Caterpillar Inc. ( CAT ) has been in focus as being among the beneficiaries of the AI wave.

While the company's earnings are likely to be supported by "strong secular tailwinds," the market seems to underappreciate its earnings power, according to Truist Securities.

The Caterpillar ( CAT ) Analyst: Jamie Cook initiated coverage of Caterpillar ( CAT ) with a Buy rating and price target of $390.

The Caterpillar Thesis: Construction investment is poised to increase during the "decade of the infrastructure renaissance," Cook said in the initiation note.

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Although Caterpillar ( CAT ) delivered record earnings in 2023, there is "more room for upside," the analyst stated, adding that the company is among the "bigger beneficiaries of stimulus associated with infrastructure and energy transition."

"The dollars are significant: The IIJA has allocated ($500B+), Inflation Reduction Act ($1T+), on shoring of semiconductor manufacturing ($200B) and North America LNG ($100B+) which implies $2T plus in spend over the next five to ten years creating a nice tailwind for the industry," Cook wrote. "Caterpillar's ( CAT ) entire portfolio benefits," he added.

CAT Price Action: Shares of Caterpillar ( CAT ) had risen by 0.53% to $343.34 at the time of publication on Thursday.

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