areas show promise amid macroeconomic volatility, including Infrastructure, Germany, Rest of the World markets and inventory levels.

Also Read: Caterpillar Tariff Impact Less Severe Than Anticipated: Analyst

In particular, the analyst says that the U.S. economy remains “surprisingly durable,” with Infrastructure repeatedly cited as a bright spot, with ample funding and positive signals for future legislation.

Fassino observed customer resilience in adapting to challenges such as higher rates without pausing large projects, stressing that stability is key for pricing and volume, adds the analyst.

Caterpillar ( CAT ) highlighted its flexible global footprint as a net U.S. exporter with optionality from other facilities. The company is implementing mitigation efforts such as tighter T&E costs, but not primarily pricing.

The analyst writes he is more optimistic about the Rest of the World markets. While Europe remains soft, positive sentiment is emerging from Germany, fueled by infrastructure headlines.

In China, momentum feels genuine, with funding actively filtering in and projects underway, leading to observable double-digit growth from a recent low base. Notably, China’s excavator sales were up +18% year-over-year in April, adds the analyst.

Dealer inventories are at a comfortable three to four months, buffering tariff uncertainty, adds the analyst.

The analyst notes that Construction Industries’ operating margins improved from roughly 10% in 2014 to about 24% in 2024, which stems from a better operating model, increased process efficiency and control, and strategic footprint changes.

The analyst expects Construction Industries’ next cycle to emphasize higher services, building customer loyalty, leveraging predictive technology, and growing rentals.

CAT Price Action: Caterpillar ( CAT ) shares are up 1.34% at $349.39 at publication on Tuesday.

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